My first venture into trading was when I stumbled onto lse.co.uk, saw a share down by a large amount, and thought to myself “It’ll go back up again”.
That share was PeerTV in November 2015. I read the bulletin board, and decided to punt £100 into it, thinking of how much I would make when it went back up again. As a student, this was a lot of money, and it promptly kept on falling. That wasn’t much fun. But I had realised how volatile the share price had been, and I knew that if I could understand why then maybe I could become a full time trader – which seemed much more exciting than the boring excel work I was doing as an intern.
From then on, I decided to consume knowledge. After working and applying for jobs, I read as much as I could and learned the hard way. I didn’t realise that if I paid £1.95 for a trade on DeGiro that I would pay the full spread until I bought a share with a 20% spread and instantly lost £100. I didn’t even know what a spread was. I didn’t realise that markets move for many reasons, until I bought easyJet the morning they announced record profits, and then the stock tanked. I made every mistake in the book, and did every dumb thing imaginable, but I didn’t give up. Every mistake was progress because I knew what didn’t work, and I could stop doing it.
I learned that I could make money trading FTSE 250 and larger AIM companies by researching the fundamentals and selling them for 20-30% risking 10-15%. This was a good system, but it was agonisingly slow. I realised that it would take me years and years to be able to get the cash pile required in order to both trade larger positions without taking on too much risk and to fund living expenses. And so I moved back to penny stocks.
My advantage coming back into this arena was that I knew that these stocks were just trading chips. Very few of them, if any, made any profit, and the charts of almost every single popular stock had only ever gone one way – down. I struggled a lot at first, making bigger wins but also bigger losses due to the wider spreads. Then CloudTag happened. This was the stock that grew my portfolio substantially, as I captured a 3p to 15p move. I knew that if I could do this just once a year combined with my system of trading FTSE 250 companies I could start to bring in material cash.
I started working full time in August 2016 as a recruiter in Frankfurt, and my time for the markets took a backseat. Back then, you could buy any old junk and it would go up – and I did. I was sometimes making more money than the job I was spending nearly twelve hours of the day doing, which admittedly wasn’t much, and the strain it had on my relationship with my now wife and my trading progress was beginning to depress me.
In January 2017 I decided to throw myself full time in the markets. It wasn’t that much of a risk – I could always go back to recruiting if it didn’t work out – but what if I never tried? Luckily for me, the small and micro caps market was booming. Everyone was making money hand over first, stocks were bagging left, right, and centre. At the end of the first month, I couldn’t believe how much money I had made and had to keep checking my accounts to see if it was actually real.
Eventually I would become a victim of my own hubris, but I didn’t see it back then. I began to take bigger and bigger risks. Whilst I never made any one position too big as a percentage of my portfolio, I had large positions in many illiquid stocks, and began to think because I was making money it must be because I was a good trader. When the General Election came, small and micro caps got hammered. I hadn’t experienced this before; I didn’t know what to do. I couldn’t sell – I was too much down! But the stocks kept sliding lower. At the end of that month I’d lost over £20,000. I felt physically sick and realised very quickly that if I carried on like that not only would I lose all of the gains I’d made in the past few months but that I would be dusting my CV off and going back to work in an office.
This was the wake-up call I needed. I’d slacked off my own trading development because I thought I was a genius. I had no risk management controls in place because I was too busy thinking of all the money I was going to make and not how much I stood to lose. From that point onwards, I decided that risk must come first.
Fast forward to now and I’m still making mistakes. But these days I know why I’m making money and I know why I’m losing it – that’s the difference. Trading isn’t hard, but often doing what is required is. I am constantly learning myself and believe that anyone can become a trader if they are willing to put in the hours and learn objectively from mistakes.