I got to know about Collin through Yong Sak’s book, “Secrets of Highly Profitable Traders”. I could have interviewed him earlier if I have known him. Nonetheless, I jumped on the chance this time round.
I believe most people know you as a successful remisier. Would you share your success with us?
When I started my remisier practice, I did not know how to manage client’s risk. Six months into the business, my friend who was one of my clients defaulted on $250,000. My commission at that time was only about $2,000 a month. A $250,000 debt looked daunting in comparison. My friend told me to declare bankrupt together and said we could lead normal lives again after six years. I decided otherwise and worked very hard. I managed to pay off the debt in one and a half years with my broking business and trading profits. If I decided to be a bankrupt, I would not be where I am today.
My strategy was to provide training for my clients, teaching them how to trade the market. This is a win-win situation as they trade profitably, they would continue to be my clients and I benefit from the commissions. As such, many clients have stayed with me for years. Probably I was influenced by my previous job in financial advisory where the approach to client management was more long term. This was unlike what an old remisier who told me that there is a ‘lifespan’ for each client, and he would have to look for another client once the ‘lifespan’ of his existing client ended.
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At first, the business will pick up slow because the new clients will trade with smaller sizes after they have learned the correct way to manage risk. Newbies tend to take on too much risk especially when they engage in contra trading.
You are teaching them ‘how to fish’ instead of ‘giving them the fish’. Moreover, without understanding risk, they may just trade way too big on any recommendation or tip. So you have been sowing good seeds by teaching your clients.
Frankly I was not so smart to know that. I just know it was the right thing to do as a responsible remisier.
When did you start trading and why the interest in the market?
I started at the age of 21. Like everyone else, I lost money at the beginning. It was difficult and it was not that I was lazy or stupid. I read many books related to fundamental investing and strategies of Warren Buffett and Peter Lynch. I applied what I read to the stock market and selected Informatics. The company had monopoly in private education business at that time with a good business model and management. The business had no inventory costs and it was pretty simple to operate. I bought the stock at $1.50 and now it is worth a few cents.
Did you develop an opinion that fundamental analysis does not work through that experience?
I do not think that fundamental analysis does not work. Warren Buffett’s strategy is to buy a good stock when it is cheap with a margin of safety. And if the stock price goes lower, he may buy even more. For me, I would not have the guts to average down. In fact, if it goes lower, I would be thinking of selling.
There are many things that are out of control. No one can ascertain if a company can truly turn around. You will need to read between the lines and try to understand the change the management is going to bring about but there is always difficulty for retail investors to access information. You will also need to observe the price movements to determine an entry. I pick up technical analysis at a later stage. I attended the Certified Financial Technician (CFTe) course but it did not make me a better trader, it was the two friends that I met during the course that helped me. One of them is a German who is a hedge fund manager. He told me that all the technical stuff published in books do not work. I got the privilege to sit beside him and watched him how he traded. I picked up some tools for trading and managed to become a profitable trader from then on.
Is it because you believe retail investors have restricted access to information, technical analysis is more suitable for retail investors?
Partly true as news is always delayed. During the accumulation phase, news would not report the big boys are buying. During the public participation phase, there are still skeptical people who would not participate. Until the news is full of bullish sentiments, the big boys are actually distributing to the public.
And your German friend mentioned that the technical indicators taught in books do not work. Why so?
The indicators will not work if you use them as they are. I know Metastock programming and I will always back test the setups to determine the workability. I found many things do not work. They may work in retrospect but in real time, the indicators may still be moving and responding to price changes, resulting in different entries and exits.
I have understand from other traders that the indicators are the same, you need to use them differently to trade successfully.
Yes. You will need to understand how the indicators work to know when is the right signal and when they will be wrong. You will then be able to apply filters to ignore the wrong signals.
Do you mean you need discretion to filter out signals despite using a mechanical system?
No. A mechanical system is rule-based and one should not exercise discretion. If you decide to avoid certain trades, the probability and expectancy of your system will deviate from the back testing results.
Are you still trading?
I am doing more long term trading as compared to the past. I take position when I have a view for the following three to six months. Firstly because the risk management would have limit the size of my swing trades and consequently the profits, it is not worthwhile to spend the amount of time on these trades. Secondly, I would be biased towards my positions if I swing trade with my clients. For the sake of clients and myself, I take longer positions now.
In my opinion, trading will be very automated in the future. The robots can replace the humans spending hours clicking in front of the computer. In fact, humans will always be slower than the robots and the former will lose their edge in scalping strategies. In fact, I like to work on trading systems and not work as part of the system. Trading is an active income, but when it becomes a passive income when I automate it.
Any insight to share on trading?
I went to Las Vegas in Nov 11 to attend a conference where the famous traders speak. One hedge fund trader told me trading is all about making the loss small and the profit big, that is all and the rest is bullshit. I agree. You just need to repeat the process over and over again. There is no 100% accurate system, and you will already be making money even with a 55% accuracy.
Do you use CFDs to go long and short on equities?
As a remisier, do you recommend your clients to trade CFDs?
It is a double edged sword since it gives leverage. I always educate my clients to manage risk. Even if the broker gives 5 times leverage, do not use the maximum leverage. You do not want to be in a large leveraged position when you are wrong.
I believe trading is just one part of your portfolio, do you have other investments?
I invest in US properties. I do not actively manage it as I have a friend to oversee them. These are properties that are not done up yet and require renovations. I also invest on a monthly basis with Phillip’s Share Builder Plan (SBP). The returns is very good and I have done this for many years.
Yes. I am also investing through SBP and it is a good product that is rarely publicised.
