September 17

A Day Well Spent: 5 Investing Styles – Should you Buy and Hold or Day Trade? (Part 3 of a series: the COL Summit journal)

A Day Well Spent: 5 Investing Styles – Should you Buy and Hold or Day Trade? (Part 3 of a series: the COL Summit journal)

September 17, 2016

After Mr. Velarde’s very informative lecture, COL’s Chairman and Founder, Mr. Edward Lee went onstage to discuss the importance of knowing what kind of trading style you are in as well as the risks involved in it.

 

Mr. Lee emphasized the different investing strategies present in our market today. He also stressed the importance of having a long term approach in investing and risk management and the difference between making money and gambling money.

 

He started by explaining how we analyze and develop ideas to trade the market. And one famous model about this is the FTSR model taken from the Caylum Trading Institue. FTSR is an acronym that stands for: Fundamentals, Technicals, Sentiment, and Risk Management.

3-3

 

Fundamental focuses on the financial statements of the company being evaluated which is affected by economic, social, and political forces.  Technicals on the other hand, are all  about price movements. Sentiment looks at one’s personal judgement or evaluation.

 

When it comes to sentiment, Mr. Lee emphasized that volatility is the new normal. The stock market experiences highs and lows, which will always be inevitable, so he advises to better just stay invested for the long term to minimize the risk.

 

Lastly, Mr. Lee emphasized that risk management is the most important element because if you don’t manage your risk, even though you make so much money, with just one big setback you can lose all of your money. You’ll be out of the game. Worse than this, when you spiral down, you will begin to lack confidence, you will begin to doubt, you will think that investing in the stock market is like gambling.

 

He emphasized that we have to remember that we are investing in the best companies of the world. So if we do not understand what we are doing, definitely, we will lose our money.

 

He also stated that investing into the stock market may be separated into two types:

 

  1. Long Term (Passive) – Buy and Hold; Position Trading*
  2. Short Term (Active) – Swing Trading, Day Trading (Momentum), Scalping*

 

He suggests 20% of your income should be invested in equities and 80% could be put elsewhere like cash, money market, balanced funds, fixed income etc.

 

*Terms are very technical that you need to have some background beforehand about this. But the essence of categorizing these types of investing will show to us what kind of trading style are we in. Do we buy and hold? Do we position our trade? Do we swing trade?

 

In a nutshell, here are the differences of the five trading styles:

Source: COL Financial SMart Investing Summit 2016
Source: COL Financial SMart Investing Summit 2016

 

Mr. Lee further explained that when it comes to momentum or day trading or even scalping, people are so excited to trade because we cannot argue that indeed a return of 60% or more is really high. However, if that person doesn’t know what he is doing and continues to speculate, he might be earning 85% from one stock but losing the same on another speculative stock. The end result, in short, is that you might just end up losing all your money.

 

And I remember this chart, this chart tells us that if we lose a certain percentage in our trades, it will require a little more percentage gain to recover from that loss:

Credits to Owner
Credits to Owner:  tradingwithrayner.com

If you lose 50% of your capital, you need to make back 100% to break even.

 

He even jested that if you are inexperienced and do speculative trading, you’ll only make COL Financial richer because of the number of trades you would be making.

 

He greatly emphasized this point to those present that day: If your mindset on stock investing is gambling, you will not feel contented. You must learn the reason why you are investing. Throughout his talk, Mr. Lee kept stressing that one must treat investing (in stocks) like a business and not like gambling.

 

He pointed out that 85% of short term or active traders lose money, and the sad part of this is that people keep on trading speculatively and actively. He advised that if we want to speculate, just allot 5% maximum of your investment to it. So that if ever you fall hard, at least it’s only 5% of your total investment plus the lesson it taught you.

3-2

He ended his inspiring talk by citing famous people and their trading styles:

 

Warren Buffet, one of the richest men in the world, follows the “Buy and Hold” Investing strategy for the long term. Most billionaires also do that.

 

On the other hand, Jesse Livermore, the best speculative trader, declared bankruptcy four times over his lifetime before committing suicide. Mr. Lee further shared that while Livermore’s life was tragic, we could read his book, if we have the time to do so, and learn from him.

 

Up next: The SMARTer way of investing, as told by Marvin Fausto with a special insight on where PSEi is heading 10 years from now and why.

__CONFIG_group_edit__{"jv80c1tc":{"name":"All Image(s)","singular":"-- Image %s"},"jv80c50m":{"name":"All Button(s)","singular":"-- Button %s"},"jv80c8rz":{"name":"All Categorie(s)","singular":"-- Text %s"},"jv80ci4e":{"name":"All Paragraph(s)","singular":"-- Text %s"},"jv80cse1":{"name":"All Title(s)","singular":"-- Text %s"},"jv80d10f":{"name":"All Images Column(s)","singular":"-- Column %s"},"jv80d6qb":{"name":"All Text Column(s)","singular":"-- Column %s"},"jv80dcyd":{"name":"All Columns(s)","singular":"-- Columns %s"},"jv80dfsx":{"name":"All Content Box(s)","singular":"-- Content Box %s"}}__CONFIG_group_edit__
__CONFIG_local_colors__{"colors":{"7500c":"Border","84f68":"Button "},"gradients":{}}__CONFIG_local_colors__

Creating a healthy money mindset is very important in achieving your financial goals. Knowing the math or the numbers alone but not having the right mindset and belief of what you can do about your finances will result to nothing. I share 3 easy steps below on how you can start having a better money


“The past has no power over the present moment.”― Eckhart Tolle I am a mindfulness speaker at Macquarie Community College and one of the things I learned from MIndfulness is that there should be a balance of how we looked at our past, present and future life. Most of the time, we are unaware of what’s


The recent news about Coronavirus had left the world with a lot of jobless people, people fighting over toilet papers and businesses shutting down due to lockdown. Media news showing an increasing number of cases, people dying and an increase in domestic violence and even mental problems had caused more anxiety and fearful emotions to all


Have you ever wondered why you sometimes feel unsafe or uneasy when you don’t have any money or when your money is very limited? I’m not talking about your expenses here or even your unpaid bills but just the thought of having no income stream or money at all. Let me tell you a story,


Lately, I have been thinking of how I can better help you understand that money is mind work. It’s not about just knowing the difference between saving or investing but it’s deeper than that. As a money coach, I will share to you probably the 3 most important money mindset shifts you can do today. You might


When was the last time you use cash to buy something? In most countries today, we are encouraged to do cashless transactions. Aside from convenience and ease, it saves a lot of time and you are able to track your expenses in your online banking application. However, the danger lies when we substitute our cash with our

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Join Money Orange's Newsletter:

>