Tribute to Chester Bennington

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the frontman of Linkin Park, whom many of us in my generation grew up with

I woke up to he news of Mr Chester having passed away due to suicide.

Linkin Park’s music, fronted by Chester with his distinctive style and expressions through his screams and yet fluid vocals, gave solace to many who can relate to the songs the band wrote.

I am one of those who found solace in their music during the worst times of my life. It may sound crazy, but it is known as a fact that when feeling low, listening to music that express your feelings can be therapeutic, instead of you expressing it yourself through self-hurt.

Suicide is not something to be taken lightly and the irrationality of it is well understood by those who are lucky, privileged, perhaps, to have never experienced going through depression, anxiety, or other mental illnesses that create thought loops that lead to one conclusion, as one of their song titles aptly put: In the End  (it doesn’t even matter)

I won’t be adding contrived statements on how this is related to trading. I have already discussed about mental issues affecting trading in a previous post.

Dedicated to those who are pushed to the edge. There is always the choice to be made. TO jump, or to step back, and pick yourself up again. Fail, pick yourself up, and carry on away from the edge towards infinite possibilities that you never knew were there.

Dreams are meant for you to happen. Ending it all ends everything, including your chance at making dreams come true.

Trade Smart, Trade Casual, and seek help if you find you’re pushed to the edge.

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Sunday Thoughts: “I want to turn $1000 to $2000 by next week.”

Perspective

Who is right?

It is possible to turn $1000 to $2000 in a single bet in forex, in one day, in one minute, in one week, or one month, or any financial instrument that allows margin. Say for under Singapore regulations, the maximum margin allowed is 1:50. Meaning if you’re trading forex, every dollar you trade is worth $50. Overseas brokers can allow margin up to 500. Imagine your $1 being worth $500. And you have $1000 to trade. You effectively have $500,000 of margin.

With $500,000 of margin, you can do lots with it, just as what you can do with a bank loan. But it’s very, very different from a bank loan.

Simply because if you use all your margin, every little movement of a forex price (pips in common language) is going to be worth alot of money.

So as an example, with using all your margin of $500,000, betting long on the USDCAD on last Friday’s NFP results (which turned out higher than expected, but the USD CAD dropped by 60 pips in 5 mins), each pip is worth about SGD$38. So a 60 pip move against you will lose you $2280.

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HOW CAN I LOSE MORE THAN I HAVE? (learn to read bro)

Ok. So that’s what can happen. So let’s say it moves 60 pips in your favour. Thats $2280. Congratulations, you managed to turn $1000 into $2280 in 5 min.

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Dr Van Tharp in his book Super Trader did a very good experiment on this. And found that when it came to the biggest winners, there were basically 2 types: The one who bet large bets and got lucky, or the one who places small bets and profits little by little.

So who is right? Both are reasonable, and very possible ways of turning $1000 to $2000 although the more patient trader will take a longer time.

It’s all in your risk appetite. If you can’t afford to lose $1000 or even more (don’t be fooled that you’ll be closed out at $1000. Price can move so fast, the broker will just close it at the next possible price, which can make you lose even more than $2280 if there’s no one to take your stop loss. Happened to me once. And once is enough.), but willing to risk it because you have really nothing left to lose and wanna have a chance and doubling your money in 5 minutes, nobody can stop you.

The patient trader has an edge over you though. And it’s survival. Time. And luck only knocks a few times.

Which of the 2 types of big winners do you prefer to be? Rationally thinking, which is the right way to trade?

Both are possible. The only difference is time. And of course, this very important question if you want to be the big bet big winner trader:

What’s your next plan for the next trade?

Happy Sunday.

Destructive Emotions will Destroy your trading account. Here’s why.

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I absolutely loved the wisdom in this book. Highly recommended, and applicable to trading

I read this book several years ago. It is quite a deep conversation, but also a highly enlightening insight into destructive emotions that cause a cycle of suffering. Seen below

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Hard to read but very good examples of how it can be applied to trading as well

I have a Masters in Guidance and Counselling, and you probably have no idea what does that have to do with trading. I would say, 90%.

Because when trading, with real money, we are so attached to the value of money, it evokes strong, extreme emotions in us. And, sure enough, “over confidence” has been identified as a destructive emotion.

What is the result of destructive emotions? What is the cause? Well, it starts with having irrational beliefs. In the case of trading, most people think trading is all about getting the market right, predicting the right move, and finding the right guru to tell you where the market will go. It is irrational thinking, because the future cannot be known, hence your belief in the Holy Grail will only result in destructive emotions, such as anger, envy, hatred, which will lead to destructive actions and behaviours, such as revenge trading, doubling down too big, moving your stop loss, and changing your mind when you decided to break even, and when when you see profit, and greed takes over, and decide to add to your profit instead, you lose everything, very quickly.

Irrational beliefs, such as thinking trading can grow a $1000 to a $10000 account in one month consistently, gives you over confidence when it happens once, and then to despair when you get your margin call, and you double down to earn it all back, losing even more, and giving up what could potentially, if you had gone through proper coaching and embraced the rational thinking of trading, lose your dreams of being self employed, enjoying great quality of life, being detached from money, and overall attain happiness you never thought possible.

