Author: Investa

As we enter a new year, there is one thing that is surely in every trader’s mind right now: how can I trade better this 2020? 2018 and 2019 were no doubt very challenging years, even for the best of us. However, there was a key difference between both years; the 2019 market was challenging on a whole other level. 2017 was a roaring bull market which made a ton of investors a lot of money, and a lot of people resigned to become full time traders. However, in early 2018, little did we know that we were at the tail end of that amazing bull run. Before the bulls went home they made their final run in the form of $NOW, $HVN, and $VITA to name a few. But when the world needed them most, they vanished. (Yes Avatar pun intended).

But there’s a huge disparity between the 2018 and 2019 market environment; in 2018 we were in a bear market, while in 2019 we were in a whipsaw market. After the bull run topped at 9k levels, we immediately experienced a turn in the market. We were in a downtrend, and it was obvious. And that’s the best part, the fact that it was obvious. Knowing that we were in a bearish environment, any trader could’ve simply remained in cash and wait for potential outliers.

The next best part about 2018 is despite being in an overall downtrend, there was a ton of speculation going on. I’m pretty sure most of us remembers the telcoserye and how that went down. There were also other outliers like $ATN, $FB, $PPG $ABA, $VUL, etc. There were obvious times where we needed to remain in cash, and there were obvious times where speculation led to several opportunities. 2019 was a different animal.

Starting off 2019 was actually a good period, bears were still mostly in control but there were still a couple of outliers like $WLCON, $GREEN, $HOUSE, $PHEN, and $HLCM. But the latter parts of the 2nd quarter all the way to the end of the year was totally different. Yes there were still opportunities in names such as $KPPI, $PPG, and $MWC, but for the most part we were in a whipsaw environment.

Unlike in 2018, the 2019 market had no clear direction. If you didn’t have a macro view and relied purely on technicals, the market has basically been sideways. Every time the sentiment shifted negatively, that’s when the index begins to rebound. Then every time the index tries to break key resistance levels, it gets sold off a few days after. It was “A Death By A Thousand Cuts” type of scenario.

Nevertheless, it’s a start of a new year. We’re not in blue skies yet, but that doesn’t mean we can’t find ways to improve our trading. Let’s take this beginning of a new decade as an opportunity to become better and wiser traders. Here are a few tips on how to trade better this 2020:

TIPS TO TRADE BETTER THIS 2020

1. TAKE RESPONSIBILITY 

One of the key things we all need to begin doing this year is to take responsibility for ALL of our outcomes. This includes all the mistakes, difficult periods, and setbacks. There’s always one common phrase we hear whether it’s from our trader friends or on social media, “Hirap ng market eh!” That’s a phrase we need to stop saying in order to truly take responsibility.

Blaming the market for a drawdown is an excuse. We do not control what the market does, so what we should focus on are the factors we have control over. We have control over our entry, stop loss, position size, strategy, work ethic, discipline, and the like. It’s time to begin focusing on those and taking full responsibility for all our results and outcomes.

2. JOURNAL RELIGIOUSLY

In his book, Think and Trade Like a Champion, Mark Minervini mentions how conducting regular post-performance reviews made him a market wizard. It doesn’t take much to journal every trade you make, all it takes is the discipline to turn this into a habit. Even summarizing all your trade logs doesn’t take much time since everything is automated these days.

If you’re an InvestaPrime+ subscriber and have access to the InvestaJournal, all the fancy graphs and advanced analytics are automatically computed and shown after every trade log is entered. The same goes if you have a handy excel sheet. Most of the effort happens when you actually analyze all the numbers and statistics. As Mark Ritchie, famously known Momentum Master, said, “You find some of the best ‘Aha’ moments when you study your previous trades.”

3. RISK MANAGEMENT

You’ve probably heard this over and over: “Cut your losses and let your winners run.” It’s also most likely in almost all trading books just simply rephrased to avoid boredom. Well, it’s said again and again for a reason: IT’S FACTS. There’s a reason why the importance of risk management is in most trading books and interviews with some of the best traders.

Ed Seykota, world-known market wizards, said that three key things you need to do to have a CHANCE of being a successful trader is: 1. Cut your losses 2. Cut your losses 3. Cut your losses. Ask any market wizard or successful trader you know, they will always mention that risk management is key to becoming profitable.

4. PREPAREDNESS

Here’s another thing we hear all the time, “Have a trading plan.” It’s also probably something most of us do religiously already. But there are still some out there who trade on impulsive behavior, which may work in some cases but for the most part, will not benefit you in the long run. Trading out of sheer impulse may get you a winner or two, but do this on a consistent basis and you’ll eventually run into a stock that goes up 15% in three minutes just to go down another -20% the next. If you want to trade better this 2020, you need to have a plan for all scenarios.

