Blog: Trading Tips

When you work a job, you’re basically exchanging time for money: the more hours you work, the more money you make. It’s a good way to get by but a bad way to build wealth, because eventually you simply run out of hours.

That’s why if you want to grow wealth quickly, you need to make your money work for you. How? By investing and trading in the financial markets. Okay, so think of the financial markets as a garden where you grow well, just like you plant a seed and watch it grow.

In the financial markets, you can invest a small amount in companies, real estate, foreign currencies, and other securities, then share in their profits as they grow in value, and thanks to a financial principle called compound interest, your take becomes bigger and bigger every year. For instance, let’s say you invest $1,000 in Company A.

In the first year, they grow 15%, meaning you make 150 dollars, bringing your total to $1,150. Then the next year, they grow another 15%. But instead of making 15% on $1,000, you make 15% on your new total $1,150 which translates into $172.50 for the year, and $1,322.50 total.

Do this a couple more years and you will have doubled your money without lifting a finger, but if you never invested that $1,000 you wouldn’t have earned anything.

In fact, your money would have decreased in value due to the rising cost of living or inflation, even with an inflation rate of 5%, that $1000 would have lost a third of its value in ten years. So, clearly investing is the better way to go but how do you do it without taking on too much risk?

First off, you should put enough money into savings and insurance to protect yourself in the event of a downturn or adversity.

Second, if you’re just starting out, you can focus on regular investing or trading.

Regular investing allows you to accumulate wealth in the long run, while trading enables you to capture consistent short-term gains to grow your capital quickly, provided you understand behavioral analysis and market timing.

Finally, once you’ve established a large capital base, you can choose to buy and hold for the long term to generate capital gains and passive income, or use long term trading strategies to manage your portfolio effectively but those are just the basics.

There are many instruments for trading and investing, and in order to grow wealth on the market, you’ll need to understand how they work.

So next, let’s take a closer look at one of the most common types of investments: stocks.

Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media.

Overview of Stock Market Basics Course

Taking the First Step to Financial Freedom

We all want to build wealth and live comfortably. The question is how do you do it.

Across the world, the cost of living is getting higher and higher making it hard to understand how anyone is able to get ahead. But for many, the answer is simple. The financial markets. Truth is the market is full of opportunities and not just for the rich, but for everyone. And you may be surprised to know that making money in the market isn’t all that hard. By learning the same strategies that professional traders use to read the market, you too, can build a strong portfolio and achieve early financial freedom.

We’ve taken the insight and knowledge from over 200 books and 10,000 hours of professional trading experience and distilled it down into a series of fun bite-sized tutorials that will teach you the trading skills necessary to start building your long-term wealth.

This series is divided into five categories.

First, the basics of trading and investing where you’ll learn the different ways you can build wealth in the market.

Second, riding the big market cycles where you’ll learn how to catch the big moves in the markets.

Third, the ABCs of stock valuation to help you select the best stocks to trade.

Fourth, behavioral analysis and market timing where you’ll learn how professional traders predict the market to earn consistent gains.

And finally, making your first trade where you’ll put all your new knowledge to use.

So, what do you say?

Ready to take your first step towards building some wealth?

Then, choose your first category and let’s begin!

Career Paths for the Trading & Fund Management Professional

Here are a list of common career paths in trading, with each requiring different skill sets. When you send in your applications, it would be good to indicate what kind of career path you are looking for, so that it would be easier to find a good match. We are always on the lookout for trading job opportunities offered by our partners, and we will send in our database of resumes submitted by our students, hence it would be a good idea to send yours in early too. 🙂

Sales & Trading (S&T)
This highly paid and highly coveted position is usually offered by investment banks, but are hard to come by, especially given the freeze in global headcount for most front office roles. Typically, the basic requirements would be a degree, as well as stellar academic achievements. Previous experience working in a bank would also improve your chances.

