Today, I finally took action and made a step out of my comfort zone.
I think it started from my trading goals (guess by now some of you know about my trading goals for 2010). And this is why we must set goals. At first, we may not have a clue on how to achieve our goals. But along the way, we tend to see possibilities that we previously failed to recognise and begin to make adjustments. If you asked me, I did not know how to achieve my trading goals but I want to attain them.
Recently, T3B organised the annual gathering for 2010 where Keane shared his insights on the markets in 2010. I had a brief moment of enlightenment when Keane commented on people having not enough capital for trading. It kind of hit the bull’s eye of my current obstacle to my trading goals which I did not see as a real problem. Trading a large capital in turn requires stronger psychology when it comes to handling wins and losses, as well as money management. Initially I thought that by cultivating and having good trading skills, it would help me gain bigger profits and meet my goals. It was until the issue on capital that created the paradigm shift in my perception. The key to bigger profits is to have a sizeable capital and strong psychology. For capital, we know that money grows money and more money grows even more money. That’s why the rich get richer. But you cannot just have capital without strong psychology, because you will mismanage your money and lose your capital! Strong psychology will help you trade without emotions even when you are trading a very large capital. It should help you trade the same way with large capital (say $1 million) as with a small one ($1,000). Thus, the key is not about the trading system, but the other 2 factors. Applying to myself, these are the 2 areas that I need to grow in order to meet my goals.
Keane said, “go find money!” And I was saying to myself, “yes, why don’t I think of that?” Sounds like a stupid question but sometimes it is just not obvious when you are too focus on other things (trading skills). As I started to explore my means…
The loyal readers of BigFatPurse would also know that I invest in STI ETF via the Share Builder Plan from POEMS. I decided to liquidate the majority of my STI ETF shares and channel the money to fund my trading capital. The purpose of the Share Builder Plan is a form of long term safe investment that I committed myself to. It took great resistance at first to liquidate the position. I was contemplating but decided that since I have set goals for trading and moreover if I succeed, it will be able to give me a greater return. I believe some of you think that it may be a wrong decision but I am frustrated with the meager returns from trading, even though I gained 50+% for 2009. It has come to a point that playing safe is risky for me and I am glad that I took a step out of my comfort zone. Although I have liquidate a large part of STI ETF, my monthly investment via the SBP is still ongoing and please do not mistake it as though I have forsake the whole plan altogether.
I am still looking for ways to beef up my capital which will force my psychology grow in tandem in order to trade properly with that sum of money.
I am not sure about you. If you are having some successes with your trading but your profits are not substantial, you may want to do a reflection. The problem may not be your trading system or your skills. It may just be the amount of capital you trade is too small.
{ 7 comments… read them below or add one }
yes, money makes money provided you don’t invest in something that loses money :p
It is a brave move to put additional capital on the risk table, trusting your own skills in chart reading and market timing.
I did the exact same thing with my ILP this week, liquidated the policy after determining it has tracked the major market moves for 2009 and has covered some of the losses from 2007-8. It is sad at 1st since the policy has been effected for almost 12 years (a lost decade??), but I’ve decided I’m confident enough to start being my own fund manager, and should be beating the returns on the policy this year onwards.
And T3B rocks!!! ;)
Actually I think the best way to make money is through work, instead of taking out from your instrument of investing. Basically you’re just taking money from one pocket to fill another pocket.
To get more capital? Work more and save more. Now, that’s fresh capital.
Hi Alvin,
I disagree. Capital is key, so u need to protect it with the proper stop loss.
But capital is not key that u need a lot to trade. hw much to trade it should be based on proper money management trading techniques after setting aside the required emergency funds, protection plans & portfolio management.
Indiscriminately increasing yr capital for trading is not going to make u a better trader. Results should not b measured in absolute terms, it should be relative.
BTW, would u like to exchange blog links. I have placed yrs on mine alr. Cheers!
I knew that I wont be convince many people. In fact, the more people disagree with me, I am more confident that my decision is right. Trading is like exntrepreneurship, if we don risk capital and hard work, business cannot be built. If you do not like the uncertainty, and play it safe, do not expect to get much from what you are doing.
I totally agree and support you, Alvin.
Capital set aside for trading is capital at work. So long as the downside is protected with proper risk and money management, the return on equity will come as a consequence of making good trades.
Nobody cares more about managing our money than ourselves. :)
If you don’t have a big capital, its fine, start small. Most contract size is quite big so small capital is a problem. But you can trade forex. Forex has mini and super mini contract, captial of USD$200 is sufficient.