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Michelle Obama once said, “you should never view your challenges as a disadvantage. Instead, it’s important for you to understand that your experience facing and overcoming adversity is actually one of your biggest advantages.”
The road to success is often paved with failures. This can apply to many things we pursue – our education, careers, relationships and our investing and trading journey.
Successful investors and traders don’t reach where they are today without making some mistakes during their journey. For some, these may even be major mistakes.
Collin Seow, founder of The Systematic TradersGPS, is someone who understands what’s like going through significant challenges in his trading journey. In 2007, the former remisier found himself staring at a debt of almost $250,000 due to the losses incurred by one of his clients, which he had to bear himself.
In this edition of #myfirstloss, we spoke to Collin about the setbacks he has faced and how he overcame them to become a better trader today.
DollarsAndSense (DNS): We always start each article with the same question. Do you still remember the first time you make a loss in your trade? #MyFirstLoss
Collin Seow (CS): One of my first losing trades was made using pure fundamental analysis. At that point in time, I’ve just completed reading a book about Warren Buffett’s investment philosophies and techniques, and I got excited to apply what I’ve learnt.
I found this Singapore-listed stock called Informatics. At that time, Informatics ticked all the boxes based on Warren Buffet’s philosophy. They had a monopoly; quarterly and annual growth were good; management was competent; and catalysts for growth were there. Many analysts were also bullish about the stock.
I bought it for $1.30 and cut my loss when it dropped by about 20% to $1.10. It has since dropped to less than $0.50 (Editor’s Note: Price as of 25 February 2020 is $0.03)
DNS: From past interviews, we know you started investing and trading when you were young. Did losing money on your trades affected your confidence in any way?
CS: To say that losing on my trades is not a problem would be a lie, especially when you’re just starting out. However, having your confidence shaken is part of the process that every successful trader and investor has to go through. The truth is you will never be right all the time.
Some people could take longer, which is fine, but it is a process that cannot be skipped. Fortunately, I could pick myself up quickly after setbacks. I quickly learnt to be emotionally stable when dealing with losses.
To succeed, you have to possess a mental approach when you trade, and free your mind from wins and losses. Only with that can you continue to look forward and focus on the next trading and investment opportunity.
For me, I went back to the drawing board and figured out why traditional Fundamental Analysis and Technical Analysis didn’t get me the results I desired. I tried a plethora of different things before I chanced upon Comparative Strength, which allowed me to get the results I wanted and formed the basis of how I build out all my trades today.
DNS: You suffered a major setback in 2007. Share with us what happened?
CS: Initially, I was trading on my own. I was also a remiser back then, and most of my commissions were generated from my own trades. My initial goal was not really to serve any clients, but I did have a few clients who followed me closely.
In 2007, one of my clients incurred a loss of close to $250,000 while trading warrants (a highly leveraged instrument) and choose to declare bankruptcy. As a remisier, if my client was unable to pay for the losses, I would be liable for it.
All of a sudden, I had to shoulder a loss of $250,000. Coupled with my second boy arriving, this was a very challenging period.
DNS: How did you overcome this setback?
CS: Out of desperation, I had to find a solution. I switch from “trading for income” (which was generating good returns for me), to “trading for growth”. I needed to be able to see the light at the end of the tunnel, and trading for growth was the only way to achieve it at that point in time.
Hence, I dug deep to develop a trading system that could do that for me. After many failures and sleepless nights, I managed to complete the development of the system to my satisfaction, and I started trading using it. Thankfully, the trading system worked out really well and I was able to pay off the losses within 18 months.
Additionally, at the request of many people, I held trading programmes to teach others how to trade using the methodology on their own, which I’ve never done before previously.
DNS: On hindsight, do you think your major setback in 2007 actually help you in the long-run?
CS: Yes, oddly enough, the setback has impacted me positively in many ways.
During the setback, I made many new friends, many of whom lent me their support during this difficult period, and these are friends that I still cherish to this very day.
Without the setback, I would probably still be in my comfort zone, not pushing myself to cross my boundaries and come up with my own trading algorithm.
The bitter experience also gave me a vision of building a strong financial community of traders and investors, helping each other in their own personal journey.
DNS: Do you think you learned more from your failure as compared to your successes?
CS: Definitely. As humans, we tend to take things for granted, and it is only through failure that we get reality checks and understand that we don’t have absolute control over everything.
We need to learn from our mistakes, understand how to survive, and most importantly, appreciate the true value of what we want in life.
As the movie character Rocky Balboa said: “Our greatest glory is not in falling, but in rising every time we fall.”
DNS: Looking back at the mistakes that you have made in the past which you regretted, what do you do now to avoid them?
CS: I’ve made plenty of mistakes and here are my golden rules that I now adhere to:
1) Don’t trade on rumours, no matter how tantalising they are. I’ve been caught a few times with this.
2) Do not over trade. Trading is a marathon, not a sprint.
3) Do not hold any big positions that require monitoring while travelling or holidaying. You won’t be able to handle it correctly.
DNS: Many people are afraid to start trading because they naturally have a fear of losing money. What would be your advice for someone like this?
CS: Bill Gates was right – the reality is everyone needs a coach. Trading is essentially a game. To play this trading game well, you need to have someone showing you the right path, and the mistakes to avoid.
In addition to getting a coach or mentor, invest in yourself first. The right education gives us leverage in life.
Finally, start slow, don’t aim to get rich fast at the beginning.
Failure Is Part Of The Learning Process As A Trader
As an experienced trader who has encountered his fair share of losses in the financial markets, Collin understands the importance of keeping his emotions out from his trades, and to focus on outcomes that he wants.
While there is no way to avoid losses altogether, what traders can do to limit it will be to implement good risk management practices. For example, Collin avoids holding large positions when he is unable to monitor them constantly and chooses to trade within his means. A good trading platform like IG can help you manage your risks via various tools offered.
Whether you wish to trade Contract for Differences on Forex, Shares, Indices or Commodities across major markets around the world, IG offers a wide range of products and services over 16,000 markets for new and veteran trades can access.
New traders should also consider starting with a demo account, where they can practise trading with up to $200,000 in virtual funds. This also allows you to gain access to exclusive educational content on IG Academy, where you can learn from online trading courses, webinars and even a forum to discuss with other like-minded traders.
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