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Every generation is different and grows up with their unique identity. Baby boomers, for example, are typically seen as hardworking, family-oriented people who are not afraid to work hard and endure hardship to improve the lives of their families. Gen X, the generation after baby boomers, are seen to be ambitious in the workplace with a work hard, play hard attitude.
Millennials, defined casually as those born between the age of 1981 to 1996, are starting to form a majority of today’s workforce. We are gradually seeing how some of the characteristics of millennial workers may reshape various areas of life. Thrown into the deep end because of the COVID-19 pandemic, millennials have embraced working from home (WFH) in the new normal, with many even relishing the newfound independence that has enabled them to better balance between their work and family.
The workplace isn’t the only part of our lives that is undergoing transformation. In the financial market, investing and trading approaches have started evolving. As I wrote in my previous article when I spoke to Loo Cheng Chuan, founder of the 1M65 movement, we are not only the generation that is enthralled by high-risk trades such as meme stocks, cryptocurrencies and NFTs, but also one that is happy to top up our CPF accounts to earn risk-free returns for our retirement.
As trading in the financial market becomes increasingly popular among workers looking to build a secondary source of income, we decided to chat with a veteran of the industry – Collin Seow. A long-time trader since the early 2000s, Collin is the founder of a trend trading system – The Systematic TraderGPS, a proprietary trading algorithm system that can be used to help traders successfully trade the financial market by generating signals on when traders should “buy” and “sell” assets that they are trading. Collin also runs TradingPLC, a co-working space for traders in Singapore. He is a qualified Chartered Portfolio Manager (CPM) holding a Certified Financial Technician (CFTs) qualification and is a member of MENSA Singapore.
As part of our article series #TheNewNormal that DollarsAndSense is working on in collaboration with IG, we chat with Collin to better understand some of the evolving trends that are happening in the trading space that retail traders should be aware of.
Collin Seow, Timothy Ho (Our Editor) & Terence Wong (Azure Capital) at a pre-pandemic event
Timothy Ho (Timothy): You run your own trading courses and operate a co-sharing space catered towards traders. Has the interest from retail traders been increasing ever since the pandemic started?
Collin Seow (Collin): Yes, in general, I would say that the interest in trading has increased. From my observation, I would say that retail trading has more than doubled since 2015/2016.
The biggest surge happened during the pandemic, where many were stuck at home and had more time to pick up trading and investing. The top interests were meme stocks and purchasing equities with the intent of either trading them for the short-term or holding them for long-term investing. Coupled with low commissions, this significantly added more daily traded volume, especially in the US markets.
Timothy: Why do you think trading is starting to become more of an interest among consumers in Singapore?
Collin: To me, it’s a combination of a few factors.
The pandemic has powered some form of revolution in trading and investing. With almost the entire population trapped at home, it is no surprise that the adoption of trading increased dramatically to make more money and/or kill time.
Social media has also levelled up as a community-based interaction medium for all; together with the rise of many financial influencers. Of course, it doesn’t hurt as well that many brokers were providing commission-free trades right around the same period, so this makes it cheaper, or in some cases, even free, to trade.
I personally think the younger generation are less driven by money compared to my generation, they will invest in what they feel will make a social impact. They will also invest in instruments that tell others about themselves. The ease of access to information is also driving people to trade more.
Timothy: Compared to the past, do you see an increase in young people wanting to learn trading?
Collin: Absolutely. There are now droves of young and inexperienced traders opening fresh trading accounts for the very first time in their lives to try their hand at this game. Naturally, a good subset of these new traders would want to get up to speed quickly so that they can attain good results faster.
Most of them understand the need to invest in themselves through quality education and that having a good and stable mentor will save them critical time and money.
In terms of risk profiles, I think they are generally similar to the older generation. The difference is that they tend to be much more open to trying trading new asset classes such as cryptocurrencies.
Timothy: While it’s encouraging to see more young people getting interested in the financial market, I can’t help but feel the financial market is an ocean, not a playground, and traders both new and experienced, cannot afford to get caught in dangerous waves. What are some of the biggest mistakes that you see enthusiastic new traders making?
Collin: I know it sounds boring but the number one mistake new traders make is not managing their risk. When their trades go wrong and the position is moving against them, instead of cutting losses, they hold it “hoping” that it will revert. This is almost always a recipe for disaster because just a few bad trades will inadvertently decimate your trading account.
The second major mistake is that younger traders tend to have a YOLO (you only live once) mindset by going big and putting on a huge leveraged position that they believe will never go wrong. The problem is that if one such trade goes horribly wrong, it’s game over. They underestimate the importance of being able to stay in the game. Trading is about having an edge and repeating the edge over many series of trades rather than just a few.
Finally, they do not have a trading plan or system to help them to decide whether to buy, sell or hold. They get too emotional with their trades whether it’s out of greed or fear.
