This article was written in partnership with IG, the world’s No.1 CFD provider (by revenue excluding FX, February 2018). All views expressed in the article are the independent opinion of DollarsAndSense.sg
12 years ago, Collin Seow found himself caught in the midst of one of the biggest financial challenges that he has faced – bearing the financial losses incurred by one of his clients as a remisier – to the tune of $250,000. This occurred during the 2007 global financial crisis.
To get himself out of debt, Collin created his own trading system – The Systematic TradersGPS, a proprietary trading algorithm that he used to help him (and other traders) to successfully trade the financial markets by generating “buy” and “sell” signals in a systematic way. This helped traders execute their trades, whilst removing the mental and emotional aspects that may impact their trading process.
Collin is a qualified Chartered Portfolio Manager (CPM) holding a Certified Financial Technician (CFTe) qualification and is a member of MENSA Singapore.
In this edition of #myfirstrade, we spoke to Collin and find out what got him started in creating his own trading system, what motivated him to start teaching and build his trading community and the kind of mistakes that beginners’ traders should avoid when making their first trade.
DollarsAndSense (DNS): We know from a previous interview that you started trading a long time ago. Can you still remember your very first trade, and how did it perform? #myfirsttrade
Collin Seow (CS): Great first question! One of my first trades was using pure fundamental analysis.
At that point of time I’ve just completed reading a book about Warren Buffett’s investment philosophies and techniques; And I got really excited about what I’ve learnt.
I managed to find this stock which was traded in Singapore, called Informatics.
At that point of time, Informatics ticked all the boxes based on Warren Buffet’s philosophy. They had a monopoly, as they were the biggest private education school. Quarterly and annual growth were good, management was competent, catalyst for growth was there – they were going into online learning; the so called “purple train”. Many analysts were also concurrently bullish about the stock.
I bought it at $1.30 and cut my loss when it dropped by about 20% to $1.10. It has since dropped to less than $0.50 today (Editor’s note: Price is now $0.04 as of 20 February 2019)
DNS: Can you briefly share with us what your trading strategies focus on? What are the instruments that can be traded using your trading system?
CS: I focus mainly on Systematic Trading. Systematic Trading is essentially having various hard rules to manage your trading, as opposed to discretionary trading. For us, it’s based on a technical approach (price, volume), to quickly detect market trends while it’s still in its infancy stage, and then take positions to profit as those trends start to assert themselves.
Many markets do not behave perfectly rationally. I have seen fundamentally good stocks go down significantly, and fundamentally bad stocks go up significantly. However, trends do occur repeatedly, just look at the prevalence of trends in so many different markets.
For me, trading systematically accomplishes two main things:
– It is logically straightforward, and unemotional (not open to much interpretation)
– The process can be employed in many different markets and assets classes; leading to possible diversification
I firmly believe in the process of trading systematically by letting your winning trades run and cutting your losses quickly. Of course, you have to complement this with strong risk management.
DNS: Share with us when was it that you discovered that you had devised a winning trading system? How can it help traders succeed in the financial market?
CS: It was actually pure coincidence that I developed my winning trading system back then. In fact, it was born out of adversity in my early days as a remisier.
Initially I was trading on my own, and the bulk of my commissions were generated from my own trades. However, what happened was that a client of mine incurred a loss of close to $250,000, which I had to bear myself.
Out of desperation, I had to dig deep to develop something that can build wealth instead of only income to pay off the losses. I developed the system through many failures, pain and sleepless nights. That’s how it came about in a nutshell.
The system can help many traders succeed by giving them a more objective buy and sell rule to execute trades in an unemotional way.
By effectively removing emotions from trading, the stress level of the trader is significantly reduced, eventually improving their profit and loss ratio as a result.
For example, a trader or investor may think that a particular stock is fundamentally cheap. However, until a buy signal is produced from the system, he should stay on the sidelines and wait for the buy signal first.
DNS: Improvements are always part and parcel of improving a trading system. How has the system evolved since you first devised it?
CS: The principles of the system have never changed much, but we do add in filters now and then to further improve the efficacy of it such as avoiding taking trades due to:
– Overlapping candles
– Sideway trends using the 20 and 40 WMA (Weekly Moving Averages)
Contrary to popular belief, once the mandate and logic of the system is sound, not an awful lot of tweaking is required to remain relevant in the markets. The market is made up of a collective of human decisions, and human nature rarely changes.
Just take Bitcoin as an example!
DNS: What are some of the biggest challenges that you see new traders encountering? How do you think your trading system can help them?
CS:The number one challenge most new traders face is not knowing what to trade. Selecting what to trade generally means more than half the battle has been won, and the problem is that most newbie traders tend to trade everything under the sun, thinking that being more active will give them higher profits.
The second challenge is that after entering a position, many traders have no idea when the optimal time is to get out. They either stay in the trade for too long or too short.
The third challenge that I deem most important, is the lack of strong money management. Without proper money management, everything else is just for a lack of a better word, useless.
My system can not only help them decide what to trade, but also how to trade it in the most efficient way.
DNS: Trading can sometimes be a rather lonely activity. How important do you think it is for aspiring traders to be part of a community?
CS:It is of paramount importance; especially when one is just starting out. Make no mistake about it, trading can be a very difficult and lonely endeavour when done alone.
At the initial point where you are starting out, even with a good trading system, there will be doubts and loss of confidence during your journey. Nothing beats having a strong-knitted community to help you out during those tough times.
With the proliferation of technology and social media, I feel that there is a lack of good old-fashioned face-to-face communication.
This is the reason why I have invested and created a semi co-working space called TradingPLC, which aims to be a place where like-minded traders can congregate, share trading ideas, and most of all, make friends.
DNS: If you can turn back time and go back to the day when you first started trading, what would be one or two advice which you would give to your younger self?
CS: Without a doubt, get a mentor fast!
Things can be simplified down easily if you want to get good at something in record time.
1. Find someone who has done it successfully before.
2. Reach out to him and get him to show you how it’s being done.
3. Rinse and repeat.
Other advice would include surrounding yourself with people who are better than trading as compared to you in various ways.
Practice strict money management, and never trade while you are on holiday!
Trading Is A Journey. You Need To Equip Yourself For It
As Collin has shared, one way to think of your trading experience is to liken it to a journey that you are taking. While it’s tempting to think that we can all get rich quickly, the truth is that being a successful trader requires time, a good strategy, constant learning and refinement, and of course, sound risk management.
There are things which you can do to prepare yourself for this journey. For a start, being part of a trading community helps, as you will be able to learn, discuss and share your experience with other like-minded traders. IG has a community created just for traders in Singapore.
Besides joining a community, IG Academy also guides new traders on the basics of what they need to know before they start trading. There are free online courses, regular webinars and seminars that traders can attend. This is useful, as it allows you to learn at your own pace. In addition, most of these courses and events are free to attend. You simply need to sign up and show up to start learning.
If you are new to trading and ready to give it a try, it’s recommended that you start off with a small amount first, or even try it on an IG demo account which gives you $200,000 in virtual credits. This will allow you to get familiar with the platform that you are using to trade whilst also giving you the time to refine your trading strategies and most importantly, give you a grasp of the psychology required in order to become a successful trader.