Lessons from My Investment Journey and the Risks of Leveraged Trading
Introduction: I started my trading journey in 2021 with one goal in mind: to grow my capital and retire early. In Singapore, investing is a feasible path to financial freedom, and I saw it as a key part of my future. However, my timing was far from ideal. Entering the market in November 2021, I walked straight into a peak, and just a month later, the markets began to crash. It was a harsh welcome, but it kick-started my learning process.
About My Trading Journey: When I first started, I had little experience and was drawn to Cathie Wood’s ARKK ETF. At the time, her fund was outperforming everything, including the S&P 500 and Nasdaq. I believed I had found a winning strategy by following her, but it didn’t take long for reality to set in. As the market dropped, ARKK's gains evaporated, and I quickly realized the importance of understanding the fundamentals behind a fund’s performance rather than following hype.
By 2022, I began focusing more on learning. I studied company fundamentals, analyzed financial statements, and moved on to options trading. One of my early options trades was with SQQQ—a 3x leveraged inverse ETF that bets on the Nasdaq's decline. During a market downturn, I bought options on SQQQ, and within a few days, my unrealized gains shot up to $7,000. Greed took over, and I believed the market would continue to fall. But as soon as the market rebounded, my gains shrank rapidly. What started as $7,000 dropped to $4,000, then to $2,000. By the time I finally closed my position, I wasn’t just back to square one—I was down $2,000.
This was a painful lesson: options trading can offer massive rewards, but without an exit strategy, those gains can quickly disappear. Since then, I’ve become much more cautious about when to take profits and how to manage risks.
Challenges and Opportunities in the Chinese Market: Lately, I’ve been focused on the Chinese market, which has been incredibly volatile due to government stimulus policies. As I mentioned in my previous posts, the Chinese government's actions—or lack of action—have created wild swings in the market. On October 8, the market reacted negatively to the government’s policy announcement, which was less aggressive than expected. A-shares in China and Hong Kong stocks both fell as foreign investors exited en masse, causing a sharp selloff.
Right now, everyone is waiting for the October 12 press conference, where the government is expected to announce further measures. I'm holding YINN call options with a November 15 expiration, and the outcome of this meeting could determine whether I reduce my losses or see a recovery. My strategy is simple: if the market reacts positively to new policies, I’ll ride the wave for as long as I can. But if the policies disappoint, I’m prepared to cut my losses and move on.
Lessons Learned:
1. Timing is crucial – Entering the market near its all-time highs taught me that timing is essential, especially when you’re new to investing.
1. Timing is crucial – Entering the market near its all-time highs taught me that timing is essential, especially when you’re new to investing.
2. Leverage and options are a double-edged sword – My experience with SQQQ highlighted the risks of leverage. While options can generate significant returns, they can also wipe out profits just as quickly if you don’t have a solid exit plan.
3. Know when to take profits – One of my biggest takeaways is the importance of locking in gains. In my case, greed got the better of me, and I ended up losing more than I should have.
Advice for New Investors: For those new to investing, my advice is simple: learn before you leap. It’s tempting to chase high returns, especially with leveraged products or trending stocks, but without proper knowledge, you’re setting yourself up for failure. Focus on long-term fundamentals, and start with safer options like index funds or ETFs like the S&P 500. If you’re considering Chinese stocks, be aware of the inherent risks tied to government policies. Unlike in the US, where companies’ fundamentals play a bigger role, the Chinese market is largely driven by policy shifts.
Conclusion: As the October 12 press conference approaches, I remain cautiously optimistic. I’ll be watching closely and will adjust my strategy based on the market’s reaction. Whether the policies reignite the rally or the market takes another dive, I’m ready to pivot accordingly. It’s all part of the learning process, and with each trade, I’m gaining more experience.
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Long-term value investor, focused on identifying undervalued stocks through thorough market analysis and fundamentals.
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PT Tan : I am also a novice investor and would like to learn about options trading. Thank you.
Alex Wong Cian Yih OP PT Tan : Hi PT Tan! Learning options trading isn’t too difficult, but practice is key. You can start by using the platform's paper trading feature to simulate trades without real money. For basic strategies like buying/selling calls and puts, YouTube has great beginner tutorials. Just search for options trading basics like "sell put" or "buy call."
If you prefer books, most bookstores have finance sections with dedicated options trading books. They can give you a deeper understanding of strategies and concepts. You’ll find plenty of helpful resources both online and in print. Good luck!
PT Tan : Thank you for your inquiry.