Markets have rebounded amidst hopes of falling inflation and easing Chinese Covid restrictions. The CNN Fear & Greed Index is at 69, which is close to the upper bound of the “Greed” rating. “Extreme Greed” is at 75 -100. This is indicative of excessive exuberance and an increased probability of a correction.
Zerohedge also has a good article discussing the likelihood of a Santa rally. It warns that fundamentals are not conducive for such a rally, although it does not definitively conclude that one cannot happen.
During times like these, it is probably not wise to go all-in. The rally is mostly driven by falling inflation expectations. Macro economic indicators have not been positive, and companies may underperform expectations in the upcoming quarters.
Please do your research diligently on both macro and micro fronts. Remember that no one knows everything and is right all the time. Aim to be your own trading/investing guru. Take care and good luck!
June was my best month of the year so far. I shorted S&P and iron ore stocks. I actually lost money on my S&P short bets. Fortunately, my profits from my iron ore stock short bets were more than enough to cover them.
Iron Ore Trades
Iron Ore Price – 3 month chart
The price of iron ore took a dive from 140+ to 110+ in the earlier part of June. I caught probably about 2/3 of this move via shorting Rio Tinto and Fortescue in the Australia market (ASX). Sentiment turned very bad in the iron ore sector, primarily due to stimulus/demand expectations not being met.
S&P Trades
S&P – 1 month chart
I got caught by the rebound in the S&P in the later half of June. I was betting that the continual negative news flow would bring the S&P lower, but the reverse happened.
Because of this cognitive bias, there is often more pain than pleasure in the field of trading/investing. It is therefore important to take care of our mental health, as we can only perform optimally with our minds in tip-top shape.
China has just found Omicron in Dalian, a major port city. Omicron has now spread to 2 major Chinese port cities. This may cause global supply chain issues to worsen as movement restrictions are imposed, and add to inflation.
This development is not market friendly, as higher inflation will cause faster central bank tightening. US and European market futures are slightly red, so there isn’t a major impact on general market sentiment yet.
If you are trading, you probably need to monitor closely whether it worsens and brings down the markets in a significant way.
I was a data analytics specialist in Singapore who got to know about the markets in 2010. In Dec 2021, I retired early from the corporate world by trading the markets, having accumulated enough trading profits. Below chronicles the steps I took in my trading journey.
I started off as a buy-and-hold investor, and bought only Singapore stocks via traditional brokerages. Profits were modest during these initial years.
I ingested mainstream investing guides and analyst reports, hoping to become an investment guru. However, I sadly remained a noob at the end of this phase.
Exploring Trading Possibilities (2012 – 2013)
Heading into unchartered waters
I opened various CFD accounts to explore the trading universe. CFD platforms offered a wide range of markets and asset classes, and facilitated different trading styles. It was like Star Trek – CFD platforms opened up strange and wondrous new worlds to explore. I tried trading different markets, industries, asset classes and trading styles. It was a time of intensive experimentation and inconsistent performance.
Awakening (2014)
The moment of realization
I finally found a combination of trading strategy, trading instrument, asset class and market sector that worked for me. Collectively, I shall term it my trading framework. As I started to refine it, consistency improved and for the 1st time, I managed to earn a 6-figure sum from trading over a year .
It felt amazing, and I thought to myself, “Wow, it really is possible for trading to change my life!” I felt hope and excitement, but also recognized that I still needed to continue to improve.
Scaling Up (2015)
Increasing position sizing
I worked on scaling up my trading position sizing to reap full benefits from my trading framework, and forced myself to endure the increased discomfort that every rise in position sizing brought. The process was akin to punching myself a little harder everyday to get used to higher levels of pain, and wondering why I was doing this to myself.
It was a painful process, but it was necessary in order to be able to generate enough profits to retire early via trading.
Implementing Trading Framework (2016 – 2019)
Carrying out the plan
With the scaling up process finished, I completed the development of my trading framework. Position sizing is an important part of the trading strategy aspect of the framework.
I used the framework from 2016 to 2019 without major changes to it. Up till 2018, it proved to be reliable most of the time. I was coasting along, thinking I could continue to depend on it to retire early by trading. But it stopped working in 2019. Market behavior had unexpectedly changed and rendered it useless.
Upgrading Trading Framework (2020)
Making changes to improve performance
I reviewed my trading framework and made changes to it adapt to the changed market behavior. The upgrade was finalized in 2020. It was more difficult to implement than its predecessor. I had to be more aggressive and take more risks, while being nimbler and more adaptive to changes in market conditions. But it started working again, so that was all that mattered.
Retiring From the Corporate World (2021)
Being my own boss
I decided to retire early from the corporate world in Dec 2021, having accumulated enough profits to feel comfortable living without a stable monthly income. Looking forward to spending more time with my family, continuing trading and pursuing other interests!
The most important lessons/reminders I gathered from my journey are as follows:
Be prepared to adapt your trading strategy to changing market behavior
Persevere on any idea that you have calculated to have a good chance of success
Avoid blindly following other trading strategies and principles, instead adapt them to your own personality and cognitive strengths
Do not be afraid to try out your own entirely original trading strategies
There is no such thing as absolute slam dunk certainty in markets
Stay humble even if you are successful, as it helps you keep true to your real self
Continue to spend time with family and friends, because they are more important than trading profits
Invest continually in your health to avoid disruptive and disabling health issues
Conclusion
It has taken 2 years of investing + 9 years of trading to earn enough profits to retire from the corporate world. I had a full-time job during these years, so it was tiring at times. I did not have a mentor, and I pretty much developed my own framework from scratch, so I probably took longer than some others to arrive at this stage. But one advantage of not rushing through the journey is that I had enough time solidify my foundation at each stage.
I hope that this sharing can help at least some of you in your own investment/trading journey. Please feel free to share your views or queries on this, I will be glad to hear from you.
Dear folks, thanks for visiting my site. This blog aims to monitor asset markets and provide useful info for traders. In the post-covid world, assets have much higher valuations than before, and it is essential to take this into account when trading.
I have been trading since 2012, and recently retired from the corporate world in Dec 2021 after accumulating a comfortable level of profits. I love trading, and I’m really glad to be able to share my views through this blog.
