I Took 2 Weeks' Leave to Day Trade in July - What I Learned

I've been radio silent since the NetLink Trust IPO. Work piled up at the office, and things happened in my personal life that left me very little time for recreation, let alone writing. However, I thought I'd take the time to pen something I experienced in mid-to-late July: day-trading on our local SGX. I'd always been curious about the idea of day-trading, and the allure of working from home and being your own boss is always undeniable.

Of course, I've also heard the horror stories of traders being burned because of bad calls or unstable companies. It is also commonly stated that only a small portion of day traders make a profit - most of them lose.

Source: Tradeciety

Inspired by the 'Wallstreet Bets' reddit group (r/wallstreetbets), I applied for two weeks leave in July to begin my experiment - I took leave from 17th July to 28th July, and set aside roughly 10,000 SGD for my day-trading purposes. My only rule was that I had to close all outstanding positions at the end of the day, regardless of whether or not I made a profit or a loss. I've always been a fundamental analyst, but I have a background in technical analysis. DBS Vickers was my chosen brokerage, and I would be using Cash Upfront to take advantage of the reduced commission. I would be open to trading BOTH penny stocks and blue chips - the counter didn't matter, as long as I made enough money to beat commission at the end of the day. I realized after the fact that I entered the market during a time when penny stocks were volatile, so results might have been different had I entered at another time.

My focus would be on price movement and volume.

If you asked me whether or not I'd do it again, I'd say yes in a heartbeat. The highs and lows of my experience were very interesting, and provided a lot of learning material. People say that you learn something new everyday while you day-trade. Here are my personal takeaways - reminders and lessons for myself in the future.

1) Don't hate the idea of losing - revenge will kill you

I think it's a human instinct to not want to lose at anything, whether it be at games, sports, work, relationships, etc. I've been speaking to a few professional day-traders ever since my experience, and they told me they all learned this lesson the hard way - it's much better to lose a little than to lose a lot. Before I began, I was advised to have a daily stop-loss limit for myself just in case, for days where everything seems to go wrong. A daily stop-loss is a percentage of money that one is willing to lose before they stop all trading for the day, and just take a break to cool off. The idea of this was to prevent revenge trading when fueled by emotion, much like a gambler who doubles his bets trying to recoup his losses.

Rowsley (A50) was my go-to stock for a couple of days - I was lucky enough to begin trading when Peter Lim announced his intent to inject medical assets into Rowsley. The price shot up, and I made a few points every day. Then the price reversed, and began moving down. I began selling, making losses. In response, I began buying aggressively, hoping to recoup. In the end, I was left with a slight profit, which could've been avoided if I'd kept my cool.

2) Always shop around - emotion gives you tunnel vision

At the same time of Rowsley's decline, there were other opportunities in the market. Counters like Sincap (5UN) and Jiutian Chemical (C8R) were on the rise, and if I hadn't had tunnel vision, I could've taken a loss in Rowsley and moved into either counter, which would've netted me a lot more. I did eventually move into Sincap, where I profited a couple of days, before I cut loss when the price began to dip. Fortunately, I'd learned from the Rowsley incident, and I exited with a tiny loss. I was glad I did, too - the price moved further down over the next few days.

3) Percentages don't mean anything - look at numbers instead

Now, I didn't learn this the hard way. Rather, it was something I picked up along the way. I can't remember which counter it was, but apparently results were superb, with quarterly profits tripling or so from the previous year's numbers. It sounded impressive on the surface; thing is the company had only just managed to make a profit the year before, so their profits in the previous year were minuscule. The much-lauded "triple profits" didn't even bring quarterly numbers back up to the levels they were a few years ago, when the company (and the stock price) was doing much better.

Even under pressure/time to make buy/sell decisions, there's a lot of difference between '400% increase in profit' and 'only made $1 last year, but made $5 this year.'

As expected, the stock price didn't rise much. In fact, it didn't rise at all.

4) Get a strategy and stick to it

The idea of freedom and being your own boss is a great goal to work towards, but that's all it is - a goal. I didn't have a solid trading strategy in place when I began. My premise was simply make as much money as possible. The most professional/profitable day-traders have developed their own plans or strategies that help to keep them focused and cool during trading. In my case, I made the mistake of chasing profits in order to make up for bad days. A common misconception about day-trading is to make a couple of hundred dollars every day, then shut off the computer and have a cup of coffee. Profits are uncertain here. You might lose a couple of hundred over three days, then break even the day after. Just get a strategy and keep at it.

---

So, how'd things turn out?

All in, I walked away from that two-week experience with a rough 9% return off my intial $10,000. I made a ton of mistakes, and I aim to learn from them, even in investing. However, the experience was something special - the exhilaration of locking in profits, and the Dark Souls-esque frustration of accepting losses. Much respect to real day-traders out there, who have managed to implement strategies of their own, and who have managed to quit their jobs and control their own income.

In the meantime, I am studying for the GMAT exam, with a Master's as the target. If any of y'all want study material, you can hit me up.

Thanks for stopping by.

Until next time.

Creed


3 comments:

  1. Sgx? Which. Broker you using? Wont the commssion kill?

    ReplyDelete
    Replies
    1. Hey there! I use DBS Vickers. I use Cash Upfront, which offers a lower commission rate (currently 0.12%). I managed to make some nice profits on some trades, so commission wasn't really an issue.

      Delete
  2. Participate in the SmartRE Token Crowdsale for a piece of investments in the largest and safest single market real estate industry - the United States. SmartRE, the first real estate tokenization platform using the Ethereum blockchain to help both homeowners and investors.
    Supported by highly credible and renowned global advisers that includes- Prof. Lee Sung-Ju, the Endowed Chair Professor at the Korea Advanced Institute of Science and Technology.

    NO 1MDB or SRC International related Advisers nor Directors!

    Add this SUPER GLOBAL and INTERNATIONAL TECH-SAVVY LAWYER CODE : HA7832019

    AND GET A 2.5% EXTRA BONUS!

    https://www.smartre.io/token-sales

    ReplyDelete

Powered by Blogger.