Date: October 17, 2011
Introduction and Background
Distinguished guests, participants, ladies and gentlemen,
The 2011 Traders Trophy Worldwide is a competition in trading of financial instruments. The trading simulation used in the Traders Trophy gives the participants the understanding of operating in a dealing room environment. The objective is educational and competitive.
The Traders Trophy is also a fun and entertaining event, using the latest technologies. It’s important for us to do what we enjoy doing. Charles Schwab said, “The man who does not work for the love of work but only for money is not likely to make money nor find much fun in life”.
This competition is being held in several places around the world and is taking place for the fourth time in Singapore. Today we will have around 30 students from three well-known Singapore’s universities participating in the final of the 2011 Singapore Traders Trophy.
It is indeed an honor for me to be among so many young and enthusiastic budding traders here this afternoon. While I am a retired Investment Advisor, I am a novice when it comes to trading. But I guess the world is a different place today. There are more instruments and opportunities for you young traders.
This is yet another opportunity to pit against one another to determine the most skill traders who would represent Singapore in the Global Final. While the goal today is to be the top trader, I would like to highlight that one must also understand the goals for the future. Therefore I would like to share my thoughts on Trading versus Investing.
Trading versus Investing
It seems as though trading and investing are diametrically opposed. If diversification of investments is needed in order to prudently “invest”, then shouldn”t a diversification of investment styles also be used? Why not take advantage of what the market is offering on any particular day in order to minimize loss or cut cost, and perhaps end up with more advantage of your favorite long position?
Many of the market movements hold no real mystery. The Feds unexpectedly raise rates, armed conflicts broke out overseas, an impending economic crisis, few bad unemployment numbers, or some analysts’ negative reports, can send the markets into a tail spin. If you are an aggressive trader or investor, most likely you are no more than minutes or seconds away from a quick sale and the opportunity to acquire cheaper assets minutes or days later. As a trader, you are more in tune with the markets and the news that move those markets. This alone is a tremendous advantage if you wish to take advantage of it.
On the other hand, for the aggressive investor, perhaps the best strategy is a mix of buy/hold strategy and day/position trading. One could say that day trading can be incredibly profitable if done well. While most trading detractors would argue that it is impossible to keep up a record of performance that would exceed that of a good long-term portfolio, but does it have to?
Trading is not for everyone, but then again, few things are. The oft struggle between the trader and the investor is as heated as any debate in any sector. The trader’s argument of “why let a stock decline 10, 20, 50% or more when you could sell it and buy it back later?” certainly has merit, as does the investor’s argument of “why take a quick 5, 10, 20% or more gain when the long term gain could be much, much better?”.
One can simply look at trading as a $50 note in the middle of the street, and sure there are dangers, but if you look both ways as you have been taught, the chances are you will be successful in retrieving it. I still believe in buy and hold, and trading for capital gain to augment my buy/hold strategy.
Trading and investing are NOT diametrically opposed.
Preparing for Trading
Not many would argue with the fact that a certain amount of skill and research is necessary to make good long-term investment decisions. For this reason, SIAS has been providing such information and education through its website, seminars and workshops to understand macro factors and financial analysis.
It is no different with trading. Take time to learn what works, and what does not. Learn from past mistakes and allow yourself to succeed. Use a trading base of capital that you are comfortable with and allow profits from your trading activity to be rolled into long positions, thus satisfying both strategies.
Don”t allow others to dictate what works for you and what doesn”t. You are responsible for your own successes and failures. Be positive to be successful. Do work necessary to become a better trader, mix around with similarly aligned people, and take what the markets offer.
There are pros and cons in each of the style of Trading and Investing in making money, and each should have a place in your investment strategy. Whatever it is, shorter term trading or longer term investing, or a combination thereof, know your ultimate goal by participating in today’s markets. You need a goal, and checkpoints to measure performance, whilst adopting an objective and disciplined approach. Never a rogue trader be, as “The only correct actions are those that demand no explanation and no apology” (Red Auerbach).
Generally speaking, most retail investors are looking to have a better return for their savings – be it in stocks, bonds, fixed deposits or currencies. The questions we must ask ourselves are what are the associated risks in the having a greater return and can you sleep peacefully knowing the risks.
Set a goal, and then stick to it. The difference between a good long-term investment and a good short-term trade can be huge. As such, a market player needs to have a clear picture of his goal and investing or trading parameters, and then stick to it. The last thing you want to do is move your goal posts in the middle of the game. If you do that, you”ll have no plan at all – and that”s a formula for financial failure.
From my years in investment management, trading in stocks, bonds and currencies can be profitable. John (Jack) Bogle, the founder and retired CEO of the Vanguard Group, said, “If you have trouble imagining a 20% loss in the stock market, you shouldn”t be in stocks”. Taking the cue from him, there must be money to be made in trading!
For me, trading is also fun. As some people say, it’s a great job if you wake up in the morning looking forward to go to work. Trading can be such an experience because you are dealing in moving things, and don’t we know traders love the financial markets around the world as turbulent as they are for the moment!
A Word of Thanks
Last but not least, a word of thanks to the sponsors for this event. Barclays Capital and Flow Traders are the main sponsors of the Singapore Traders Trophy. The event is co-sponsored by Oxyor and organized in association with SIAS. We want to thank all these parties for their support.
On a general note, I am also pleased to say that SIAS sponsors all the university investment clubs. It is involved in organizing inter-university activities with the university students and investment clubs. It also supports their activities with publicity and other areas when called upon.
And now, let the competition move along. I know time is of essence for the traders. May your judgments and convictions prevail, and you have plenty of profits to ride on. Good luck. Have lots of fun and a wonderful memory of today.