“Sales and trading is one of the key functions of an investment bank. The term refers to the various activities relating to the buying and selling of securities or other financial instruments. Typically an investment bank will perform these tasks on behalf of itself and its clients. In market making, traders will buy and sell financial products primarily to facilitate the investment and trading activities of its clients with the goal of making an incremental amount of money on each trade. The Sales component refers to the investment bank’s sales force, whose primary job is to call on institutional and high-net-worth investors to suggest trading ideas and take orders. Sales desks then communicate their clients’ orders to the appropriate trading desks, who can price and execute trades, or structure new products that fit a specific need.” – Wikipedia

Proprietary Trading
In the past, most banks used to have this job function, but the number has been on the decline. Nowadays, most of the hiring comes from private funds (prop funds). Typically, these funds hire experienced traders to trade the firm’s funds, but usually has training programs to train new traders to groom them into successful traders. The selection is stringent, and the turnover rate is high, as it is not an easy environment to thrive in. Usually, remuneration is on a profit-sharing basis (ranging from 30-80%), with a small allowance, so one should have at least a year of savings to live on during the learning phase. Strategies vary, but most involve high-frequency trading on short timeframes, with high-leverage products such as futures and options.

“Proprietary trading (also “prop trading” or PPT) occurs when a firm trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments, with the firm’s own money as opposed to its customers’ money, so as to make a profit for itself. They may use a variety of strategies such as index arbitrage, statistical arbitrage, merger arbitrage, fundamental analysis, volatility arbitrage or global macro trading, much like a hedge fund.” – Wikipedia

Fund Management
Fund management typically requires more experience and a track record, and traders are expected to have an advanced knowledge of trading. Products can vary widely, and strategies and usually flexible, depending on the discretion given by the fund. Given the larger capital base, strategies may be geared towards a longer holding period. Typically, there will be some sort of benchmark and drawdown limits, and remuneration is a combination of a base salary (management fee) and profit-sharing.

“A hedge fund is an investment fund that can undertake a wider range of investment and trading activities than other funds, but which is generally only open to certain types of investors specified by regulators. These investors are typically institutions, such as pension funds, university endowments and foundations, or high-net-worth individuals, who are considered to have the knowledge or resources to understand the nature of the funds. As a class, hedge funds invest in a diverse range of assets, but they most commonly trade liquid securities on public markets. They also employ a wide variety of investment strategies, and make use of techniques such as short selling and leverage.” – Wikipedia

Research Analyst
These jobs are offered by banks and brokerage firms, as well as some independent research houses. These jobs are suitable for those who have good analytical and writing skills, and enjoy doing research and analysis, but do not like the stress of executing trades and holding positions. Depending on the level of experience, these jobs are usually paid quite well at banks and financial institutions.

“A financial analyst, securities analyst, research analyst, equity analyst, or investment analyst is a person who performs financial analysis for external or internal clients as a core part of the job. Writing reports or notes expressing opinions is always a part of “sell-side” (brokerage) analyst job and is often not required for “buy-side” (investment firms) analysts. Traditionally, analysts use fundamental analysis principles but technical chart analysis and tactical evaluation of the market environment are also routine. Often at the end of the assessment of analyzed securities, an analyst would provide a rating recommending an investment action, e.g. to buy, sell, or hold the security.” – Wikipedia

Brokerage & Dealing
These jobs come in various forms, including working as an in-house dealer for a retail brokerage or an institutional brokerage, or an independent remisier. These jobs require less analysis and trading skills, since you will be mainly executing orders for clients, although clients may rely on your input to make their decisions. Remuneration is typically a base salary plus a sales commission if certain targets are met.

“A brokerage firm, or simply brokerage, is a financial institution that facilitates the buying and selling of financial securities between a buyer and a seller. Brokerage firms serve a clientele of investors who trade public stocks and other securities, usually through the firm’s agent stockbrokers. A traditional, or “full service”, brokerage firm usually undertakes more than simply carrying out a stock or bond trade. The staff of this type of brokerage firm is entrusted with the responsibility of researching the markets to provide appropriate recommendations and in so doing they direct the actions of pension fund managers and portfolio managers alike.” – Wikipedia

My Reading List – Top Trading & Investing Books I have Read Over the Years (Updated 2019)

Here are some of the better books among the 200+ that I have read over the years, so if you want to learn the basics & foundations of trading by yourself, these might come in handy.

