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How to Raise A Trading Capital With or Without a Source of Income

For most people, the moment they start learning strategies and demo trade here and there, they can’t wait to put their money in their brokers ASAP.

But another question arises…

“Should I trade with the extra money?”

“I don’t have any source of income, how should I get capital?”

“Should I go all-in with my savings to trade the stock markets?” 

So, in this guide, I’ll be sharing with you different ways on how you can start (and grow) your trading business.

It doesn’t matter whether you are a student, an employee, or an already consistently profitable trader.

But first…

Let’s be clear

If you want to start a trading business because you need to pay your lifestyle, or immediately want to replace your full-time job…

Then I highly suggest you don’t, as the worst time to start a business is through desperate times.

Yes, having a business can give you exceptional rewards, but it does not guarantee you a fixed income all the time, or even a return of investment.

Which is why trading is a business that should not be approached with an employee mindset.

But if you will approach this trading business in such a way that you’re…

  • going to build a personal and financial empire, instead of trying to survive
  • acting from your vision instead of your fears
  • ready to learn the skills needed (and to pay the price) to become an exceptional trader

Then I can almost guarantee you that you will enjoy this amazing journey of a lifetime.

So let’s start…

#1: Your Most Supportive Investor 

This may not sound like a grown-up move but they can be your #1 supporter and first investor even if you don’t have any track record.

But you have to let them be aware that trading in the financial markets is not a get rich quick scheme.

So never make promises or guaranteed returns to them.

Another thing that you should do is to show them that you are going to trade the markets with a plan and not just enter and exit randomly.

Your trading plan may constantly change as a newbie, but let them know that you are not starting with “lack” as this is good for you and your “investor”

Finally…

Make sure they won’t sacrifice important payments or be in debt to give you capital.

Because IF the worst happens, you don’t want your decision to trade the markets affect your whole family.

Next…

#2: Using Your Hard-Earned Cash Properly

As an employee, it’s easy to say that you should save money and invest extra funds.

But trading is not just a side hustle or a part-time job, it is a business that requires commitment and energy.

So one thing you must do first is to…

  1. Build a safety net

You must have a 3-6 month emergency fund in case something happens, and eliminate consumer debts.

Because the last thing you ever want to do is to trade because you need to pay the hospital bills or pay your debts as it puts your mind in an environment where you will be forced to perform and expect guarantees in the market.

  1. Have a budget plan
    Always remember that a budget plan is goal-oriented.

So there’s no such thing as a fixed rule or percentage on managing your money, it is up to you!

But having it will always set your priorities straight, fulfilling responsibilities and personal goals at the same time.

As an example, you can allocate your monthly income to the following

• 25% = Needs/Expenses
• 25% = Wants/Self-Investment
• 15% = Passive investing
• 35% = Trading capital

Again, this is just an example.

So you want to ask yourself what you want and adjust the percentages accordingly.

Overall, I want you to know that what we are doing here is to put you in the right environment to trade.

Moving on…

#3: Taking Your Trading Into The Next Level 

I highly suggest that you choose this step once you have found consistency in the markets, and not when you’re just starting, but here are some sources you can consider…

1. FTMO (Paid):https://ftmo.com/en/welcome/#objectives

You must complete their challenge of profiting at least 1% and not lose more than 1% within 30 days

You can get funded up to $100,000 but this will depend on the challenge FEE you will pay

If you are someone who trades the forex markets as a momentum or day trader, then this is for you, as the challenge and time required is quite short.

2. PSYQUATION (Free): https://psyquation.com/

To qualify, you must have a PQ score above 75 with a 6-month track record on their platform.

You can receive funding up to 150,000 AUD and 20% of profit is yours, all you need to do is to use your trading capital and build a track record.

Again, if you are someone who trades the forex markets, then this is for you.

3. FUNDSEEDER (Free): https://fundseeder.com/home

It is a platform led by Jack Schwager, but conditions and funding amount is not disclosed.

You can also trade any financial markets in the world with their accredited brokers, so if you are someone who trades global markets, then this is for you.

Now…

The reason why I mentioned that you should only choose this step if you’ve already found consistency is because pursuing institutional funding or managing other people’s money with an inconsistent and self-destructing trading habit is like pouring fuel over a fire.

So if you haven’t found consistency within yourself yet, then the chances of you finding consistency with other’s money are unlikely.

Finally…

Bonus: Controlled “Tuition” Fee

If you want to start your trading journey with having “low risk” and “high reward,” then this method is for you.

Let me give you an example…

If you are dedicating a ₱100,000 trading capital to trade the markets, only put ₱20,000 (20%) on your trading account as you start trading.

Once you gain consistency in the markets and not lose everything for the first 3 months (depending on trading style)…

Place another 20% of your initial budget capital into live trading.

