What a month to start trading stocks for real.
August has been an educational experience, to say the least. The extreme volatility in the global markets swept across various trading instruments and products.
It was driven by everything from the reaction over the European Central Bank buying bonds to speculation and panic over the downgrading of the US sovereign credit rating. While stock markets around the world plunged, they then rebounded briefly after the investor Warren Buffet ploughed US$5 billion (Dh18.36bn) into Bank of America. There were periods of anticipation over what the US Federal Reserve would do next. Meanwhile, trading volumes dropped severely towards the last week of the month.
While one could consider this period of uncertainty as an opportune time to invest, it is vital to have a trading plan in mind and imperative to manage emotions - especially if you are a momentum day trader or a short-term player.
The early days of the month were challenging, no doubt, with markets moving so swiftly it was difficult to execute a decent trade at the level desired, whether to buy or sell. Often, the trading floor would either resound with investors cursing at the screens, or remain silent as people stared in disbelief and confusion.
Emotionally, for me, it has been a roller coaster, with my moods oscillating with the market. August contained times when I felt extremely energised and hopeful enough to overcome the fear of pulling the trigger to execute a trade after a few consistent losing days. On other days, I doubted my ability to find strength, resolve, confidence and determination to keep moving forward. It was exhausting.
Trading with Dubai Professional Trading Group (DPTG) has been useful, and the firm's mentors and professional traders have offered guidance and support. Speaking with Jamie Lear, DPTG's chief executive and an experienced trader, after a rough trading day brought home to me how exceptional this volatility was when he mentioned that his friends and counterparts in London - who have been doing this for years - have never seen anything quite like it. German bund futures alone have moved from an August start of 130 to a high of more than 135. Meanwhile, Eurostoxx futures have seen large moves, dipping from 2,700 levels to 2,200.
The market does give you ample opportunity to make money, volatile or not. It is up to you to make objective decisions after observing the swings, understanding the trend and momentum and trusting your judgement. Ensuring that you get in and out at the right levels, while being quick to admit when you have gone wrong, are important. Another key factor is knowing when to cut your losses.
Admittedly, I have erred this month. And that's not something I'm proud of. Overall, I've lost 30 per cent of my starting capital during my first month of live trading.
But September is a brand new month and market dynamics are set to change as volumes will shoot up. I have hopefully emerged as a smarter, and stronger, trader after the past turbulent month. So what's my plan going forward? In a broad stroke: to keep my trades clean, and to keep them green. Wish me luck.
Renee Tauro is chronicling her quest to start a new career as a trader