A Learning Journey Through a Pandemic

I am not new to investing but I am new to the WA programme on Value Momentum Investing (VMI) and Momentum Trend Trading (MTT). I started investing in June 2016 after graduating from another investment course conducted by another company. I was mostly profitable from 2016 to 2019. Encouraged by my initial success, I left my job to try investing and trading full time in 2019. I reviewed my records from 2016 to 2019 and realised that 2018 was a year when I barely made any money. A large portion of my profits were mainly from the other years and this kept me “thinking”. There were two major dips in 2018 and this made me realised that my skills and knowledge were not good enough for me to handle a sudden plunge or worse, a “swan” event where the economy goes into a recession. I became a little worried as the economy had in general been good over the years from 2016 to 2019. I realised that being profitable when the economy was good does not truly define me as being successful.

In early Feb 2020, when the SPX was still on an uptrend, I chanced upon Adam Khoo’s introductory course on momentum investing and trading. I decided to take up his main course programme to be scheduled from 19-22 Mar2020.  Little did I know that this was one of the most important decision I ever made.

D-Day : 23 Mar 2020

Towards the last week of Feb 2020, the market was still going strong with the S&P 500 Index reaching a high of 3393 points. I was looking forward to attend the WA course when the index started to turn sharply downwards, apparently from news of the coronavirus which seemed to get worse each day. My profits started to turn into losses. Increasingly, I was worried that the WA-course would be cancelled. Fortunately, it was not called off as the effects of the coronavirus was still in its early days in March 2020.

The night before 23 Mar 2020 (D-Day), my heart was heavy after returning home from the 4-day WA programme but even more so when I open my trading account the very next day itself. The S&P 500 Index had plunged to a record low of 2191 points on D-Day. The first thought that came to my mind was to consider selling all my equities and closing my options positions. This indeed was a swan event where the SPX had plunged 36% from its high. My realised and unrealised loss at that time was about $139,000, wiping out all the profits and more that I had made in 2019. I was dejected and hope that the market would turn around quickly. However, hope wasn’t the answer. After staring blankly at my loss for a while, I decided to pick myself up and see what I can do with the knowledge and skills that I had gone through with Adam during the 4-day investment and trading course. 

As a previous high school-teacher, I remembered telling my own students to differentiate between hard work and effective effort in order to do well for their academic success. Studies have shown that our ability to recall information diminishes very quickly if we don’t rehearse them soon enough. To be effective, I needed to quickly practise what was taught in Adam’s class while it was still fresh in my mind. I resolved to make good what I had learned in the 4-day programme. Immediately, I went through WA- book that was covered during the 4-day course. I was thankful for the videos that came with the package that I could review any principles or lessons which I did not fully understand.  The very next day after D-day, I did a DCF valuation on 5 companies and sent them to Adam for his opinion as I wanted to invest in them. These 5 companies were Microsoft, Facebook, Amazon, Veeva and Alibaba.  I put into action what I had learned by rebalancing my portfolio and concentrated on stocks that I understood would do well in this pandemic.

Besides the strategies on VMI and MTT, I also learned from Adam what I considered as the most important part of his programme - the psychology of investing and trading. How to position size and be disciplined and not let emotions and other distractions get the better of my decision. This, however, was easier said than done.  I had just lost a significant amount of money which I had set aside for my retirement. Fear was very real in my mind. How to be objective in the midst of overriding fear was something I had to overcome. Over the next 5 weeks after D-day, I started my invasion into a new path of investing. I increased my capital in stages and started investing and applying the knowledge I have gained. I reviewed and completed the videos that was included in the training package. By the end of Apr 2020, I had already recovered 60% of my initial loss. My loss was about $54,000 compared to the original loss of $139,000.

May 2020 – Momentum

Contrarily to the doom’s day scenarios which I heard frequently on the media, the market was actually recovering. This was in line with what Adam said during the course that “The stock market is not the economy”. Had I not taken the WA-course, I could have been out of the market and not ride this recovery.  My confidence returned. The market was recovering and I was in learning mode and riding the momentum.

In May, I decided to take the online advance options course to complement my VMI strategies. The advance options course conducted by Adam and Bang was an eye opener. There were many strategies to be learned but I quickly understood them because I already had some options background. Different option strategies were geared towards different market conditions and I realised the importance of knowing various strategies. For example, I learned to sell more options strategies such as cash secured puts, iron condors or verticals to collect premiums when volatility is high during this pandemic. I also learned how to hedge and use options to protect my portfolio. On 1 June 2020, more than 2 months after D-day, I had almost break even using a combination of VMI and options strategies. My loss was a notch below $6000. 

June 2020 – Diversification

At this stage, I was seeing the benefits of the VMI and options trading course when my “coronavirus free” stocks were rebounding and also how my options trading is complementing my investment.  I felt I could further diversify to include other trading strategies to improve my overall investment. MTT was my weakest area as I had some difficulty deciding on the Stop Loss and Entry points when looking at charts. I decided to enrol Roboray as my buddy by opening a new account exclusively for Roboray trading in early June. So far, I had not seen any results as I had some technical difficulties connecting Roboray to the IB platform during the first month.  However, each time when Roboray traded, I was sent an email on its recommended trades. I then studied the charts to establish its position behind each trade and I was able to trade manually. By including Roboray in my arsenal, I am now able to have all the investment methods such as using VMI for investing, WA Options for rents and Roboray for trading. 

July 2020 - Community Trading

Finally, to round up my education and training, I started joining a trading group for Momentum Trend Trading (MTT) in July under the WA inner circle telegram chat. Nothing beats working together as a team. We help to look out for each other and give each other feedback to improve our trading skills. Trading as a community helps to challenge our own assumptions and we realise it is good to have second or third opinions with those who are similarly trained.

With all this training and experiences, I was happy to achieve profitability on 23 July 2020, exactly 4 months after D-Day when the market recovered to the same level as the start of the year. My realised and unrealised profit was $71,000, up from an original loss of $139000.  I was fortunate that I was able to take immediate action and applied what I had learned to ride the recovery.

Key Takeaways: There are three important learning points from this experience.

First, I realise that having a little knowledge can be a dangerous thing, just like having a two-edged sword. When I started investing actively, I was profitable straight away and thought I knew about investing until the market turned against me and I did not have the tools to turn it around.

Second, in investing or trading, there will be times when the market is up or when the market is down and we can’t really control it. It is what we do in preparing for its next probable move that most determines our success.  No matter what happens, it is important to do our due diligence and check our own emotions before acting.

Third, investing and trading is a skill that takes as much effort to master as it is in any other profession. It requires learning and re-learning all the time. Each outcome is an experience.  Learning does not stop at Graduation (Lawrence Wong, 30 July 2020, The Straits Times).

Finally, I would like to leave these thoughts by quoting from Winston Churchill when referring to any journey one is about to embark:

                “Success is not Final, Failure is not Fatal, it is the courage that counts”

May the learning be with you.

Desmond Chee

P/S