The ups and downs of global trading

The ups and downs of global trading

It has been another eventful year for the Rivkin Global portfolio. Global markets were hit with a barrage of negative news, with patches of optimism. If markets were up, it was deemed a ‘risk on’ event, while if they went down, it was a ‘risk off’ event. From fears of a euro-zone break up to concerns over the U.S. economy falling off a ‘fiscal cliff’, it was the year global markets see-sawed. With these constant mood swings, generating positive market returns was challenging to say the least. But despite all the ups and downs, Rivkin Global still managed to end the year on a high.

In years as choppy and volatile as 2012, the directional trading strategy used by Rivkin Global can, at times, be challenging to follow, especially for clients with limited trading experience and high risk aversion. Seeing your trading account make over $10,000 one month (based on a $50,000 portfolio), only to then slowly lose money for the next three, can be an emotionally draining experience for many. While it is understandable emotions can run high during volatile times, in the realm of trading, emotions are often detrimental to long-term trading success.  And this year more than ever, the Rivkin team has done a great job of assisting clients to manage their emotions.

Every day, Rivkin analysts and dealers talk to clients about Rivkin Global positions, performance, trading psychology, and general trading related themes. From this daily communication, we have noticed particular patterns emerge, with client psychology and trading behaviour that are often seen as precursors to trading failure. From our observations, common patterns that emerge in patches of negative performance are:

  • Placing too much emphasis on short-term performance
  • Not following every trade
  • Taking profits too early
  • Being too aggressive with trailing stop losses
  • Being inconsistent with trading size

When following a trading strategy such as Rivkin Global’s, these are typical behaviours people exhibit during extended periods of drawdown. Although these ‘fight or flight’ type behaviours are understandable, to be successful at trading, they should be avoided. Essentially, one must unlearn their natural instincts (when it comes to trading), and do what feels unnatural. But this is where many novice traders fall down. Regardless of how hard they try, natural instincts take over and emotions end up dictating trading behaviours, ultimately leading to poor trading performance. So unless it is someone dedicated to becoming a professional trader through rigorous self improvement, training and education, then those natural instincts will often prevail.

When trading, regardless of how great or terrible the account P&L statement looks, trading behaviours should simply:

  • Focus on the big picture
  • Be process orientated, not outcome orientated
  • Follow trading rules
  • Let profits run, and cut losses short

By bringing people freedom from financial fear, Rivkin’s vision is to provide unrestricted life choices for its clients. Financial fear along with time constraints, inexperience and lack of a trading plan are all common reasons why people become unsuccessful traders. Rivkin Global is designed to allow anyone, regardless of experience, time constraints, skill or knowledge, to professionally trade global markets at minimal cost. Unlike a hedge fund, Rivkin Global does not charge clients management and 20% performance fees. There is just a $37 fortnightly flat fee. And if trading is conducted through Rivkin, accumulated frequent trader points can be used to substantially reduce the fortnightly fee.

When used successfully, short-term directional trading strategies are an excellent long-term wealth creation tool. For instance, if someone ‘invested’ $50,000 with Rivkin Global at its inception in December 2009, it would now be worth approximately $80,000, a return of ~60%. However, for clients who see trading as a great way of making fast money, following the strategy for only a couple of months, their chances of success are substantially reduced.

This year, the Rivkin Global portfolio endured plenty of ups and downs, testing everyone’s trading discipline. Some clients stayed disciplined, sticking to the strategy even after three months of losses, while some strayed by missing trades, being too aggressive with stops, and becoming inconsistent with trade size. With the Rivkin Global portfolio having a strong run higher following the drawdown, clients who stuck to the strategy profited, while the ones who strayed lost out. If used correctly, Rivkin Global is an excellent long-term wealth creation tool, which essentially allows anyone to trade like a professional.

How to get the most out of Rivkin Global:

  • Commit to following the strategy for at least one year
  • Don’t deviate from the advice
  • Use Rivkin’s dealing service. It will reduce costs, make life simpler, and give you 24 hour access to dealers with a thorough knowledge of Rivkin Global
  • Have separate accounts for Rivkin Global and personal trading
  • When lost, unsure, in need of support, or encountering any difficulties, be open to asking the Rivkin Global team questions on Virtually Live Global, the Rivkin Community or directly over the phone
  • Avoid getting emotional about the short-term swings in your account P&L, regardless of whether they are up or down
  • Regularly watch the morning videos and listen to Virtually Live Global
  • Trade an account size that fits your personal circumstances. For instance, whether you trade a $10,000 or $1 million portfolio, it should be in accordance with your age, income level, risk tolerance, time horizon and long-term financial goals, among others.

Rivkin Global is a simple and insightful way for almost anyone to trade global markets like a financially fearless professional. By looking at the big picture, committing to the strategy over a long-term period, and trading the right account size, Rivkin Global, despite short-term volatility in performance, is a great way to maximise wealth. To find out more about gaining exposure to the dynamic and exciting world of global markets, please call Rivkin on 02 8302 3600.

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DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice and dealing services on securities, derivatives and superannuation (SMSF). Rivkin also provide SMSF administration and accounting services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.