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
When Rayner Teo graduated with his Banking and Finance degree, he was also the valedictorian of his cohort. While many may think this opened him up lucrative employment possibilities in the finance sector, he chose to become a trader instead.
In a way, Rayner was like many fresh graduates, filled with passion but not really knowing where to start. Initially, he joined a prop-trading firm but soon knew this was not what his future had in store for him.
In 2014, he started TradingWithRayner and never looked back. Along the way, he also started one of Singapore’s most followed trading website with over 100,000 readers each month. He also runs a YouTube Channel with close to 200,000 subscribers and a Telegram Channel with nearly 20,000 fans. Of course, he continued to stay a profitable trader all this while.
Today, we speak to Rayner Teo for our #myfirsttrade column to glean more insights into his journey and what newbies to the trading scene need to know to become more successful traders.
DollarsAndSense (DNS): Thank you for joining us today. We ask everyone we speak to for this column this one question: Do you remember what the first trade that you ever made was?
Rayner Teo (RT): I don’t remember which was my exact first trade. The earliest trade I recall was when I bought one or two lots of Sembcorp Marine during my university days. I thought that it was a value stock, with sound fundamentals and healthy cash flow. At that point of time, the oil crisis hadn’t hit. I bought in at $2.84, but sold it at a loss at $2.60 or $2.55.
Obviously, I didn’t know what I was doing and didn’t have a plan. From that trade, I learnt a valuable lesson – to succeed we need to have a plan. We should always have a reason to buy in and out of the market.
DNS: You started trading in your university days. What got you interested in trading?
RT: My interest in trading started from my army days – whenever I had some free time, I would read books on financial markets and trading. This interest also fueled my desire to study Banking and Finance, which I felt was most relevant to my interest and placed me in a good position to enter the industry.
DNS: You graduated from your university course, in Banking and Finance, as valedictorian, why did you choose to become a trader rather than seek a more “mainstream” career?
RT: Again, I have to put this down to my initial interest reading books on finance and trading in the army.
I also didn’t want to become an employee. As an employee, there’s the benefit of a constant flow of income which acts as a safety net, but I feel that you don’t really get to exploit your full potential. I feel that employees will always have a cap placed on what they can achieve, what they can do, and how much they can earn.
I didn’t want to get bounded by this limit. At the same time, I came to understand that trading is an endeavor that could be limitless, and you can make as much money as you want – given the right knowledge, sufficient trading capital and proper risk management plans.
That’s what made me want to take that path.
DNS: You started out as a proprietary trader with a firm in Singapore. What made you want to strike out on your own?
RT: Prop trading entails trading the firm’s money and keeping a proportion of the profits. The company will allocate capital to you to trade. Usually, your earning is determined by your profits as it typically runs on a profit-sharing model. Occasionally, they might even give you a monthly allowance, depending on the firm.
As a prop trader, it was very similar to working long hours in any job – I could be working close to 10 to 14 hours a day being glued to the screen.
I was not afraid of the hard work, but it was not something I wanted to make a career out of. I didn’t want to work those hours in my 40s or even 30s, while I had a family. I also knew that the longer I stayed, the deeper I got into it, and the harder it would be to leave the industry. That was why I decided to leave after two years as a prop-trader.
At the same time, I was more interested in higher timeframes, capturing longer term market fluctuations. Prop-trading doesn’t require traders to trade such a high timeframe, and that’s when I decided to transit out of the prop-trading scene to trade on my own.
DNS: Since becoming an independent trader, what are some of the biggest challenges you have faced?
RT: The first challenge I faced was getting an edge in the market. I needed to have a method that clearly worked, if not trading would become similar to guessing or gambling. And, even if it was a 50-50 odd, I would probably lose money after transaction costs. So, the biggest challenge for me, and any aspiring trader, was to have a proven methodology that clearly works.
I also needed sufficient capital. Even if I had a trading methodology that worked. The reality is that a $2,000, $3,000 or $5,000 account isn’t going to generate meaningful profit potential. This was when I decided I had to open other stream of income to diversify my revenue and grow the trading account.The latter is probably a challenge which most people face.
The third thing is possibly having wrong expectations. With the amount of information or “noise” you read on the internet, it’s very easy to get distracted or lured into the wrong direction. You’re never going to make 100% or 200% consistently for a sustained period of time. Maybe once in a decade, or twice in a decade, in really good years, maybe.