Which comes back again to my take on being a reflective trader. Do you trade with irrational beliefs? Are these beliefs leading to irrational, destructive actions, which feedback to your irrational beliefs, ending up in a never ending cycle of trading suffering?

Something to think about, and definitely not to be scoffed at. Most real traders will agree with me, that they have learnt more from books on trading psychology than from technical trading books. And that has actually sharpened their edge. At least, that has, for me. Perhaps you can try the same. And start, if you haven’t, read about trading psychology more, than about trading strategy.

Happy trading!

 

Where is the line between gambling, speculation, calculated risk taking, trading, and investing?

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There is only one side of the market and it is not the bull side or the bear side, but the right side. ~ Jesse Livermore

How we wish we were always on the right side, don’t we. Some may say, be with the smart money, don’t be with the dumb money, but who ever wants to be with dumb money?

I had an interesting conversation today with an old friend. We talked about a varied approach towards trading, and it was quite interesting to try to pin down what exactly was trading, and what defined it. “Calculated risk” may seem to be the best answer, but it is also too general and misleading, especially if your calculations are based on gut feel, and your risk is too high.

I have met with some whose background in investing is basically bets on soccer, using some method of calculating the odds, and using some formula to decide on how to size the bet. It sounded alot like a calculated risk, but no doubt, it was gambling.

Then there’s speculation. It sounds more benign than gambling, but essentially it is still betting on an unknown future, be it in stocks, forex, or the weather.

Now we come to the debate between trading and investing. And it came to my mind because of the conversation I had, because investing seemed like the “zero risk” approach, investing in products sold by the banks, with “full capital guaranteed” clauses, with decent returns of 3-5% a year.

But what the institutions do, are basically speculating and trading in a portfolio of equities, bonds, commodities, forex etc. How is it being sold as “risk free”?

I guess in essence, investing is widely accepted to mean putting capital into a product for capital appreciation, or for some interest return in some form, be it in rental or dividends, even swaps if you invest in forex.

Did I just say “invest in forex”? Some may call me out on saying that. But isn’t that what the institutions are doing, distributing your capital into currencies, and selling you an “investment product”?

What do I do? I trade forex, for a living. What does that mean? I have a set amount of capital, I allocate a percentage of capital into products known as exchange rates based on price movements, and make profits and losses whether I am on the right side, or the on the wrong side. And since I am doing it for a living, it means overall, my profits exceed my losses, and my capital is growing. For now.

I do not know the price of the USD/JPY tomorow, or later at night. But I can make an entry based on price patterns and other information that allow me to make a “calculated risk” on how much to “bet” and where to take profit, or to cut a loss.

Am I gambling?


To me, the line is very clear. And it lies not in definitions or words, or descriptions.

The line is drawn in the Mind.

I am a forex trader, running a business, making calculated risks on future, unknown prices, and allocating small amounts of capital for every position, with the aim, in Mind, to grow and compound the capital over time. I don’t aim to grow 100% in a week, but I do aim to beat the market by a fair margin, over the course of years.

So which category do I fit into?

There’s a Smart Casual Trader™ in all of us: Lessons from Monsters University

I love Pixar movies. Partly because not many people know that Steve Jobs had a large role to play in changing the animated movies industry not just by helping fund the small company, but through his legendary “reality distortion field”, managed to put Pixar on the map through tough negotiations with Walt Disney. Many of Walt Disney’s animated movie successes would not be possible without Pixar.

I digress.

Pixar movies move both kids and adults. And the script, storyline and characters, are mostly the brainchild of one man: John Lasseter.

I digress again.

Monsters University has a deep meaningful story. A story of Mike, the least scariest monster, gunning his way to pursue his dream to work in Monsters Inc. as a scarer. Despite the odds against him, he uses his strengths, his determination, and resilience, to build a team to top the university’s scaring program.

On the other side, we have Sully, the “sure-win”, overconfident, privileged monster who believed he didn’t need to try hard at all to be the best.

To cut the story short, things didn’t go well for both of them, but they had to team up in order to stay in the program, and group up with other non-scaring monsters in order to win a scaring competition to stay in the program.

To inspire the motley group that they have what it takes to be scarers, Mike brought them secretly into Monsters Inc to see real scarers at work. And the lesson then, was to realize that each monster had their own unique characteristics, using their strengths to their advantage to scare: Each monster had their own edge, there was no one “type” of monster like Sully, who was big, strong, and had a unbeatable roar. In other words, to succeed in scaring, it had little to do with who you are, what you look like, but rather, how you used your special talents, your edge, to be successful. Some of the scarers looked silly, even, but they still worked as top scarers, by leveraging on their edge.

The tagline for Monsters University is : “There’s a monster in all of us.”

And that is so true, for trading, or whatever you want to pursue. Don’t be intimidated by the men and women with the credentials in black suits, equipped with the top equipment, working in the top banks or funds. There is no one archetype of a successful trader. And I believe I’m a living example of such.

Find your edge. And the edge comes from being Smart, Casual.

Forget putting on your black suit and tie and put on your most comfortable T-shirt and shorts.

This is the Smart Casual Trading™ philosophy to be a successful trader, no matter what strategy you use.

Happy trading!