Finally, 21 years
old. Who remembers that feeling of waking up and saying, “Now life really
begins for me.” Such an exciting time full of optimism over what life is going
to bring to you. We go out, have a huge party and drink to the edge of
consciousness.
Well, my 21st
birthday was slightly different. The months and couple of
years leading up to this faithful day, I was taking trading seriously
thinking it was going to be a make-or-break for me. Maybe I was going to be a
superstar trader and people would recognize how great I was. Finally, I was at
the legal age where I could own my very first trading account. So I woke up
that morning, had a normal breakfast, took a bus into town, walked over
to the bank to get a check from the bank teller, and walked across the street
to open my very first brokerage accounts.
My key to life
was finally here! And I did well! In the first month, I made $1,000
from my $3,000 account. I remember withdrawing some of the money
and treating my friends and family to a great meal. I even bought a
new skateboard. Man it felt great! What felt even better was that a close
friend who was going be a missionary was raising money, but as a full time
student, no one expected that I could fork out $800. Nothing, and I
mean absolutely nothing, feels better than 1) providing for your family and 2)
giving money away. You can call it the Law of Attraction or
something, but I just think it innate to our human nature.
Alas, the
reality was, trading isn't easy, it is BRUTAL. A short year later, I busted
my accounts. It was so absolutely humiliating after all the hype
and talk of earning big bucks vanished.
I did eventually
open another and successfully traded my way through university earning about
3-7% a month and even managed to get a job as a part-time trader in a
hedge fund. I've also learnt some important lessons from my busted account. And
here are five reasons I think technology is changing the way we invest.
Reason 1: Remember Rare Pokémon? They are rare
for a reason.
Mew-two: Remember this little rare fella?
It is possible to
make money. It doesn't matter what people say; it is possible. Is it a very
small percentage? Absolutely. It is possible? Absolutely. It is possible to do
it full-time and quit your job? Absolutely.
Read this book if
you need proof. But again, these are the rarities and should not be taken as
the norm.
On etoro there
are some consistently profitable traders, and I believe I have found them.
Wouldn't it be great if you could hire them to trade your money?
Also the learning
curve is steep and time and money investment is high, amongst others the
lessons to be learned. There’s the months upon months of papers trading,
and at the end of it, you might not even be that good at it. Or worse yet, the
system you have does not fit your schedule or your personality type.
Even if you are
willing to go through that pain, what happens if you lose your first
account? I once met some traders who described the experience of losing
their first real money account as part of the “school fees.”
Etoro has some
people who have already paid the school fees. Why not ask them to trade on your
behalf?
Reason 2: Batman? Billionaire playboy by day and
superhero by night.
I can do this on
the side and still work a full time job. Well some people
are able to for inspiration please read the Millionaire
Traders: How Everyday People Are Beating Wall Street at Its Own Game,
i should be doing a book review soon. But if you have responsibilities I would
like to present you with a term called "ego depletion." We
all have a limited reservoir of ego or decision-making
abilities in a single day. If you have a stressful job, a wife
and a kid, will you still have the mental ability to manage the super stressful
arena of trading? I remember how I used to hide in the toilet to monitor my
trades. Not something I would recommend. For more on this, you can
read Willpower by Roy
Baumeister and John Tierney.
And honestly, do
you really want to spend your time glued to the screen? I find most people who
get into trading want to get into the game to have enough money to do something
they really love. Or rather, the freedom to do things they just don't have the
time and money for.
If you knew your
end goal and are patient enough to earn it, wouldn't investing your money in
someone who knew the market be better? After all, even the most seasoned
traders don't make as much as you think.
Reason 3: Why be
Robin when you can be Batman?
Throwback Robin "Holly smokes Batman"
But wait, didn’t you trade part time
when you were in school? Why do you want to recommend copytrading instead of
doing this yourself?
While I was in school, I could sleep
when I needed to as long as there weren’t classes, study when I wanted to, and
I had Sundays to catch up on sleep and had no family obligations. Depending on
your lifestyle, you may not have the ability to do this.
I will have to do my own monitoring,
but since I will be in the market I will not need to handle the nitty gritty
everyday stress.
Reason 4: Okay,
fine, I'm not batman, but I can buy a Robocop - Robotraders? They seem to do
well.
Well, it’s not right for me to make a
sweeping statement about Robotraders, but honestly I have found that systems
may work for a while and completely disappear later. I bought one system way
back in 2010, backtested to good effect, and realised it didn't provide as many
returns as advertised.
Yes, the buy my robot “and in no time
buy a Ferrari” doesn’t really apply.
The trading strategy I was using in
2008 may not apply in 2012 and certainly hasn't in 2016. Some robotraders promise
continuous updates, but if you were to ask me, humans still triumph over the
machines.
And please don't
mistaken Robotraders for HFT (High Frequency Trading). This is a
"Big-boys Only Club" and is essentially riskless.
Reason 5: Doomsday
virus - what if the trader goes nuts?
Doomsday Virus Even Superman has a bad day right?
Yes, humans have emotions, too. What
happens if they go berserk and forget their strategy?
Etoro has one unique feature to
settle this over traditional funds: Your fund manager will lose money
if you lose money. It is estimated that for a traditional mutual fund,
less than 10% actually have a stake in their own fund! If the fund loses
money, they lose nothing.
Copytrading means if you lose
money, the trader on the other end of the trade loses money as well.
Finance geeks know this as "skin in the game," as popularized by
Naseem Taleb.
“Instead of relying on thousands of
meandering pages of regulation, we should enforce a basic principle of ‘skin in
the game’ when it comes to financial oversight: The captain goes down with the
ship; every captain and every ship. In other words, nobody should be in a
position to have the upside without sharing the downside, particularly when
others may be harmed. While this principle seems simple, we have moved away
from it in the finance world, particularly when it comes to financial
organizations that have been deemed ‘too big to fail .’”
- Nassim Nicholas Taleb and George A. Martin
In the case of Etoro, this is very
true.
