If you thought being a professional trader means only working for a couple of hours a day, while sipping cold drinks by the beach, you’ve been told a lie by opportunistic marketers, my friend. I can tell you that, because I interviewed a professional trader who shared with me how the #tradinglife is really like.
Meet Isabelle Zhen from Kenanga Investment Bank. She is the first (and to date, only) person who could explain trading – and specifically warrants* trading – to me in a language that I can actually understand. I learned more about warrants trading in a two-hour workshop conducted by her than literal years from other sources.
*Warrants = a financial instrument. You can trade other things – more info further below
Isabelle has an interesting job – she is the Warrants Issuer and Spokesperson at Kenanga Investment Bank. Her job scope involves both trading warrants professionally and organising educational talks. After some prodding I found out that Isabelle has been there for 4 years (so far), and already promoted twice. I think that speaks for itself.
The Daily Routine of a Professional Trader
Isabelle specialises in trading derivatives, specifically warrants, and maintains a strict daily routine which debunks all the trading-is-easy-money fantasies sold to you by irresponsible trading platforms and self-declared trading ‘gurus’.
Isabelle’s Daily Schedule
|6.30am||Wake up, have black coffee and start the day with spiritual activity (read Bible)|
|7.00am||Listen to BFM 89.9 for local newsflow updates (“while I shower”) and turn on CNBC to find out what happened in Western markets (“while I get ready”)|
|8.30am||Stationed at desk and ready to start work. Double-check charts and trading systems|
|9.00am-5pm||The market opens; Trading and other work activities|
(Isabelle: When I start trading, I talk to the stocks like they are my babies
Me: Even in front of your co-workers?
Isabelle: They’re used to it)
|After work and weekends||Do personal projects, reading and practice trading for fun|
Some trading tools Isabelle uses include:
- Broker – Kenanga Investment Bank (of course)
- Information/Newsflow – “In addition to BFM89.9 and CNBC, I scan through every related news source. But my favourite is our Bloomberg terminal (it’s like a Google for companies)”
- Structured Warrants – NagaWarrants.com for warrant terms, indicators and Live Matrixes.
Something that is immediately apparent about Isabelle is how much she LOVES trading. During the course of our conversation, her face LIT UP when we talked about trading mindset, thought process and strategies. She admitted she “likes to visualise candlestick chart patterns before sleep, before The Queen’s Gambit made it a thing”.
Listen, I don’t exactly have the best experience with trading (got burned when I attempted copy-trading, which serves me right tbh), but Isabelle made it sound downright fascinating, so let’s talk about that.
Life of a professional trader: Trading mindset, thought process and strategies
Can I admit that while I’m aware there are books about trading as a skillset, I had no idea there are biographies and memoirs of great traders?
“I like knowing the history of trading greats; like Richard Dennis who believes that trading is a learnable skill, W.D Gann’s trading rules, and Jesse Livermore’s big wins and big mistakes,” said Isabelle, “I also love the works of Richard Thaler in behavioural finance and apply when I execute trading execution”
How do you apply that? I asked.
I’m simplifying it, but here’s how Isabelle explained it:
- First, visualise your trading goals and make a trading plan. For example, you might set RM10k in income as your goal. From there you can decide on suitable financial instruments which can help you reach your goal, given available capital and your risk profile
- Second, look at behavioural quirks. What works for AND against your own personality? For example, Isabelle said she’s aware she has ‘itchy fingers’ – the tendency to over-trade – so she mindfully sets trading limits
- Third, execute the plan following trading rules*. “Trading rules are like the red signal light at the traffic light. You can always break it, but be prepared to face harsh consequences.”
|*Isabelle’s Three Trading Rules|
#1 – To have an abundance mindset. Never feel like you should enter a trade because you don’t want to miss a ‘once-in-a-lifetime opportunity’; there will be other opportunities and more good trades to catch in the future
#2 – Being constantly self-aware and staying humble. The market attracts the overconfident and humbles us quickly – that’s just the nature of this beast. But it is a game of probability where you can improve your odds of success by doing the homework.
#3 – Trade like a robot. This means analysing the market objectively and consider which weapon aka financial product to attack it with. It’s important to set stop losses and target prices, then mercilessly cut loss like a robot, if it gets hit.
“My trading rules come from understanding the trading greats and simplifying it for myself. In the 1900-1950s, you’ve got the main principles from Charles Dow, the market structure from WD Gann and chart patterns from Richard Wyckoff & Robert Rhea in the 1930s, the boom of technical indicators from Richard Dennis, George Lane, John Bollinger, John DiNapoli & Wilder in the 1950s, Japanese candlesticks from Steve Nison in the 2000s & now is the age of the Quant.”
(Suraya’s note: I only have a very shallow understanding of these people and concepts. Guess you have to learn from Isabelle by attending her workshops – scroll all the way down for the video)
In addition to improving trading as a skill via self-practice, and learning from history/notable figures, another strength that Isabelle has is the ability to succinctly describe concepts and approaches.
For example, when I confessed my own fear of trading, Isabelle explained satisficing as the decision-making strategy which she applies in her trading life – “At some point, you have to realise you have learned all the theory you could at one go, and can only learn further by executing.”
The 4 Type of (Professional) Traders
According to Isabelle, there are 4 main types of professional traders: scalpers, day traders, swing traders and position traders. The differences between them, in her words:
- Scalpers – The goal of a scalper is to make 1 tick or break-even, and do this many, many times through the day. I used to do this. I know a few traders who make at least 10 trades a day – 7 break-evens, 2 wins and 1 cut loss. This machine-gun style of trading suits “active personality” types but there is the risk of “over-trading”.
- Day traders – Day traders open and close trades intraday, meaning they close their positions before the end of the day, so they don’t expose their capital to overnight risk. They usually have a “view” for the first half, second half or whole market day.
- Swing traders – These traders hold on to a trade for several days or weeks. Usually working professionals can’t monitor prices through the day, so they do their homework and analysis at night. For swing traders trading Structured Warrants, I find them profiting the MOST as they get to harness the full power of the Force, I mean gearing.
- Position traders – These traders hold positions from weeks to months to even years. The main risk is that such traders may ignore “trend reversal” signals or experience “opportunity costs” from tying up your money for too long.
The same trading skillset can be applied to each instrument*, but most professional traders concentrate on one or two instruments at most as they require different background research.
*You can trade many financial instruments, including cash instruments, derivatives instruments, stocks, foreign currencies (‘forex’), cryptocurrencies and more.
Watch Isabelle’s Warrants Trading Workshops
Is warrants trading for you? Maybe yes, maybe no, but it is something that stocks investors favouring blue-chip companies can explore – unlike other financial instruments, derivatives and warrants trading is a regulated activity in Malaysia, so you’re somewhat protected (reminder: most of those aggressive forex platforms are not licensed in Malaysia).
To end this, I’d like to share here a 20-min beginner-friendly guide to trading warrants, presented by Isabelle herself, plus the Q&A session where we talked more about trading mindset and experience. You can find intermediate and advanced materials at the Kenanga Youtube channel and also join the NagaWarrants telegram group for warrants-related information, community support and learning opportunities.
*This is not a sponsored article from Kenanga, but I was paid for the webinar appearance, which took place on December 2020. Information were summarised from our conversations before and during the webinar.