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
Trading and investing are two different ways to make money from the financial markets. While investors aim to profit by investing in assets that either increase in value over time or pay out regular dividends, distributions or interest, traders typically aim to profit by taking advantage of short-term price volatility in the assets they actively trade.
Most traders will also leverage their positions to increase their trading size, and hence exposure. Leverage is a double-edged sword: it can be used to significantly increase returns on good trades or it could potentially translate into much larger losses on bad trades.
As trading is generally considered riskier, and requires more time and skills, returns for successful traders also tend to be higher. This makes it both lucrative and potentially dicey at the same time, especially if a trader is not able to manage his risk.
In order to understand the journey of what it takes to become a successful trader, DollarsAndSense.sg spoke to Rayner Teo. Rayner is an independent trader, ex-prop trader and founder of the blog TradingwithRayner. He is also the most followed trader in Singapore, with more than 75,000 traders reading his blog each month.
Rayner has been trading since his university days. He graduated from the University of London (UOL) with First Class Honours in Banking & Finance and was also the valedictorian of his graduating cohort in 2012.
DollarsAndSense (DNS): Many people are fascinated on what it’s like to be a trader. Can you share with us how a typical day looks like for you?
Rayner Teo (RT): A typical day for me is to scan the market each morning to look out for my trading setup. This take me about an hour. After which, I will monitor my trade positions every few hours to make sure it is doing okay, and that any risk that I face is well contained.
I also spend some time each day penning down my thoughts for my website TradingwithRayner. Since I work from home, I also get to spend time with my wife and child if they are at home.
DNS: What got you started in trading?
It started when a broker came down to my university to organise a forex competition. Back then, I was clueless about trading and the only idea I had about the financial market was knowing how to read financial reports and calculating financial ratios. I told myself that trading was just an accelerated version of investing – how difficult could it be.
I was wrong.
I took part in the competition and in a matter of days, blew up my account and got kicked out of the competition. That’s how I got started.
That’s basically how I started trading.
DNS: You graduated with first class honours and was valedictorian so you obviously did well in school. Why did you not pursue a career in the corporate world as what most of your peers did?
During national service, I was enlisted into 1st Commando battalion. I went from being mediocre all my life to being placed in an elite fighting unit. For two years, we were constantly reminded that nothing is impossible, and that many times, the difference between achieving and not achieving something simply depended on just how much we wanted it.
During my time in the army, I also read a book called Secret Of Self-Made Millionaire by Adam Khoo. From this book, I learned that there is more to life than just working for somebody, and more to life than just being mediocre.
These two things shaped my belief.
Needless to say, I did not want to pursue a career in the corporate world. People work half their lives and retire at 65. I didn’t want that. I wanted the freedom to do the things that I love today. One thing that struck me was that I needed a skill. A skill that could help put food on the table for me and my family.
I did not want to be trapped in a working environment that I didn’t like just because my skills were not translatable. I didn’t want to climb up the wrong corporate ladder. That’s why I opted to go into trading, starting out in prop trading.
DNS: How long was it before you decided to strike it out on your own as an independent trader? What prompted the decision?
As a prop trader, I was in a firm for a couple of years. Being a short-term day trader, my hours were long. Though the skills I picked up were mine to keep, I was still a slave to the market as I had to watch the market for long hours.
I didn’t feel that was feasible if I wanted time for my family and other personal matters. So, I started trading on my own and moved towards longer-term trading.
DNS: As an independent trader, not having a stable, fixed income must be daunting. What did you do in order to manage this risk?
It’s not really risky if you know how to manage your risk.
I was single at that point and my parents were very supportive. I didn’t have any student loan, credit card debts or car loan. I could survive on $500 a month then as I only needed to put food on the table for myself to make sure I didn’t go hungry.
Having worked for a few years, I also had some savings. I knew I would be okay for the next couple of years even if I didn’t make any money from trading.
DNS: How long did it take before you became profitable?
It took me about four years to become profitable and it definitely wasn’t an easy journey. I started out in university and spent lots of time googling for information, lurking around forums for tips and reading as many trading books as I could. I tried many different strategies and it took me a while before I realise there were many ways to skin the cat, and that you need to find a way which suits you.