However, do note that trading for real is very different from textbook examples. If you are new to trading, you will realise the difference once you start trading.

If you are serious about learning this skill on your own, make sure you finish all these books before you start putting your real money into the market. That was what I did when I started my trading career. This is just the bare minimum, and anything less is likely to end in failure. Even if you finish reading all these books, it is unlikely that you will be able to trade well.

There are many things which cannot be learnt from books, such as “market feel”, behavioral analysis, applied price action, and real trading psychology. These can only be learnt by paying “tuition fees” to the market (paper trading or demo trading is a waste of time), or learning from a real trader who has mastered these skills and get them to guide you. Investing in education is a small price to pay to help you avoid the costly mistakes in trading.

Without further ado, here are the list of books:

The Secrets of Economic Indicators – Bernard Baumohl
Freakonomics – Stephen Dubner & Steven Levitt
The Undercover Economist – Tim Harford
The Pocketbook of Economic Indicators – Manual Jesus-Backus
 International Economics – Paul R. Krugman
Trader Vic – Methods of a Wallstreet Master – Victor Sperando
The Trader’s Guide to Key Economic Indicators – Richard Yamarone
 One Up on Wall Street – Peter Lynch, John Rothchild
How to Make Money in Stocks – William O’Neil
The Alchemy of Finance – George Soros
Hot Commodities – Jim Rogers
Investment Biker – Jim Rogers
Technical Analysis from A to Z – Steve Achelis
 Technical Analysis – Power Tools for Active Investors – Gerald Appel
Bollinger on Bollinger Bands – John Bollinger
Technical Analysis Demystified: A Self-Teaching Guide – Constance Brown
 All About Technical Analysis : The Easy Way to Get Started – Constance Brown
Technical Analysis for the Trading Professional – Constance Brown
 Fibonacci Analysis – Constance Brown
Mastering the Trade – John Carter
Trend following – Michael W. Covel
Trend Commandments – Michael W. Covel
The Complete Turtle Trader – Michael W. Covel
How I made $2,000,000 in the Stock Market – Nicolas Darvas
Understanding RSI – Edward Dobson, Roger Reimer
Integrated Pitchfork Analysis – Mircea Dologa
 Technical Analysis of Stock Trends – Robert D. Edwards, John Magee
Entries and Exits – Alexander Elder
Trading for a Living – Alexander Elder
Sell and Sell Short – Alexander Elder
Come into my Trading Room – Alexander Elder
Way of the Turtle – Curtis Faith
Inside the Mind of the Turtles: How the World’s Best Traders Master Risk – Curtis Faith
The Master Swing Trader – Alan Farley
The Elliot Wave Principle – A. J. Frost, Robert R. Prechter Jr.
Truth of the Stock Tape & Wall Street Stock Selector – William D. Gann
45 Years in Wall Street – William D. Gann
 New Stock Trend Detector – William D. Gann
How to Make Profits in Commodities – William D. Gann
Trend Trading – Daryl Guppy
Snapshot Trading – Daryl Guppy
New Trading Systems and Methods – Perry Kaufman
Breakthroughs in Technical Analysis: New Thinking from the World’s Top Minds – David Keller
How to Trade in Stocks – Jesse Livermore
Fibonacci and Gann Applications in Financial Markets – George MacLean
The W.D. Gann Method of Trading – Gerald Marisch
Dynamic Trading – Robert C. Miner
High Probability Trading Strategies – Robert C. Miner
 Candlestick Charting Explained – Gregory L. Morris
Technical Analysis of the Financial Markets – John J. Murphy
Intermarket Technical Analysis – John J. Murphy
How to Get Started in Active Trading and Investing – David Nassar
Japanese Candlesticks Charting Techniques – Steve Nisson
The Candlestick Course – Steve Nisson
Beyond Candlesticks: New Japanese Charting Techniques Revealed – Steve Nison
Timing the Trade: How Price and Volume Move Markets! – Tom O’Brien
The Secret Science of Price and Volume: Techniques for Spotting Market Trends, Hot Sectors, and the Best Stocks – Timothy Ord
 Candlestick and Pivot Point Trading Triggers – John L. Person
