DIYQuant talks about his first trade

This is a post about my first trade to share about my story on how I started my investing journey.

It all began when I was still at my first job. Some of my colleagues were active investors in the Singapore market. There was this particular colleague who seemed to be very good at making trade calls. I used to see him walking to other colleagues’ desks telling them to buy a certain counter that he believed would rise in price. Some of them would even vouch for his accuracy. Through the years I can see that he really made quite some money as he started buying car in cash and going for holidays with his whole extended family. And he had his staunch followers who appeared to follow whatever that he was buying. I used to join them for lunch and listen to their discussion about investing. 

At that time, I knew nothing about investing, all I heard about was “buy this” or “sell that”. They didn’t really involve me in the discussion, probably because they knew I know nothing about it. I just sat there and listened while eating my cai peng. All these started to trigger my interest in investing. I was curious why this stuff can earn people like Warren Buffett huge sums of money. Another compelling reason was that I want to be financially free. Having a full time job with mediocre pay would take me decades to reach there. Looking at the way my colleagues seemed to be profiting, I decided to learn about investment.

I started reading up on investment and trading. I remember the first book I read was a book by Warren Buffett “The Snowball: Warren Buffett and the Business of Life”. I never finished reading it even until today. It was too thick and I don’t like to read thick books actually. (Ok I like Lord of the Rings, that’s the only thick book I finished reading.) Anyway most of my initial trading knowledge came from websites such as Investopedia and MarketWatch. It was tough in the beginning given that not only I knew nothing about investment, I also knew nothing about finance! But I managed to get some basic knowledge by reading. 

Armed with the minimal knowledge that I had, I started to engage this group of colleagues in investment discussion hoping to gain even more knowledge. By the way, my this group of colleagues, they are not bad people. In fact, they are a few of the nicest colleagues I ever have. Since now they realized that I can talk in the same ‘frequency’ they started to share more. They advised me to start by practicing using paper trading account. So I created one on MarketWatch’s Virtual Stock Exchange. I learnt how to look for a company’s stock via its symbol, how to buy/sell, what is stock price etc. 

My colleagues also explained to me about the 2 groups of analysis investors usually belong to, which is Fundamental Analysis and Technical Analysis. Since I admire the success of Warren Buffett, I decided to look into Fundamental Analysis, and Warren Buffett’s ultimate buy and hold strategy. And I made the first trade. It was just a paper trade. I decided to ‘invest’ in Boeing, VISA and Volkswagen. I wanted to invest in companies that produce things that everyone needs. I want to be like Warren Buffett. Then when I began to dive deeper into Fundamental Analysis, I realized it started to daunt me due to my lack of financial knowledge. There were too many things to analyze and too many uncertainties. There were lots of information in a company’s financial report and I don’t think I can understand all of them and what more to know the message behind them. To me, uncertainties mean risks. Anyway, my first few paper trades didn’t yield good results.

So I started to look at the other ‘clan’, Technical Analysis. It seemed less daunting, basically what is most important is price and the history of it (and other metrics like volume, volatility etc which later in my trading I realized are also important). And though there are many methodologies to analyze price movements, I find it less complex than Fundamental Analysis (just my opinion probably due to my technical background, no hard feelings). 

I started with the most common method of all, Simple Moving Average. I learnt about Golden Cross, Death Cross, 100/50 SMA. Then I began reading up more complex ones like EMA, CDMA, Bollinger band even Elliott wave and Fibonacci indicator. I also got fascinated by candlesticks and other charting methodologies. So I began to try out technical analysis. This time I am using real money. I decided to start with Singapore market. At that time, Standard Chartered was having the cheapest brokerage fee so I opened a trading account with them. 

My strategy was simple, buy when the stock hit a golden cross. My first real money trade in Singapore was buying Capitaland Mall. At that time, the market was rebounding and this stock was rising hot. Subsequently, I bought more stocks using the same strategy and I also tried others like candlestick and Fibonacci. Long story short, technical analysis didn’t get me anywhere as well. Maybe because some of them are already overused.

So I started exploring other ‘clans’ which is how I ended up doing quantitative analysis. I wrote my own trading system, backtested and traded using it. I even went to the extent of joining the Quantopian trading competition. At one point, I was holding the #1 position until my code crashed and I was disqualified.

Anyway, until now I have been trading as a quant. So far, it has been doing quite well in both Singapore and US market. Since this is a post about my first trade, I shall not go further than this. You can visit my blog to see my performance and find out my current strategy and other postings.

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