This article was written in partnership with IG, the world’s No.1 CFD provider (by revenue excluding FX, June 2019). All views expressed in the article are the independent opinion of DollarsAndSense.sg
While trades are typically made to profit in the short-term, learning how to trade successfully should be viewed as a marathon rather than a sprint.
The journey to becoming a good, profitable trader is something that takes patience, discipline and focus. No one understands this better than Alex Yeo, a self-directed trader who primarily trades futures and options.
Alex is a Certified Financial Technician (CFTe), accredited by the International Federation of Technical Analysts (IFTA). He is also the co-author of “The Traders’ Blueprint”, a Kinokuniya bestseller in 2018.
In this edition of #myfirsttrade, we spoke to Alex about what motivated him to start his trading journey, and find out the lessons (and mistakes) he has learnt through the course.
DollarsAndSense (DNS): We start off every interview with this question. We know it’s a long time ago but can you still remember your very first trade, and how did it end up performing for you? #myfirsttrade
Alex Yeo (AY): I started with stock investing in 2011. To be honest, I can’t remember the first stock I invested in. What I do remember was being very eager to take action after attending an investment course.
I bought a few stocks on the same day worth about S$10,000 after attending the investment course. I can’t remember all the stocks I bought but they include GK Goh, Metro, Orchard Parade Holdings (now known as Far East Orchard) and Chip Eng Seng. I bought them because they were deemed “undervalued” by my investment mentor.
But I bought them at the wrong time. Not long after, the European debt crisis (EDC) hit and it created massive fear worldwide. Singapore stocks were not spared then, and the valuation of the stocks I invested in plunged to about 30-40%. As I was still a newbie, I didn’t have the psychological fortitude (or the right knowledge) to hold on to my stocks, thinking that the stock market was going to crash further. I panicked-sold my stocks and lost about 40% of my capital.
On hindsight, my very first (basket of) stocks were indeed undervalued, and they eventually climbed their way above my entry prices had I held on to them till today. The EDC was just a temporary “bad news” event. In fact, it became a non-event eventually and markets rebounded.
DNS: What were the reasons that make you start investing?
AY: I ran an online business, and it did pretty well, so I saved up some capital. I wanted my money to work for me, instead of just keeping it in the bank. But the issue was, as an engineer by training, I had no prior investing knowledge or skills.
This was also why I decided to attend an investment course to equip myself with the right knowledge before starting.
DNS: Most people start their journey as investors. What prompted you to make the move from being an investor to becoming a trader?
AY: My mentor during a course taught us some simple technical analysis. I became intrigued by it.
At that time, reading price charts via candlesticks was totally new to me and even simple indicators like moving averages would fascinate me. Somehow, I just prefer analysing “price” on charts to “numbers” on a financial report. Subsequently, I dived deeper to learn more about technical analysis and trading in the shorter term.
DNS: There are many types of trading instruments available. What were the reasons why you decided to focus on option trading?
AY: Indeed there are many types of trading instruments – stocks, indices, futures, options, FX etc. I have tried and traded them all. Eventually, I decided to focus on options trading because it was able to give me more consistent returns compared to the rest.
However, option trading is notoriously difficult to understand. It took me some time before I understood the concepts and know how to trade it. My business partner, Alvin, traded options previously. His experience helped me to cut short my learning curve, as I can just ask him questions directly. He also shared what he traded before as case study. So that helped also.
DNS: New traders are always trying to find the holy grail of trading as soon as possible. What will your advice be for these new traders?
AY: The holy grail of trading doesn’t lie in any secret technical indicator but rather learning to read price action that differs from common textbook knowledge. Learning what won’t work can also help you discover what works. It is important to understand that what works for someone else may also not work for you.
It takes diligence and skill, as well as time and experience. It is a good gauge to give yourself at least 3 years before you give up.
DNS: You did full-time trading for some time. What’s the biggest surprise about being a full-time, independent trader that you want to share with others just starting out?
AY: I joined a proprietary trading firm previously and discovered that day trading (aka intra-day trading) is a whole new ball game.
The strategies that worked in swing or position trading may not work in day trading. I quickly learned that I had to adjust my strategies. It’s a challenging endeavour and the learning curve is steep.
DNS: How does a typical day look like for you today?
AY: I enjoy day trading when the time allows. I trade the Hong Kong index (Hang Seng) which opens at 9.15am (SGT) and Germany index (DAX) which opens at 4pm (SGT). At night, I will be watching the US markets and looking for opportunities for my option trades.
DNS: You have been trading for 8 years now. What’s the biggest lesson you have learnt about trading that you wish you can tell your younger self today?
AY: If given a chance, I would tell my younger self to dive deeper into learning how to do programming. It can be immensely useful in today’s markets when trading is increasingly becoming automated and quantitative-driven.
Learning To Trade Is Like Picking Up A New Sport. It Requires Time, Discipline & Intent
Speaking to Alex, one of the things which stood out was how wanting to be good in trading is akin to picking up and mastering a new sport. If we want to get good in a particular sport, we have to train with intent and hone our skills over time. Similarly, reading up about trading helps, but it will take time, experience and even failure for us to get better.
Starting our trading journey with a demo account from IG allows us to experience how it’s like trading without having to put in any actual money yet. This allows us to test trading strategies and to even determine the instruments that we are most comfortable trading.
Joining a trading community helps. This gives us a platform to discuss and share our experience with other like-minded traders. By learning from the experiences and mistakes of others, we ourselves can become better traders. IG has a trading community that you can join as long as you have an IG account.
The IG Academy is also an online resource that you can use to help in your trading journey. There are online trading courses and live sessions that you can participate in to better familiarise yourself with trading.
The trading journey is not going to be easy. But, as highlighted by Alex, we should give ourselves some time before we throw in the towel. A period of 3 years is a good gauge to build up your knowledge as well as provide a sufficient runway before achieving consistent profits, rather than to expect immediate quick returns when you are just starting out your investment and trading journey.