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My share trading past…

I’ve traded for a while now and mostly shares. It’s a hobby I picked up at school and continued during my studies. The occasional trades have served me well and provided a better alternative to miserable interest rates on my savings account. While stock markets and trading have been a strong interest of mine for all these years, I only got into active trading last year. Having had the right funds on hand I saw my chance to get my hands and head deeper into trading when markets took a steep plunge in August 2011 -  erasing 2.5 trillion USD of global equities on 8th August alone.

Over the next few days I quadrupled my portfolio size, moving funds across from my savings account – a bet that paid off and got me into active trading. Since then, my portfolio has seen many (more) trades, while becoming more diversified and focused on short to mid-term gains.

In picking stocks I followed two simple rules, both of which are associated with Warren Buffett*, but are probably just common sense :

a) Only invest into companies whose business model you fully understand; and
b) that are currently undervalued.

I thus focus on internet and technology companies, primarily in the US and Asian market. Funds managers (also called ‘asset managers’ in North America) as well as other financial institutions from Australasia and Europe have also made it into my portfolio. While I’m living and working in Australia, I’ve purposefully ignored the mining sector so far. It’s certainly a very prominent investment choice around, but is something I still haven’t gotten my head around just yet. I’m hoping to amend this amend in the near future given the potential returns this sector has to offer.

*Be warned: my adaptation/interpretation of Warren Buffett’s investment philosophy is rather liberal and tailored to my needs. For a more elaborate description head over to Investopedia.

…and my CFD trading today

Anyways, while my share trading has served its purpose and returned a stable 13-17% over the years, I started looking for alternative trading opportunities in December. I wanted to broaden my investment options and above all allow myself to profit not only from bullish markets, but bearish markets as well.

I rather quickly settled for CFDs as a suitable option. The reasons were manifold, but put in a nutshell: being able to short sell most assets and invest into commodities and indices with low hassle and in real-time. What added to the appeal was the fact that most CFD brokers offered sophisticated trading platforms to clients at no extra cost. Something one doesn’t get from standard stock brokers or banks.

Researching various CFD brokers, I signed up with IG Markets for two simple reasons: It’s the biggest and most awarded player in the market and I liked the information/resources made available by them that help making the transition into CFD trading. A good choice as it turned out, as my experience with IG Markets has been very positive thus far and I’m aiming to write a broker review at a later stage.

Getting started with CFDs was a paradigm shift for me and my trading. It changed my way of trading completely. Suddenly I was able to trade almost anything in real time and around the clock, benefiting from access to exchanges around the world. I was able to invest into gold one moment and into coffee, the FTSE100 or FX the next. In fact, it was all just to easy to believe and I was making anywhere between $100 to $1300 on the first few days of trading ‘playing’ with just a few thousand dollars.

I was aware of the risks involved with CFD trading: the high leverage and the possibility to lose more than once original investment and so on. But it was all just to good to be true… and indeed it was as you’ll see in my next post!