In the initial stage, my journey was just about losses. However, there was one particular moment when I caught the trend and rode it all the way up. This one successful trade covered for all my earlier losses. It was my aha moment, as I realised it’s okay for me to make several small losses as long as I could catch, and ride out, a profitable trend.
I am still learning. This is, and always has been, an ongoing journey.
DNS: What are some of the misconceptions that you realised after you started trading?
One of the biggest misconception is that traders think they need to predict the market in order to make money. This is untrue.
Think of it from casino standpoint. Casinos deal with statistic and probability all the time and this is quite similar to trading. At any point in time, the casino has no idea about the outcome on the roulette or the blackjack table for the next five or 10 rounds of play. They don’t know if they will make or loss money. Neither do they care.
However, what the casinos do know is that given enough time, their edge will play out and deliver them profits.
Likewise, as a trader, you don’t have to be concerned about where the market is going. Each time I put out my trades, I have no idea which of my trades are going to be my winners.
If a trading setup presents itself, I take it. If the trade goes against me, I cut my losses. If it moves in my direction, I ride the trend until it hits my trailing stop loss. That’s about it. I don’t predict the market.
Read Also: How To Make The Most Of Volatility
DNS: Besides doing your own trades, what else are you involved in today?
Aside from trading, I am also involved in running my trading education website TradingwithRayner. I cover topics such as trading, risk management and trading psychology. I also recently co-authored a book called The Traders Blueprint with three other traders as well.
DNS: What got you motivated to start on some of these other initiatives?
When other traders leave a comment to thank me for my advice, it really motivates me to continue sharing, knowing that I have made a difference to someone out there whom I have never met, and probably never would.
This is my strongest motivation.
DNS: Lots of people think it’s cool to be an independent trader. You get to trade at your own timing and leisure. What do you have to say to these perception that people have. Are they accurate?
The part about having the freedom to do what you like is accurate, but the struggle during the journey is very real.
If you want to trade, I don’t recommend for you to just quit your job and do trading full-time. That’s because you will always be facing losing weeks or even months. Instead, keep your day job and trade on the side. This could be an additional income which doesn’t require a lot of your time. An hour a day should be enough if you know what you are doing.
DNS: Any regrets that you may have being a trader?
One thing I realised is that there is a whole world out there. When I first started, I got caught in a tunnel vision thinking that trading is all there is.
But when you have a website, and you interact with other people, you realised there is so much more than just trading. There is philanthropy, marketing, business, creating value for others, making a difference to others.
It’s not really a regret but I wish I knew earlier on that there is more to life than just trading.
Learning How To Trade…Is A Journey
Having listened to Rayner, one of the things that struck us was that learning how to trade is a long and often arduous journey which can take years to pay off.
Rayner started his journey by learning how to manage his risk while trying out different trading strategies. During this time, he focused on keeping his losses small while continuously improving his own trading strategy. After some time, he found the trading strategies that worked well for him.
If you are new to trading, and especially if you’re starting it as a side-hustle, we strongly recommend that you start off with a demo account first. A demo account allows you to become familiar with the various tools available and the strategies that you may wish to use. IG allows you to hone your trading skills with $200,000 worth of virtual funds first, before you put actual money into your trades.
Learning is also a never-ending journey when it comes to trading. Aside from reading articles or joining online courses, webinars, seminars on IG Academy to learn more, the IG Community is another good way to share ideas, discover new products and discuss market opportunities with other like-minded traders, and to learn from them.
This article was sponsored by IG, the world’s No.1 CFD provider (by revenue excluding FX, February 2018). All views, opinions and recommendations expressed in the article are the independent opinion of DollarsAndSense.sg and do not in any way reflect the views, opinions, endorsements or recommendations, of IG Asia Pte Ltd (Co. Reg. No. 20051002K) (“IG”). Information is for educational purposes only and does not constitute any form of investment advice nor an offer or solicitation to invest in any financial instrument. No responsibility is accepted by IG for any loss or damage arising in any way (including due to negligence) from anyone acting or refraining from acting as a result of this information or material.
Make The Most Of Volatility
Most people fear volatility in the market. But those who are well-informed welcome volatility as an opportunity.
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