If you mess things up early but only put 20% of your budget into live trading, then you have experienced a learning opportunity (the reward) at a low cost

On the other hand, if you managed to allocate 100% of your capital budget, then you’ve reached the stage of consistency that’s above the majority!

Remember, confidence comes from competence and something you must prove to yourself gradually.

So…Which Option Should You Pick?

Overall, every person is unique and has different circumstances.

So, you can choose an option on how you can raise capital, and then improve on it, or tweak it in a way that’s appropriate to your situation.

With that said…

What are the other ways on how you can raise trading capital (legally)?

Let me know in the comments below.

Contributor: Jet Toyco
Investagrams Username: @Jet_Toyco
About the Contributor:

Jet Toyco is a private executive trading coach and a systematic trading portfolio fund manager at TradingwithRayner.

He is also a public helper of the trading community that is always open to questions anytime to give the knowledge people deserve at no cost, and no hype.

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Featured Trader of the Week: CorruptedVodka

Even though several market leaders have emerged in the local market, multiple of which have also appeared in the US stock market. As the said market contains approximately 7000 stocks and its status quo for being the so-called “giant” of all stock markets, there is inevitably a higher chance of spotting leaders in the global landscape. 

For our featured trader for the week, we will be showing you how she was able to spot Nio, Inc. or $NYSE: NIO. CorruptedVodka a.k.a. @corruptedvodka, is an active member of the Investa Community who continuously spreads his knowledge, insights, and expertise in the global markets, including the US stock market and cryptocurrency.

She got the trade idea using Elliot Waves and classic indicators such as EMAs in AOTS condition, RSI (14), ADX. Her notable post highlighted the importance of analyzing a stock’s DNA. CorruptedVodka stated that, based on its historical data, the said stock is volatile and prone to shakeouts given the wicks embedded in several of its candles. Moreover, an all-time high stock would most likely present bearish divergences, although let us remind ourselves that in a trending price behavior, the RSI (14) tends to exhibit false readings. 

The key to trading volatile stocks is to check volume behavior along with its price movement stringently. As you can see, there were several fakeouts in the said name, although it is observed that those fakeouts were accompanied with below-average volume.

A breakout of a pivot high with an enormous volume of an underlying base supported with dried up volume is imperative for any market leader. All-time high stocks are perfect for traders who are equipped in being a swing or position trader with a trend following approach.

It was a low-risk, high-reward trade, as a triangle pattern presented itself at around the $11-$15 areas. It allowed purchasing at the breakout of the said base around the $15.7 with a quick cut below its corresponding candle right below the $15 area (5-6%).

If the said market participant missed that, another opportunity represented itself as the said stock created another triangle pattern around the $16.5-$20. A market participant can choose to execute the trade at the breakout of the latest base at around $20.5 with a quick cut below $19.3 (-6%). Selling into strength (selling on the way up/while it is easy) and into weakness (the breakdown of a, for example, a pre-determined Moving Average) is fitting since this is an All-Time High stock.

It is ideal for $NYSE: NIO to continue hovering above the $20 structural and psychological support levels to further assert its dominance. Moreover, the company shows massive potential as it is allegedly the direct competitor of Tesla Motors Inc., which is owned by Elon Musk. Despite that, market participants should always adhere to their respective setups. Price is king, as they say. 

It is challenging to trade all-time high setups in the US stock market as various market participants’ opinions may cloud an individual’s judgment. The bottom-up approach lets you spot resilient names without being discouraged by other traders’ views along with the US indices. Traders must rely on their analysis and bias while being openminded by acquiring things with a grain of salt concerning vital information regarding an asset class. 

Congratulations to those who were able to maximize the technical swing of $NYSE: NIO. Lastly, kudos again to CorruptedVodka for sharing her execution. Your FREE 1-Month InvestaPRO access is on its way!

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Eradicating The Superman Syndrome: How to achieve emotional stability in Trading

Have you ever experienced a losing streak which ultimately depleted your confidence in trading the markets? There is also a similar situation that is as dreadful. It is when you experience a winning streak that ultimately makes you overoptimistic. 

The Superman Syndrome enables you to feel like an eternal being thinking that the trader possesses a tremendous control over their next trades. The trader starts to execute setups that are not in conjunction with their trading system. As if the market participant deems that their future trades would be mostly right. The trader feels that they can bear with the extra losses as they have gained a significant hedge through their previous gains. The Superman Syndrome enables impulsive decision making through overtrading rather than being in Zen through being selective in their stock selection. 

It is also as bad as feeling lost and being diffident on your next trades. Thinking ahead that their next trades will be losers. An individual would find it difficult to execute a trade given the bias that is circling in their head. Being too defensive will hinder an individual from amassing the full potential embedded in the financial markets.