Timothy: The markets are exceptionally volatile right now. We not only have the pandemic (going into its third year), but also the war in Ukraine and we have been through some of the most volatile periods in the stock market as well. How should traders think of the current situation, and are there additional precautions we must take if we intend to trade in the financial markets?
Collin: This may come as a surprise for many of us, but if you look at historical data, after 1-3 years after the war, the markets are usually up.
In higher volatility environments, a trader always has a choice based on their personality. Some traders thrive in volatility and movement to make gains, while others tend to stay on the sidelines until the volatility they face is more palatable. You can always choose what to do based on your own risk profile.
I like to say, “not having a position is also a position”. This applies not just in politics, but also in trading.
As for my views, I would think that this is a buying opportunity, especially in the Hong Kong and China markets. Some of the profitable technology stocks that were beaten down in the last few months due to the fear of rising interest rates are also a buying opportunity.
Timothy: Some people are drawn towards trading because it allows them to make money quickly due to volatility in the financial markets. Is this a healthy reason to get into trading?
Collin: Trading is a high-level life skill just like swimming. If you learn to master it, you can potentially use it to get additional income, or even replace your current one. If you disrespect it, by not having proper expectations, weak emotional control, and poor money management, it will be a path to ruin.
However, note that the success rate for a trader is low, hence the need to get yourself a proper mentor to cut short the time and money required to be successful in this game.
Timothy: You’ve been trading for about two decades already. Are there any notable differences in the approach towards trading that you see among traders today compared to the past? Share with us some of these differences.
Collin: I would say human nature is still relatively similar. Emotional greed and fear are the same today, as compared to 20 to 30 years ago when I started.
However, the key difference would be the level of information and technology used today.
In the past before the real prevalence of the internet, we had to depend on telex and teletext for stock prices. I can still remember clearly (and fondly) that people would turn on their TVs to check stock prices.
The information gap has clearly narrowed, and now the new challenge is coping with an overload of information and data. A good trader can separate the signals from the noise better than an average one. As the world of technology continues to evolve and the adoption of digital/mobile devices increases, there will just be more and more new entrants in trading and investing.
Timothy: What are some pieces of advice that you will share with traders as we enter what seems to be a volatile period in the world?
Collin: I would say the key is to understand your trading style to have an edge over the market.
Know yourself and the types of trades that suit your personality and risk profile. As I’ve mentioned previously, as a trader you always have a conscious choice to put on a position or stay on the sidelines in light of the current volatility.
Learn how to manage your emotions, rather than letting them interfere with your trading decisions. Your ability to deal with risks and stick to your trading plan is essential. Personally, I accomplish that through systematic trading with a back-tested system.
Otherwise, you’re akin to a tiny boat in the vast ocean that has lost its way!
Trading Through Thick & Thin
We live in an unprecedented time. Even as the COVID-19 pandemic rages on in its third year across the world, we are also facing a Ukraine-Russia war that has dominated headlines over the past couple of weeks. Technology companies that have initially performed well over the past two years when the pandemic started are now seeing their share price decline over the fear of rising interest rates and lower than expected earnings results.
This, however, has not diminished the interest that people have for trading. Despite the uncertainties in the market, Collin shared that a combination of factors has led to greater interest in trading in the financial markets. High volatility, which many long-term investors may find as less-than-deal, can be used as an advantage by traders.
With the right risk management strategies and tools in place, traders can ensure they limit the losses they incur on losing trades, while enjoying a higher upside on their winning trades. Also, using derivatives like CFDs, traders with a shorter investment timeframe can take both long and short positions in their trades, allowing them to profit from either direction of the market.
One instrument that retail traders can also consider using to trade is knock-outs. Offered by IG, knock-outs can be used to trade various asset classes like forex, shares, indices and commodities with a unique feature – if prices go below or above a certain loss level as set by the trader, the trade will automatically be closed out. This way, knock-outs allow our upside as traders to be unlimited while limiting our downside risk. It allows the trader to set the maximum amount he/she is willing to lose in a trade. This can be particularly useful during a highly volatile period such as the one we are currently facing where major market movements within a day can be the norm. Like CFDs, traders can take either direction of the market and a small premium is paid only when the knock-out is triggered.
Younger traders may also extract value from being part of a community. For traders in Singapore, the IG Community provides a forum where traders can participate in forum discussion, read articles written by analysts, or watch video content on IGTV On Demand
For those who are new to trading, it’s advisable to start off your trading journey with a demo account. An IG demo account starts off with $200,000 virtual credits for you to practice real trading on different asset classes using various strategies and to familiarise yourself with the fundamentals of trading without using actual money. A demo account will also allow you to access the IG Academy where you can learn more about trading via online courses, live sessions and webinars that are available. Once you are confident, you can then transit to a live account where you put actual money in your trades.
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