Monday, August 3, 2015

Money Matters: My Stock Trading Experience

For quite sometime I have been wanting to try online stock trading, since I work in a Bank, many of my colleagues were already into it, and I was one of the few who were not yet aware of the earning possibilities from stock trading. 

I started attending free seminars by BPI Trade (you can like their FB page and available seminars are posted there, some seminars though are exclusive to clients). What I suggest is attending a seminar and opening an account at the same time (since you need to submit a form personally to the office (3F BPI Head Office), why not do it when you're already there :)). There are lots of other online brokers (COL, Metrobank has their own, Security bank as well, etc). Personally though, since I worked in BPI, applying in BPI Trade was the most convenient way for me. 


After opening an account, I did not trade right away. I joined a lot of Facebook Groups related to stock trading (Traders Apprentice Pilipinas or TAP, Tsupitero.com, etc). I read a lot of articles and blogs on how to go about trading, but honestly, no blog post cannot really prepare you for the emotional roller coaster that you will encounter once you start trading. 

I found out the hard way, that you need to keep you emotions in check when trading, and for me the hard way costed me around 20,000 pesos (Which I eventually earned back after learning to sit and wait). Here is my short list of things I wish I knew when I started:

1. You will not earn big money if you risk a small amount. Based on computations, the optimum amount you should invest PER TRADE is around 7,000.00, so you won't be "lugi" in transaction fees. Also, if you plan to invest only around 5,000.00 never expect that your money will grow to 6 digits right away. A good trade earns around 5 to 10%, so if you compute, you will only earn around 250 to 500 pesos less fees and taxes.

2. Never get swayed by the crowd without doing proper research and due diligence. Since I joined FB forums, I spent hours and hours on end reading posts and comments about certain favorite stocks. I started buying them because it was the talk of the town, and that was really a rookie mistake. Never invest in a company which you have not researched or read about. It's like giving away money to a stranger, and hoping (and praying) that this stranger will give you back your capital plus some more. 

3. Learn to Sit and Wait. Patience is key when it comes to trading. I have heard numerous stories of people earning 30 to 50% of their investment in one day, but what I did not know, is that they bought the stock way before the breakout (e.g., when a stock who is trending sideways, meaning will go up and down day to day, then suddenly breaks out of the sideway trend and increases 10 to 50% in day), they bought, sit and waited until the day the stock rocketed to it's all time high. While what I did was buy a stock, wait for 2 days, if it goes down, sell. Buy another stock, wait for 2 more days, if it goes down sell. And more likely, a few days after I sell, these stocks will go up. I think my motto before was Buy High, Sell Low. Or worse, I buy during the breakout, or "naghahabol" which gives me a really high average, and if the stock does not sustain the breakout and suddenly drops, I will end up "Ipit", or someone who has a really high average cost as compared to the current stock value. There are two ways to go after being ipit, either you sell at a loss, or you just simply sit tight and wait for the next breakout. 

4. Do Not Be Greedy. A gain is a gain. Learning when to sell a high flying stock, it's a talent I have yet to perfect. Once you get to 15% gain, you keep telling yourself, it can still go up, it can still go up. And before you know it, your 15% gain will turn to 10, and then 5 and then nothing (because all other investors were selling and turning their paper gains to actual money, while you cling to your hopes that the price will still go up). A useful tip is to always have Trail Stops and a target price. Sell when one either one is met. 

5. Read, Read, Read. There are basically three types of investors, one is the fundamental investor, wherein one takes into account the business, income and the management of the listed company and use this data to decide whether to invest or not. Another is the technical investor, where they use charts, indicators and price action to tell whether they should start buying or start selling, and of course there are those who are hybrid (which I really think is the best way to go). 

Whichever way you go, you need to read up to be able to understand the different terms, computations and theories that is being used by traders. I have an accounting background, so the fundamental data is easier for me to understand (Including reading the companies Income and Balance sheets,etc). For the technical side, I tried reading a lot of investment books, but the best for me is The Trading Code by Jason Cam (Check out their profile in FB, it's worth every penny, promise :)). By far, this was the most thoroughly explained technical theories (charts, candles, indicators, etc). Also, I get to easily understand and apply since it's by a local trader. 

I am not by far a good trader, I am still learning (the hard way) and honing my trading skills, but after 10 months, I think I learned the basics and now ready for the next step. My goal now is to earn enough to put my capital in the 6-digit level. I still have 5 months to reach my goal. You should set a goal as well, so you have a clear picture why you want to trade, and what do you want to get out from it. 

Happy Trading!! 

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