Trading for a living

As mentioned in my 2Y Real Estate Blog, i was cleaning up to find articles that can be suitable for this blog where i read about my article in 2008 on trading for a living. 

Maybe you will find the article interesting but i am not going to 'repost' the entire article here.

One reason why i segregated my blogs into various categories (Investing - Starfish SRS Fund, Trading - Ninja Master Fund, Punting - Singapore IPOs, Real Estate - 2Y Real Estate Fund) is so that beginners who are just venturing into investing and trading are aware of the differences.

Back to the topic today, is it easy to trade for a living? My frank answer is I don't know because i have never ever tried it. I don't think it will be easy if you have 6 mouths waiting for you to feed from your trading income. However, what i do know is that if i ever need to trade for a living, i think i can make it happen because i have already learnt the art of trading through all the school fees i paid to Mr. Market. There are many different types of traders, traders who scalp for a few cents, traders who trade within a day and square off all positions, traders who swing trade for days and traders who swing trade for weeks. You have to know which category of traders you belong to. I have share a lesson on time frame previously. It is sometimes difficult for me to share some of the trades because our time frames can be very different.

Let's talk about the tools or environment you need (or what i think a trader needs).

1. Money management skills 

The ability to cut loss is very important. If your hands freeze when it comes to cutting losses, trading is not for you. Please consider other asset classes or methodology. I have shared with you previously that you must know yourself! When i enter each trading position, i know exactly where my cut loss is. 

2. Volume and Volatility

Traders need to trade instruments that is liquid and possibly volatile. Without volatility, a trader is 'dead'. Imagine trading some of the stocks that i have in my SRS portfolio, i think the trader is going to be very hungry. Pick the right stocks and shares for trading. When i trade, i only pick stocks that have a healthy volume or better than usual volume.

3. Technical analysis (TA)

When you are trading, fundamentals analysis will be of a lower priority. I use FA to pick stocks to invest but i use TA to pick stocks to trade. Test out a few indicators to get a feel of how the indicators are. There are so many indicators available and being created every now and then. Just pick those TA indicators that you have a 'feel' for. For example, i used the following TA indicators when i just started: Candlesticks, MACD, Parabolic SAR, Bollinger Bands, Stochastics, RSI, Trend lines, supports and resistances, Sooner or later, you will realise that you will use the same few indicators again and again. I have since cut down my indicators to just a few of them to make trading decisions. I will not tell you which indicators i used as these are very personal to each trader. You have to discover for yourself which indicators or tools work best for you as a trader.

I have also shared my trading journey previously. You can find the link here.  Dr. Elder shared about the 3Ms in his book, trading for a living. Money Management, Mindset and Methodology. I still like this classic book best if you intend to venture into trading. You can skip the rest of his books (just like RIch Dad Poor Dad, i only find the first one inspiring. hahaha). 

Happy trading.