Meeting with a Full Time Trader – TW

Alvin Chow
Alvin Chow

The good thing about sharing in this blog is that, it is presenting the opportunities to meet some people that I would not have met. Talk about TW, a full time trader, who emailed me for a chat. As usual, with the defensive nature of humans, I was trying to figure out “what does he want out of me”. I even asked him if he was selling something to me 😀 But I mistook his good intention that he just wanted to meet a fellow trader to talk about trading and exchange views and ideas. TW, I apologise 🙂

I forgot to ask his age, but my guess is probably early thirties. Humble and sincere person. “Down to Earth” kind of guy. He begin to introduced himself and probably the most surprised thing is that he quitted his job even before he becomes proficient in trading. It was a year since turning full time trading and he admitted that he only managed to make enough to survive. To me, this is tremendous achievement for first year of trading. I cannot even make enough to survive. But maybe this is the difference, when you are at the brink of survival, you tend to be very determined to succeed.

Risk Management

Even in a casual talk like this, I was able to gain insights and understand more about the reality of trading from him. I learned more about risk management and not that I do not know the importance of it previously, but it is just different when you have a real person talking about it and his experience. It comes out stronger. He mentioned that he was tweaking the same trading system that we used and adopted a more defensive approach to trading. He sets his cut loss at 3% and profit take at 6%, yielding a 1:2 risk-reward-ratio. True enough, he may not be able to ride a trend to it’s end for bigger profits, but he gains in win rate and has lower fluctuations to his account. This is important when you start trading; do not lose too much. You will be less emotional and your capital protected. It is something that I overlooked as greed climbed onto me. I was taking up bigger positions, blindsided by the potential upside. Instead, I should have focus more on losing as little as possible. In other words, play great defence first, and only learn how to attack when you know how to defend properly.

Edge in the market

He talked about an edge in the market, which lately I have grappled with the question, “what is my edge in the market?” All successful traders or investors have their individual edge in the market. He talked about his teacher who was an ex-bank trader, knows the in’s and out’s about the way the bank trades. By looking at the charts, he was able to tell what the banks are doing and trade accordingly. He mentioned about another trader who uses the same system as us, but he has great patience, only waiting for the best opportunity to enter, and most of the time, he would sit aside and watch. By not participating in frequent small gains and small losses, he was able to ride a few big trends a year, and that is enough to make decent profits. Besides knowing what’s our edge, he also talked about how much the brokers can actually eat into our edge. The spread and commission charged to the professional traders are less than half of what the retail traders are given. Overtime, the erosion of the edge can be significant.

Talking about professional traders, he mentioned most of them are in the futures market and it is very hard for the retail to challenge them in that market. He opined that the Singapore stock market is generally less competitive but I voiced the concern of the implementation of high frequency trading (HFT) may change the landscape for the market. To me, HFT is like the floor traders in the past. They know where the orders are coming before you, and they will get the contracts and resell to you at a higher price. Speed is their edge.

Hence, you need to find and know your edge in the market. As mentioned above, it can be as simple as a personal trait like patience, and you should tailor your strategy to suit yourself and to produce the edge.

Passion and Commitment

Something that I realised about him which he himself has not realised. He is really passionate about trading and the markets. I told him that I could sense his interest and passion, but he did not really concur. He can keep talking about trading continuously, from brokers to risk management to tactical execution of trades. The amount of energy he displayed is something you cannot fake. From his description, you learned that his activities centralised around trading. He meets his trading mentors 3 times a week and even joined a group of full time traders for constant support. Of course, quitting his job shows his conviction that he can make a living with trading. Entrepreneurs are the same, they take the route of uncertainty and assume risk for greater reward, and also for doing something that they are passionate about. It takes tremendous courage to take this path, and he even mentioned the reality of his close ones being unsupportive about what he is doing. Please do not get me wrong. I am not asking you to quit your job, especially you are not passionate in trading. I just want to say, to succeed in anything, you need passion, committment and discipline, trading is not as easy as you think. TW treats it as a profession and even has the goal of turning professional institutional or proprietary trader. Somehow, I feel that he will succeed with his kind of passion and committment. It is just a matter of time.

Alvin Chow
Alvin Chow
CEO of Dr Wealth. Built a business to empower DIY investors to make better investments. A believer of the Factor-based Investing approach and runs a Multi-Factor Portfolio that taps on the Value, Size, and Profitability Factors. Conducts the flagship Intelligent Investor Immersive program under Dr Wealth. An author of Secrets of Singapore Trading Gurus and Singapore Permanent Portfolio. Featured on various media such as MoneyFM 89.3, Kiss92, Straits Times and Lianhe Zaobao. Given talks at events organised by SGX, DBS, CPF and many others.
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13 thoughts on “Meeting with a Full Time Trader – TW”

  1. you’re moving in the right direction to understand about system development instead of tactical entry/exit. try to understand a little more about probability and game theory and it will help a lot. the casino has an edge, everyone knows that. but what is an edge, for a simple big/small game, the casino still has an edge. there are no game in the casino that has a 50/50 chance of win loss. the nearest is 51/49 chance and the casino has the 51 chance win. this 1% is consider an edge. how to achieve this 1% edge is in how the game is played. the higher % the better the edge. to be successful in trading, it is the responsibility of the retailer to improve his 49% chance of winning into 51%. sometimes people underestimate this 1% edge because it is from an understanding of this concept that a casino can operate as a business (not out of business).

    Reply
  2. “Can you share on how we can see from the chart what the banks are doing?” – dielah July 4, 2010 at 7:40 pm

    I believe Ed Seykota, Forex Patterns & Probabilities: Trading Strategies for Trending & Range-Bound Markets are tell tales sign of what the big players are doing. However the most obvious the pattern is the higher false breakouts are likely to occur. Contradiction yes possible to trade yes with defense.

    Reply
  3. if you are single and can’t quit your job for trading, do you think you can do it when you have a family to support?

    your problem is money, if its so important to you, don’t trade.

    cheers

    Reply
  4. Hi dielah, Daivid Aw actually recommended some books (see his comment above). I have not read these books before, but you can always check them out at the library.

    8888, thanks for your articles!

    Reply
  5. Trading is all about passionate. Many people always ask me what stocks to buy or sell without really looking into the market themselves.

    Without the interest and passionate in trading and just looking for fast bucks….it is really hard to trade successfully.

    Personally i also have a few friends who are full time traders….it is very stressful especially if u have a family to feed

    Reply
  6. Sorry i miss out 1 point…u can also join SGX pro membership for a fee and ur trading cost will be reduced as well. Of cos u need to trade in high qty to justify for the membership fee.

    Reply

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