Technical Analysis Explained – Martin J. Prings
The Visual Investor – Martin J. Prings
Martin Pring on Price Patterns – Martin J. Prings
Dow Theory for the 21st Century – Jack Schannep
Trade like Jesse Livermore – Richard Smitten
 The Secret Code of Japanese Candlesticks – Felipe Tudela
New Concepts in Technical Trading Systems – J. Welles Wilder
Secrets for Profiting in Bull and Bear Markets – Stan Weinstein
 Stock Market Technique, No 1 – Richard D. Wyckoff
Stock Market Technique, No 2 – Richard D. Wyckoff
Studies in Tape Reading – Richard D. Wyckoff
Wall Street Ventures & Adventures Thru 40 Years – Richard D. Wyckoff
How I Trade and Invest in Stocks and Bonds – Richard D. Wyckoff
R N Elliott’s Masterworks, the Definitive Collection – R. N. Elliott, Robert R., Jr. Prechter
Technical Analysis: The Complete Resource for Financial Market Technicians – Charles D.Kirkpatrick II, Julie R. Dahlquist
Ichimoku Charts: An Introduction to Ichimoku Kinko Clouds – Nicole Elliott
Practical Speculation – Victor Niederhoffer, Laurel Kenner
The Wall Street Waltz – Kenneth L. Fisher
Stock Market Wizards – Jack D. Schwager
The New Market Wizards – Jack D. Schwager
Millionaire Traders – Kathy Lien, Boris Schlossberg
The Battlefield for Investment Survival – G. M. Loeb
Fooled by Randomness – Nassim Nicholas Taleb The Black Swan – Nassim Nicholas Taleb
 The Education of a Speculator – Victor Niederhoffer
Liar’s Poker – Michael Lewis
Reading Price Charts Bar by Bar – Al Brooks
The Lexus and the Olive Tree – Thomas L. Friedman
The World is Flat – Thomas L. Friedman
Reminiscences of a Stock Operator – Edwin Lefevre
Trading in the Zone – Mark Douglas
The Disciplined Trader – Mark Douglas
Investment Psychology Explained – Martin J. Prings
Irrational Exuberrance – Robert J. Shiller
Beyond Greed and Fear – Hersh Shefrin
Trading Rules that Work: The 28 Lessons Every Trader Must Master – Jason Alan Jankovsky
Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves – Kathy Lien
Bird Watching In Lion Country 2010 – Dirk Du Toit
Pairs Trading: Quantitative Methods and Analysis – Ganapathy Vidyamurthy
Quantitative Equity Portfolio Management – Ludwig B Chincarini, Daehwan Kim
Technical Traders Guide to Computer Analysis of Futures Market – Charles Le Beau, David Lucas
The Definitive Guide to Point and Figure – Jeremy Du Plessis
SteidMayer on Markets: Trading with Market Profile – SteidMayer J. Peter, Steven B. Hawkins
Quantitative Trading Systems, Practical Methods for Design, Testing, and Validation – Howard B. Bandy
Expert Advisor Programming – Andrew Young
Future Trend from Past Cycles – Brian Millard
Cloud Charts: Trading Success with the Ichimoku Technique – David Linton

Note: I will continue to add to this list as I discover and read more good books. Feel free to recommend any books not on this list!

Thanks! 😀

9 Comments/by Spencer Li

Understanding Trend vs. Range Market State Transitions

This is an essential skill required by every aspiring trader. All professional traders definitely know this, for it forms the basis of many setups, and can mean the difference between breezing on the right side of the market, or clenching your fists in anger as the market goes against you.

I am referring to the ability to tell the state of the market.

Besides behavioral analysis, there are some simple price action guidelines that we can use to accurately determine the state of the market. This is important for obvious reasons.

There are 2 basic states of the market – trend or range. As the market shifts between these 2 states, it creates many trading opportunities in the form of setups.

Newbies who attempt to trade by memorising setups while ignoring the underlying structure of the market are heading for the proverbial iceberg. That said, this is just the tip of the iceberg.

This video should provide you an idea of how prices move, and if I have a chance to share more in upcoming seminars next year, I will show how these transitions give rise to the different trading setups that we teach during our training programs.