30 August 2018

3 Types of Traders and Investors (Which is you?)

As a stockbroker, there is a lot about a trader on how much he watches the chart and the questions he asks. It can be intriguing for some, but it will be easy for you to understand once I characterise these traders based on their chart watching attribute and other whatnots.

Amateur

An amateur doesn't spend much time watching charts as he doesn't know how to interpret it. But he does put in a lot of work and effort in forums and blogs, looking out for advice from experts. Most traders tend to be successful at this point in time in their career as they do trust and follow expert advice meticulously. It is mostly because of this initial run traders get lured into the trading fraternity and want to take up the career.

A few behavioural characteristic questions include:

"So the DBS shares, if S$20 can buy?"
"Market good or bad now?"
Will market crash in 2019?"
"What is the best stock to buy?"
"Which shares can short to make more money?"
"I bought Singpost at S$2, should I still hold?"
"How come today ST Engineering did not rise in price?"

....and the list goes on.

It is very very hard to answer such questions in the office with limited time over the phone. Though I am happy to share, the phones are reserved for placing trades during office hours.

In my case, usually, I will reply and try to educate whenever I can. Beginners usually take things in a fixated view, as a result, they are unable to see the downside or the other possibilities that may happen in the market.

And worst kind of questions I ever encountered in my line of work,

"How come you as my stockbroker did not stop me from buying this share? Now I lost money because you didn't stop me?!"

We all start somewhere, and whatever we learnt we should give back for free. This is the exact reason why I started this blog.

Intermediate trader

An intermediate trader watches the chart incessantly as the euphoria of learning and understanding the intrinsicality of the market will be overwhelming.

However, the incessant gets transformed into addiction and result in over-trading. The intermediary period can be either the dawn or dusk of any trader. It is the trader’s innate trait of will and resilience to find a way out from the slump and revamp his trading strategy and attitude. The quicker the trader identifies the problem of chart watching, the merrier. But, what happens in most cases is that the traders compensate the loss with more hard work -- chart watching which is like adding salt to the wound.

With these above points mentioned, it is also interesting to note that many people tend to associate more computer screens equates to more powerful and effective trading.

So what if you can see so many charts? Do you have sufficient response time and effort to key in such trades? Likewise usually market is forward-looking, trying to catch that quick trade may result in accidentally losses due to market swings.

Thus with such common impression, those selling trading courses will insert such photos for marketing purposes. This blog does not sell trading courses and I am happy to take any questions, or if you are keen to open a trading account with me. And I would like to reiterate again.

Many many monitor screens are good to have, but it is not a must-have. And for me, I only have 2 computer screens.

Expert trader

He/she who watches the chart only for analysis and only during pre-trade and closes the chart post-trade is the expert. The expert watches only till he makes a trading decision. It is irrelevant whether the decision can be right or wrong, but the maturity to digest the loss is important. If a trader follows a risk-reward ratio of 1:3, he will be profitable even with a 30 % success rate. But it is essential to follow a system for achieving that kind of success.

It is a surprising fact, contrary to many biased views, housewives or working ladies are usually better traders than guys. (That explains the picture above.) It is a combination of rationality and probability that makes up the major part of their trading strategy.

Case in point, my most successful client trades only 5 types of company shares; DBS, Singtel, Venture, SGX and SIA.

Yep, 5 companies only.

She buys, holds and sell at times depending on the market flow. It is very interesting as well as exciting to see her work. I enjoy exchanging trading ideas with her.

Snippets of conversations sharing her views:

"SIA is now back to 2013 low, so let's queue to see if we can get some from sellers at 9.65"

"DBS has been coming down. I have some shares bought at S$29, but let's sell some first at S$27 and see if we can buy back cheaper a few days later."

"Hmm... Venture has dividends and the buyers are rather aggressive, let's hold it past XD and see how's the response."

In conclusion regardless of which types of trader you are, we ALL can be expert traders. We just have to improve and change consistently according to the market. Understanding ourselves is one important key factor to being a successful trader.

Some of the trading courses out there teach swing trading, day trading, with some certain "X-factor" and whatnots. If you really have no idea how the market works, I think such courses will help you to gain some insights. BUT you have to remember this;

If these trading gurus are really that profitable, they should not be teaching courses but trading more frequently in the market.

For my followers who have been following this blog, I would like to state that this blog does not sell trading courses. I am happy to share always, and that is the purpose of this blog: To share, network and exchange ideas with everyone.

Any comments please leave it on the page below, or on our Facebook page

Peace.

*All images belong to respective owners