5. COMMITMENT

You don’t lose when you lose all your money, you lose when you QUIT. Any trader can make one winning trade that can change their life, but to make money consistently from the markets over a long period of time requires a deep-rooted commitment to becoming the best trader you can be. In the words of Javi Medina during InspirePH, “You have to COMMIT to MASTERY!” Without that undying commitment for the game, small bumps on the road will bring you down instantly. If you want to trade better this 2020, you NEED to have that undying commitment.

Also, only those who commit to mastery put in the work required to become great. Always remember, anything great won’t come easy. You have to dedicate a tremendous amount of time to be one of the best at this craft, you have to become a perpetual learner. When the going gets rough, when your back is against the wall, and all odds are against you, the only thing that will keep you up is your undying commitment to become the trader you always BELIEVED you can become.

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We all know that beginning your investing journey at a young age will reap tremendous benefits in the future. Even if it’s not in the context of trading; if you’ve attended a basic investing seminar you would’ve probably heard that the younger you start, the better. Imagine how much more impactful it would be if you started trading as a student. Nevertheless, whether it’s trading or investing, starting on your journey towards financial freedom at a young age is a HUGE advantage.

If you’re a student reading this article you may be saying to yourself, “I’m too young, trading as a student is impossible” or “Investing is only for those who are already working.” Let us be the first to tell you, there is NOTHING hindering you from starting your journey at a young age. The only thing stopping you from achieving financial freedom is your own disempowering beliefs. In order to succeed in trading as a student, you will have to believe with all your heart and soul that YOU can do it. Your age will never define what you can or can’t do.

But don’t go thinking that everything’s going to come easy since you started early. It’s without a shred a doubt going to be a difficult challenge, but great things shouldn’t come easy anyway, right? One of the defining factors that will lead to future success in the market is your willingness to PUT IN THE WORK! Now that we got that out of the way, here are a few advantages of starting your trading journey as a student:

ADVANTAGES OF TRADING AS A STUDENT

1. TIME

The biggest advantage young people have above all else is TIME. You have more time to learn, make mistakes, refine your strategy, and learn more about the markets. However, you will also need to have patience in a longer-term perspective and understand that the success you seek in trading won’t come quickly.

We tend to overestimate what we can accomplish in a year and underestimate what we can do in five. What’s important is you have to understand that achieving success in the markets is a long process, but also have the balance to know that a ton of work will need to be done on a daily basis. Oh yeah and you also benefit from compounding interest, but you already know that.

2. LESS RESPONSIBILITIES

Don’t get us wrong, we know that you all have your own responsibilities and circumstances. Being in school feeling academic pressures is no easy task to deal with. However, that’s mostly where the struggle ends for most students.

You don’t have to provide for your own family yet, you don’t have to pay for someone else’s education, you don’t have to deal with real estate, tax, and the like. You guys are at the time of your lives where you may possibly have the least amount of responsibilities to deal with. It’s much harder for a 40 year old person to go all-in on becoming a great trader considering that person may have a full-time job and three kids.

3. YOU BECOME FINANCIALLY LITERATE

Before you even begin on your investing journey, we all know that you will need to start saving up money first. By wanting to start trading as a student, then that means you also build good financial habits you carry over once you get older. Eventually, you will also begin building an emergency fund, getting some form of insurance, all while going through your trading journey.

TOMATRADER’S TIPS FOR TRADING AS A STUDENT

We have a good amount of teammates here in Investagrams who began trading the stock market while still in school. Our youngest teammate, TomaTrader, began his investing journey at the age of 16 when he was still in first-year college. We asked him to give a few tips and tricks for everyone looking to navigate their way through the financial markets while navigating their way through life as a student as well.

What’s up, mga ka-Investa! I’m more than thrilled to share a few tips I have for all the current and aspiring student traders out there. First of all, just the fact that you’re reading this article up to this point shows a level of dedication that only a few have. So kudos for that! Now let’s get going with a few tips I used when I was still a student trader:

TRADING AS A STUDENT TIP #1: ASK PERMISSION

Now, this tip is pretty basic, you may have some professors who don’t allow the use of gadgets during their class or the use of gadgets for things unrelated to what’s being done in class. I got caught a couple of times myself, so I simply asked all my professors if I could trade during class. Well, they all allowed me and it was great!

TRADING AS A STUDENT TIP #2: USE THE RESTROOM WISELY

Now before I continue, I’d just like to say that I do not promote cutting your classes just to trade. BUT I didn’t say you couldn’t use the restroom. There may be an instance where a professor may not allow you to trade during his/her class, so the only way for you to quickly execute on your trades is to step out of the class. What better way than to use the restroom really quick, right? But make sure you come back after a few minutes!