DNS: What have you implemented and done to increase your chances of being a successful trader?
RT: First, I have to say that I don’t think I’m successful trader.
I like to learn from others around me and other successful traders. Putting into real-life examples, if you want to be a super-skilled public speaker, model after people who are very good at public speaking, like Tony Robbin. If you want to be very good at cooking, model after someone who is successful at the cuisine you want to master. Try to get them to become your mentor, or if not, try to consume their content – talk to them, eat their food, read their cooking books, watch their cooking shows, join their courses. I find that this is one of the simplest, but often mostly neglected, life tip that one should have.
That was what I did. I also love reading and picked up a lot of books and studied a lot of successful traders to understand their mindset, methodology to form my own thoughts.
DNS: You also run one of the largest YouTube channel for traders in Singapore, as well as your blog TradingWithRayner and Telegram channel. Do you have any secret sauce to trading?
RT: The not-so-secret sauce is having grit, which I think many entrepreneurs already speak extensively about and I think I’ve even watched a Ted Talk about it.
I’m also a firm believer of doing what you love and being passionate about it. Without it, you’re never going to have the same tenacity as a competitor to see through the difficult times, that will surely come for every trader.
Whatever industry you go into, there’s always going to be a learning curve and an uphill battle you need to overcome. When adversity hits, the way you’re going to see yourself through is by reminding yourself on the love and passion you have for it, instead of doing it just for the money. If it was just about the money, once adversity hits, you’re going to run.
DNS: What should a person just figuring out their strategy do before starting to trade?
RT: First, they have to know their goal. Are they trading to replace their monthly income? Or increase their wealth while continuing a full-time work? Or to hedge against a financial crisis?
Only after figuring out your goal, you can implement the appropriate trading methodology.
If you want to trade to generate a consistent source of income to replace your monthly salary, then you have to focus on shorter timeframes. You’re not going to earn a consistent income trading off the daily or weekly timeframes. The amount of trades you generate will simply not be enough for the law of large numbers to work in your favour.
Often traders come in, without really understanding what they’re trying to achieve in the big picture. It’s important to take a step back and understand what you want out of your trades, and then finding the appropriate methodology to achieve your goal.
For example, if you want to race in F1, you won’t bring a Toyota Wish to race. You’ll want to be behind the wheels of a Ferrari. If you want to go on a family trip, a car that can accommodate everything, and is more fuel efficient, would be the obvious choice. Then you’ll want a Toyota Wish rather than the Ferrari.
DNS: Managing your personal finance is important as a trader. How do you do this in your daily life?
RT: Right now, I run the TradingWithRayner brand as an education business. I consider myself an employee of the business and I draw a fixed salary every month to run my living expenses.
Any additional profits that my business generates, I may also put it into the trading account so that I can trade more.
My trading account is entirely separate. I don’t withdraw any money from my trading account. In fact, I try to put more into the trading account each month.
About 60% of my savings are in the financial markets – some in my own trading system, some in my discretionary trading accounts and a portion to build a passive portfolio for the long-term.
Also Read: Motley Fool Singapore CEO David Kuo: From Graduating With A Chemistry PhD To Being A Bookie To Joining The Finance Industry And Helping People Build Their Own Six-Figure Investment Portfolio
DNS: If you met your younger self still studying in university today, what advice would you give yourself?
RT: Learn how to be of value to others and learn how to sell. These skills will help to shape your knowledge and expertise.
These are also timeless skills that will ensure your success in any field or point in history. Unfortunately, these are also skills that are not taught in schools.
One Of The Greatest Hacks Is To Learn From The People Who Have Achieved The Results You Want
This point really stood out during our interview with Rayner. It’s one of the most simple things we can do, yet many of us neglect it.
To become a better trader, you can simply read books written by successful traders as well as articles such as the #myfirsttrade series to better understand what it takes it be a successful trader.
You can also follow websites like IG to join communities to stay up-to-date with financial events and meet like-minded individuals interested in trading and investing. The IG Community allows you to interact with peers to discuss your trading plans and bounce ideas off them.
IG also have regular seminars and live webcasts for new, intermediate or advanced traders to learn from other traders and analysts that you follow, admire or have achieved the results you are gunning for.
Another thing Rayner stressed was to have a plan to achieve your goals. IG Academy puts together an interactive education through webinars and seminars. You can also create a demo account equipped with $200,000 virtual credits to kickstart your trading journey with greater confidence.