2018 hasn’t been great for the Philippine stock market. The Philippine Stock Exchange Index (PSEi) fared among the worst performing markets this year, sowing a lot of fear and doubt among new traders on the wisdom of investing locally.
But where there are problems, there are also massive opportunities. And it’s in this economic context that non-brokerage stock market platform Investagrams held its Traders’ Summit 2018. Investors, traders, and stock market enthusiasts gathered together to discuss strategies for getting ahead as a trader.
For those new to trading on the stock market, or interested in launching a career in trading, here are some key insights from some of the best in the field.
You don’t need a ton of money or time to start trading in the stock market
David Ramolete (a.k.a. King Trade) opened the day with a discussion about balancing stock market trading with a full-time career. According to him, many people are hesitant to become more involved in the stock market because they feel they don’t have enough money or time. He stressed that you don’t need much of both to start.
“What’s important is that you start as soon as possible and maximize the power of time and compound interest to our advantage,” he said.
Starting small and just getting the ball rolling is the best move for beginners, he says.
End-of-Day Trading is the busy person’s tool to gain from the stock market
For people with full-time jobs, Ramolete said, around fifteen to thirty minutes a day would be enough to execute end-of-day (EOD) trading strategies. EOD simply refers to a time in the market where the stocks reflect the closing prices for the day. In the Philippine market, that’s between 3:17 and 3:30 p.m.
“Being busy is not an excuse to not earn from the stock market,” he said.
EOD Trading fits most market profiles, from long term investors to short and medium term traders so anyone can profit from it provided they put in the work. What’s more, EOD trading protects traders from the noise of intra-day fluctuations in stock prices, allowing them to focus on bigger moves and capital preservation.
The only limitation to EOD is that it doesn’t give much room for high risk trades that reward quick responses and precision timing.
Choose your battles well
Because EOD traders don’t have much time to monitor market performance, it’s crucial to make safe decisions to be able to turn a profit. The focus should be on bigger moves, based on patterns like swings and trends.
Look for uptrending stocks that have consistently been hitting higher highs and lower lows over a given period, or stocks that are trading above their moving average. Wait for a breakout before putting it on your watchlist, then plan accordingly.
If things go poorly, set a stop loss at levels you’re comfortable with. If things go well, sell at the first sign of resistance. Rinse and repeat.
Focus is what differentiates success from failure in the stock market
“What is the difference between a market loser and a profitable trader? That one thing that will make you fail as traders. That is a lack of focus,” said Nikki Jurado (a.k.a Nomad Finance Girl).
Newbie traders often get so distracted by obsessing over the most successful strategies and the best performing traders that they tend to jump from one strategy to another.
Develop a strategy that works for you and fits your appetite, and stick to it. To be a successful trader, you must be willing to put in the effort needed to hone your own skills and strategies.
Find your purpose. Focus on the right things
The reason so many people quit trading early, Jurado said, is that they simply don’t have a purpose strong enough to sustain them whenever they suffer losses. When money is the goal, it becomes much harder to power through a process that may end up losing more money down the road.
“What makes people successful is what they do with their time and their money. They live their lives everyday with purpose. They have something to fight for; they have values that drive them. That for me is what makes a successful trader,” she said.
“Money is never strong enough to make you stay when everything goes to shit. And I’m telling you right now, everything will go to shit.”
Be welcoming of mistakes and the lessons that come with them
Since much of stock market trading relies on statistics and probability, mistakes are par for the course. Trial-and-error is an essential part of the process, especially when you’re just starting out building your own strategies. Jurado recommends making as many mistakes as you can learn from.
“Make mistakes that you’ll never forget,” she said. “Mistakes that you’ll always regret. Unless you make these mistakes, stupid embarrassing decisions, unless you’re able to go through the shit, you’ll never make it.”
“So make mistakes, fail often, fail hard, but never quit,” she said.
The goal is growth
Celeste Rodriguez (a.k.a. Rooting for Celeste) said that people who are just starting to trade have to commit to being a student.
“You have to have the hunger to keep learning,” she said.
At this stage, the focus should be on building the character and grit you need for success. And that means looking for the best mentors available to you. Positive influence and a supportive community can dictate what direction you go in the future, and is crucial to your early development as a trader.
Rodriguez also recommended establishing early habits like journaling to help navigate what she calls the “Learning Jungle”, where traders try to build a system of their own.
Test your system and strategies once you have them, but don’t risk too much
After about a year into trading and finding a system that works for you, you should then focus on gaining more experience, tweaking your strategies as you go. Focus on risk management. At this point, it’s more about building your own competence and confidence in your system than it is about making money.
“Your goal is to build a system, learn, and survive,” Rodriguez said.
“The more you know about your methods, the more you figure out what its strengths and weaknesses are. If you know it enough, you’ll know when to play and when to pass.”
Always be conscious of the market and adapt when necessary
When you hopefully achieve mastery of your own system, try to strive for consistency. Just because you’ve become a successful trader doesn’t mean you can be complacent. Always evaluate yourself and how you perform in the market.
“It is not the strongest species that survive. It’s the one that is most adaptable to change,” Rodriguez said.
Set rules for yourself and stick to them
It’s often easier to find what you’re looking for if you know how to look for them. This is what Akio Kashiwagi (MoneyGrowers.ph) talked about in his session, ‘The Art of Bottom Picking’. He said that every trader should have a trading strategy, a specific set of entry and exit rules in trading.
Sticking to your rules even if they put you at a loss or you feel like you’re missing out on a good trade will save you some heartache later on.
“Patience is not inaction. It is simply knowing what you are looking for and taking action at the right time,” he said.
Don’t compare yourself to another’s success
What may work for another trader may not necessarily work for you. This is why system-hopping, or frequently changing trading strategies, is so detrimental to your overall growth as a trader.
Kashiwagi suggested that you find a strategy that works best for your lifestyle, your goals, and your temperament, then master it.
“The biggest determinant of a trading system’s success is the ability of the trader to follow it one hundred percent.”
Have faith in yourself
The only way to be a successful trader is to build confidence in yourself and your system. Backtest and forward test your strategies. Collect and look at the data. Look at the patterns that form over time. If you’re unsure, try virtual or paper trading first before you put money on the market.
Once you’ve found a system that works for you, believe in it even in the worst of times.
“If you trade, you must remember it’s like a pendulum. You will experience both the extreme sides: the pain and the joy. That’s how your character will be tested,” Kashiwagi said.
“How you will be able to pick yourself up from the bottom, that is the real art of bottom picking.”