It is not publicised because the profit is small. For $1,000 or less investment per month, the commission is only $7. I do recommend to my clients but I told them to apply on their own.
What other investments do you have?
Would you share a little more about sharesxpert?
Fabian is managing the business and I contribute by giving the concept and designing the algorithm for the system. It is a medium to long term trading system on the equity market.
It seems like you are having many businesses.
I do not run most of the businesses. As I know people in this industry, my value proposition is to connect people from one network to another, and help to accelerate the growth of businesses.
Since you are not running most of the businesses, how do you spend your time?
The broking business is built on relationship and hence, I spend most of my time with clients. The rest of the time I would research on creating trading systems as I have passion for it.
You give me the impression that you are always actively looking out for new business opportunities.
I would say that the broking business is not going to last forever. In Malaysia, the brokerage commission can be as low as 0.1%. How long would Singapore be able to charge at 0.25% when the commission in the region is reducing? The middleman business is going to be tougher.
Are you working hard to strive for success in life?
There are different stages in life. At one phase, I wanted to make a lot of money and I would strive for it. Nowadays, I want to make a difference to the world – did I leave this place with a plus or a minus? I want to be a candle that light others and it has become my responsibility.
In the book, “Secrets of Highly Profitable Traders”, you mentioned that new traders always get lost in the “wilderness”. It is only after a period of time that they learn what matters most in trading. You took 7 years to get out of this “wilderness”. What were the key processes that allow you to find a successful trading strategy?
Many traders would look for the holy grail that does not exist. They often switch one strategy to another one but they will never find a successful one. Each trader has to develop his own strategy. Who are you? Do not ask if this method work but ask is this method suitable for you. Analogous to kung fu, there are many different styles to fight, and you need to find what suits you the most.
A beginner would still need to try many strategies and methods to know what is available and to discover what suits them.
Yes. In the past, I would tell my students it is pointless to learn more strategies but I realised they would do so anyway. The essence is to do more with less. This is contrary to our experience where we become better by doing more. In trading, it may be beneficial if you spend less time staring at the chart. Some traders make more money looking at daily or weekly charts as compared to intra-day charts.
In my trading course, I talk about 4 Ps that you can change and narrow down for yourself:
- Product – Instrument
- Price – strategy
- Position – size
You lost all the money in your account twice. What motivated you to keep trading?
Probably I am stubborn and did not want to give up.
I see something similar to how you dealt with the $250,000 debt – you just do not give up. I believe most people would have taken the easier way out to declare bankruptcy but it was not an option for you. You preferred to bite the bullet and fight it out. Likewise, most people would have given up trading when they lose money. This fighting spirit is essential to become successful in trading.
When my trading account was wiped out, I did go through phases of doubts. I have questioned about trading and if it could really work. I have also questioned whether I could pay off the debt in my broking business? I think I pulled through all these because of moral support from my family and friends.
Was there one lesson that you learned which became the turning point to your trading?
It is about position sizing. You can have a system that is 90% accurate and still lose money. Assume your position size per trade is 50% of your capital, it just takes 2 consecutive wrong trades to wipe out the entire account.
You emphasized a lot on journal writing. Do you still keep a journal?
Journal writing is more for learning about yourself. It is a process of self reflection. It will help you discover something that you do not know about yourself. For me, I cannot have trades on when I am on holidays. I do not want to worry or allocate time to look at it. So after learning about myself, I set certain rules for my trading.
Now, I simply rely on my trading system to tell me the entry and exit prices.
The system will actually tell you? What do you mean?
I have design my trading system to tell me the point to exit and the position size that I can take.
What are the important things to include in a trading journal?
Enter your Entry Price, Target Price, Exit Price and Time-frame, or ETET in short. You will also document the source that led to this trade and write down your set-up. I find it convenient to record directly on the charts as I am more visual. Once you have done this consecutively for 30 trades, regardless of winning or losing trades, the awareness of trading and the understanding about yourself will increase tremendously.
It forces you to articulate your thinking behind every trade, to bring yourself to greater awareness of your actions and behaviour.
Yes, it is to detach yourself from the market. Whenever it involves money, the animal instinct in you will dominate.
But journaling takes a lot of effort and most people won’t do it.
Or some people may just log the right trades and ignore the wrong trades.
Because it is too painful.
You know you shouldn’t do it, and you still do it. You will feel even more foolish to write it down. The hard truth is that there is nothing wrong about the system or method, but the problem lies in you.
You have 3 strategies, namely, retracement, break-out, and volatility. When do you know which to use?
The time frame determines the strategies. For example, a volatility trade is usually shorter, about 2 days.
What do you mean by volatility trade?
The market goes through periods of high volatility and low volatility. We should look for opportunities during low volatility period and when the price range is narrow. You either buy when price break out of the range on the upside or short it when price break out on the downside. You trade the next volatility.
How about breakout method?
For break outs, a stock must make a significant new high such as 1 year; 2 year; or 3 year high.
And retracement method?
When the stock made a new high, price would normally come down or retrace. You enter once it turns back up a little.
Would you say the market changes and you would need to adjust your strategy accordingly?
No, I think that the market is better suited for trending system now as compared to the 80’s. The market tend to move in trends from late 90’s onwards. It is something that I observed but I do not have a reason for it.
You are saying that the market do change, but your strategy should still apply because the principles such as pay-off ratio and position sizing are everlasting.
I would say it may change in the very short time frames. But in the longer time frame, the market is driven by greed and fear and animal instincts would not change. The market goes through cycles and this is the fact.
In a way, the longer the time frame, the less you need to change your strategy?
Yes. In fact it is easier to programme trading systems for longer time frame too.
— end of interview —