TRADING AS A STUDENT TIP #3: SET ALERTS

This may sound like a plug since I’m already working at Investagrams, but the INVESTAWATCHER played a huge role in my ability to latch on to huge winners even if I was busy with school. Even if I was allowed to trade during class I didn’t just glue my eyes to the screen. So with the InvestaWatcher’s real-time alerts I was able to quickly pull out my phone or laptop and quickly execute on my already set out trading plan.

To know more about TomaTrader and see his market and stock insights, you may follow him via this link: Tomatrader at Investa

Conventional wisdom tells us that in order to reap high rewards in any endeavor, a huge amount of risk must be taken. We’re here to tell you that this cannot be farther from the truth. Don’t get us wrong, there will be some instances where you may need to risk big to win bigger. However, if we’re placing it in the context of trading the financial markets, the “High Risk, High Reward” saying is not the absolute truth.

“Low Risk, High Return” is not something you’ll usually hear from your uncle when you ask him what it’s like to invest in the stock market. This is why many beginning traders go all-in on names that they think will go ‘TUDAMOON!’ Mark Minervini said it best in his book Trade Like a Stock Market Wizard; to cut it short, he gave factual statements showing that you don’t need to risk big to make a fortune from trading.

People who have an “I run on adrenaline” type of personality are usually those who do bad in trading. They’re in it to become a millionaire by next week, they want the returns to arrive instantaneously. However, what they don’t understand is that becoming a great trader is a process of perpetual learning. If you want to become a consistently successful trader you will first need to truly believe that you are running a marathon, not a 500-meter sprint.

If you’re in the markets seeking action, you will be very prone to breaking your own trading rules. Once that happens, all hope may be lost in an instant. Always remember, at any moment during your trading journey even just ONE mistake can lead to financial ruin. This is especially true if you fall for the temptation of going all-in because of the belief in “High Risk, High Reward.”

So what’s the best way to find “Low Risk, High Reward” scenarios?

1. You will first need to develop solid risk management parameters.

Above all else, you will need to have studied and applied solid risk management rules to your system. If you’ve read any of the market wizard books, you’ll know that RISK CONTROL is one of the most essential ingredients they mentioned needed for consistent success in all financial markets. Without proper risk control metrics, despite finding “Low Risk, High Reward” opportunities, you won’t be able to execute efficiently during times you will need to cut your losses small.

2. Have a RISK-FIRST mindset.

No matter how advanced or complex your risk management procedures are, without the proper discipline it will all be for nothing. The problem with most traders is that they only take into consideration the potential reward they will gain if their trade idea materializes. What they fail to take into careful consideration is the risk they’re taking. Whenever you make your trading plan for a specific stock, always remember to focus on protecting the downside first then the upside will take care of itself.

3. BE PREPARED!

Even with the most complex risk management parameters and the undying discipline to execute on your stops, if you’re not available to check the market at a specific time you might just miss out on cutting your losses small. This is a problem the INVESTAPRIME solves; all InvestaPrime subscribers gain access to the InvestaWatcher. With the InvestaWatcher, you will receive real-time price and news alerts via in-app notification, email, and SMS.

4. Understand how much RISK you’re taking in all trades relative to the REWARD.

This is definitely the most important factor you will need to consider; how much risk you’re taking in a trade relative to the potential reward. Conventional wisdom says that a Risk Reward Ratio (RRR) of at least 1:2 is ideal, but if you can find opportunities with 1:3 RRR or higher, then much better. Also, the best type of trades are those where the downside is limited while the upside of unlimited. We’ll be showing a series of examples for better visualization.

Here’s an example of a low risk, high reward trade. As seen in the chart, $ATN’s structural support was at around the 1.33-1.35 area and it was clearly in a trading range. While it’s major resistance at the time was around the 1.58-1.60 area. Having a swing trader mentality, you could’ve accumulated shares of $ATN at it’s support area then sold it close to its resistance. By identifying its support area, you could place a wide stop to give the stock more room or a tight stop (as used in the example) so you can quickly cut your losses in the case of a breakdown.

This is an example of a bad RRR trade. As seen in the chart above, the RRR is 1:1, meaning that you’re risking the same amount of money for the potential to make the same amount of money. Yes, if the trade goes as planned then you can make a nice profit. However, if you do this consistently in the long run, knowing that we’ll only be right less than 50% of the time on our trades, then at best your performance will simply be breakeven.

Here’s another example of a trade with a good Risk Reward Ratio, but this time in the context of a potential breakout. Seeing that $ISM was in a long consolidation, we should know that the longer the base the larger than potential breakout once price breaks the resistance. What you’ll need to do now is check a longer-term timeframe to find its multi-year resistance level as a potential target profit.

Looking at the longer-term timeframe, we now know that a good potential target profit area would be 7.50 to 8 pesos. And as we already know, $ISM was able to reach that area in only a few days time.

