12 Nov 2014 Perspective on our Wannabe iTrader’s failures and successes
In September, Bradley Lund won the Wannabe iTrader competition on Sanlam iTrade Online’s LinkedIn company page. That earned him the opportunity to trade with R10,000 of our money for a month and then keep all of it, the R10,000 plus profits minus losses. We asked him to blog about his experience along the way and all followed closely.
He started off using the internet, especially www.Investopedia.com, to learn more about investing as he was quite green to trading. Investopedia is a great resource for definitions and explanation of all terms found in investments. He also used Sanlam iTrade Online’s own Learning Centre (we are currently working to update our learning modules to exciting online education courses, so watch this space). He also used the educational webinars on www.JustOneLap.com as a resource.
He should have spent more time on Technical Analysis education, especially for short term trading, however. There are good modules in our Learning Centre and one of the recommended books is the very-easy-to-understand: Technical Analysis from A to Z by Steven B Achelis. Technical analysis is the most important tool to determine direction, buy or sell signals as well as stop-losses. (You can also read First steps to start investing and the many more articles in our Investor Education Series.)
His first trade went wrong when he clicked “buy” (went long) instead of “sell” (going short). It is an easy mistake to make and many people will learn from his mistake. What would have been a nice profit turned into a small loss. He rectified it very quickly, however – another good lesson to learn is to check every trade.
His second post ‘Shoulda, woulda, coulda’ revealed an attitude that is guaranteed to make you lose money. I quote: “The market is a fickle beast, trying to coax it into playing nice is quite a mission.” NO, NO, NO! You can never coax the market or think the market is wrong and you are right. That type of arrogance is a sure road to failure. The market has no emotions. You have to analyse the market, using both Fundamental and Technical analysis. As the investment guru Warren Buffet said: “A stock doesn’t know that you own it”.
Gut feel is developed with decades of investment experience and even then it can go wrong. I have 27 years of stockbroking experience and you can read about the mistake I made last year with the Sanlam iTrade Fantasy League. Fortunately I knew that if the market makes a new high I would be wrong and rectified the mistake 11 days later without losing much (see Balance of Payments, Syria, strikes and putting money back). My calls this year were better. I warned about a correction on 29 July in JSE All Share Index up 37% in 13 months! That is still the all-time high of the JSE and the Index started to decline the next day. Hopefully my blog post on 15 October When to invest in the JSE when the market falls? helped our Wannabe iTrader to start going long after correctly going short before. Incidentally that was the low in this correction and the JSE started to recover in a strong V shape the next day. Pure luck.
In his third week our Wannabe iTrader started to make some profits, going long of Mediclinic and Satrix 40. His kept Old Mutual shares also started to get into profit territory. In the Blog Our Wannabe iTrader finds his groove, he shows that he has learned a thing or two about stop-losses. He correctly says: “I’ll probably keep adjusting my contingent orders (stop loss) as the share grows, and be taken out of the position when the share price turns.” That is a good way to manage your exit in the absence of clear technical analysis signals.
He makes full use of the JSE recovery in the last week with more profits on Woollies. His total profit after all trading costs for the month is a very respectable 9.4%. Obviously trading in CFDs to gear yourself makes a big difference if your trades are positive. The JSE All Share Index increased by less than 1 % in October. Well done to our green Wannabe iTrader who is not so green after trading for only one month. He increased his R10,000 prize money to R10,941 and can now continue to experience online trading.
If you want to experience trading shares on the JSE you can open an iView account with Sanlam iTrade Online and make use of all the information on our website as well as trade your own virtual portfolio. This is a great way to gain real trading experience with no risk and it will only cost you R200 per year. Go to www.sanlamitrade.co.za and click on Register.
We referred to Warren Buffet earlier in this post and he is regarded as the most successful investor of the 20th century. He is also known as the “Oracle of Omaha”. The price of his investment company, Berkshire Hathaway, is now $217,350.00 per share. If your dad invested $1,000 in Berkshire Hathaway in 1964 when he became the major shareholder, his investment would now be worth more than $10m. Here are a few more wise words from Warren Buffet that are relevant:
“I made my first investment at age eleven. I was wasting my life up until then.”
“If calculus or algebra were required to be a great investor, I’d have to go back to delivering newspapers.”
“The market, like the Lord, helps those who help themselves. But unlike the Lord, the market does not forgive those who know not what they do.”
“No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.”
– Gerhard Lampen
Head Online Trading
Sanlam Private Wealth