As seen in the chart, the RRR of this trade idea was 1:13 with an upside of 100% and a downside of only -8%. Take note, however, that trades like this don’t happen often. At best, these type of monster plays may only happen ten times per year.

IN CONCLUSION

In order to reap high rewards from trading the financial markets, it doesn’t necessarily mean that a great amount of risk needs to be taken as well. As traders, we will be wrong on our trade ideas at least half of the time. This means that in order to become consistently successful in our journeys, we will need to make more than we lose on a consistent basis.

Christmas bonus stories: 

“Tara kain!”

“Uy, sale sa department store!”

“Samgyup tayo mga besh!” 

The next day: “teka nasaan na pera ko?” Usually pag nagkakaroon tayo ng additional income eto yung mga naririnig natin.

Pero tama nga ba na dapat gamitin ang buong CHRISTMAS BONUS pang good time? Don’t get us wrong. It’s very important to also have a portion of your income spent on enjoying life. All of us work extremely hard to not only provide for our families but to also live a quality lifestyle. However, how much spending is TOO MUCH?

If you’ve been watching our Personal Finance Series here on Investagrams, you may recall our first episode where we tackled the state of the Philippines in regard to financial literacy. To cut it short, we’re still a long way from where we need to be as a nation. Let’s talk about a topic that often gets overlooked: HANDLING YOUR 13TH MONTH PAY.

You may be wondering, “Why focus on the Christmas bonus?” You’re right, there are so many other aspects we can focus on. We can talk about saving tips, budgeting strategies, and much more. However, we’re zeroing in on how to handle your Christmas bonus because it’s that time of the year again. While it’s just a bonus, it is still money that you can make the most out of. Rather than using it all on luxuries, let’’s tackle how we can be smart about it; while still enjoying the bonus for the holidays!

HOW TO HANDLE YOUR CHRISTMAS BONUS

1. PAY BACK ANY LOANS OR DEBTS

This may not be applicable to all. But, if you owe some money then it may be best to hold back on your samgyupsal cravings for a while. Take the Christmas bonus as an opportunity to pay off debts and lighten the burden on your shoulders. On a side note, try your best to avoid borrowing money from other people especially if it’s only to satisfy your wants. Eating out is great, but definitely better when you don’t have any debt worries after!

2. GIVE BACK TO THE COMMUNITY

Christmas time has always been known as the season of giving. Donating to charities or simply doing a kind deed for someone in need can go a long way. Of course, you don’t have to give your entire bonus away. Even small amounts can go a long way to impact the life of someone less fortunate. It’s also just something nice to do, especially around this time of the year. Humans are social beings, so helping out a fellow human should come naturally.

3. ADD IT TO YOUR EMERGENCY FUND

If you don’t have one yet, then now is the best time to start! Conventional wisdom says that you should have an emergency fund greater or equal to at the very least six months worth of salary. Not everyone can set aside cash for an emergency fund since we all have different circumstances. However, setting aside just half of your Christmas bonus can be a great start! Always remember, we will never know when a black swan event may happen. Better to be prepared than face the consequences.

4. INSURANCE. INSURANCE. INSURANCE

Speaking of black swan events, we will never know what may happen to us or any of our loved ones at any moment. As we’ve said, it’s best to always be prepared. You can use your Christmas bonus to begin investing in insurance. We won’t go deep into the different types since that would take up a whole article of its own. But, as early as now you can start doing your own research on them. There are many kinds and there should be at least one that fits your current situation.

5. MAKE YOUR MONEY WORK FOR YOU

Rather than spending your Christmas bonus on “luho,” why not invest it? It can be a great way to jump-start your investing journey! Anyone can learn how to invest, all you need is effort and dedication. To help everyone get started, we’ve released some guides to help you understand the basics. Of course, you can go over our vast resources to find information on fundamental analysis, technical analysis, and many more!

6. INVEST IN YOURSELF

One of the best investments you can make is an investment in yourselft. No matter what you do in life, there’s always a way for you to improve. May it be in the form of training videos, seminars, or books, investing in yourself is always a great idea. If you’re a trader, one of the ways you can invest in yourself is getting the PRIME ADVANTAGE. If you want to take your trading to the next level, attain your most powerful trading partner in the form of the InvestaPrime+. Curious about how it works? Check this out: 

CONCLUSION

Again, it’s okay to use your Christmas bonus on stuff you enjoy. However, it’s not okay to splurge it all and then come back to your worries once the new year starts. We’re just pointing out that you shouldn’t spend ALL OF IT on impulse splurges. The importance of using your Christmas bonus wisely is that it forms DISCIPLINE.

If you can apply the same discipline in your day-to-day road to financial freedom, ‘edi solid diba? Always remember, it’s not just about how much you MAKE, it’s also about how much you SPEND.

Spend wisely, ka-Investa!

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