Having confidence in trading is a key aspect to achieve success in the financial markets. However, a market participant should not be reluctant nor conceited when it comes to their trading psychology. 

It is best to take a breather whenever you score huge gains and winning streaks to reset your urges. This also applies when your money is on the drain after a losing streak. As they say, trading is 80% psychology and 20% methodical.

Being in Zen while being free from external negative energies that could disrupt your trading is a non-negotiable aspect of this endeavor. Being in this type of state enables the trader to stay in the flow. Traders who are at peace tend to make themselves available on the endless streams of opportunity that the market is offering at any given moment.

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Possessing the urge to revenge trade or to trade impulsively due to the Superman Syndrome must be treated instantly. The same goes with being hesitant due to losing streaks. It pains to be in an emotional rollercoaster while pursuing this type of endeavor. As they say, you attract what you are.

To learn more about trading psychology, I highly suggest reading the book called “Trading in the Zone” by Mark Douglas. It is a trading psychology book that will enable you to master the market with the proper discipline, confidence, and attitude.

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Winning With Nothing But The Basics

Before entering the level 10 in a game, the player needs to start at level 1. Before even the famous Shakey’s or Mang Inasal have started, they have started small too! And just like any other investor or trader, everyone starts with the foundation of the basics in technical and fundamental analysis.

Winning in the stock market is a process. It is never just a one-step win or even a trade with 80,000 pesos gain. Everything starts with a good foundation of financial literacy, and this starts with the basics in technical and fundamental analysis.

Now, what’s in it for you to understand the basics? Understanding each concept of technical and fundamental analysis will help you assess the stock you are about to pick. It helps you gain more wisdom on how you should understand the stock market and the company on various perspective, just like how you would choose between wearing a casual or formal attire. Analysis provides information that will help you interpret the structure of the company or even understanding the figures on the financial statements.

As an investor, you must know the intrinsic and true value of a stock. You must be able to determine if the value reflects on the stock prices. Of course, who would like to buy a 500 pesos worth of ground coffee without knowing its history, background, and components! This is the reason that you should invest in knowledge on analyzing the stock market.

Fundamental Analysis

Fundamental analysis is not just defined to be any fundamental, basic, or elementary education. Understanding the component of fundamental analysis would help you asses the quality, profitability, sustainability, and growth of the company.

Start from a top-down approach, in which you would start analyzing information from general to specific. Now, how are you supposed to win the basics in fundamental analysis? Remember the acronym FLIGHT! And now we are boarding to our destination, the fundamental analysis

F stands for Financial as your Language

English and Tagalog are not enough in understanding the stock market. Make finance as your language.

Why? So that you can understand the financial characteristics and financial statements of the company you are about to invest into. Now, making finance as your language does not solely mean accounting or computing. It also helps you understand underlying factors and signals such the news and press releases of the company. Assess the valuation, earnings, and growth, of the company to know the financial health in terms of assets, obligation, ratios, and cash flows.

L stands for the Law of Demand and Supply

Math? Stock Market? And now Economics? Yes! You see, if there are sellers and buyers, there is a demand and supply in the market, and this makes the stock prices rise and fall. Take note that when the stock goes uptrend, there are many buyers. Otherwise, there are many sellers.

I stands for Intrinsic Value 

Always keep it in mind that you would want to buy a stock which reflects its value on the stock price. To know this, you must check the Price-Earnings ratio of the company and compare it among its peers or company of the same industry.

G stands for Growth and Good Investment

The relationship of the price and value also leads to quality of growth and goodness of the investments. In order to know the quality of the company, you must check on the high-quality rate of the company’s value on the financial statements (balance sheet, income statement, cash flow) and financial ratios (liquidity, operating, valuation, common size, solvency).

Never just check on one part of the structure! You must check the signals and be able to determine if the company is under too much debt or is it well operating on its finances.

H stands for Historical Performance

It is a must to check on the historical performance of the company to check whether or not they are growing. Ask yourself if it is the company you are willing to place your money into for a certain period.

T stands for Think not Trend

Never invest on a stock just because it goes trending or your friends tells you so. Think wisely and analyze the company’s stability and development. Remember being famous or big does not necessarily mean it is good investment.

And now we are unto our next destination, technical analysis. Now, let’s READ!

Technical Analysis

R stands for Reading Charts, Lines, and Patterns: Market Structure

Understanding the different charts, trend lines, and candlestick patterns will help you understand the market structure. With these visual representations, you can slowly begin to determine if the stocks are going uptrend, downtrend, reversal, or sideways.

E stands for Evaluation with Indicators

Now, in technical analysis there are various indicators. However, you must begin with learning the concepts then applying each and checking which one would fit your strategy as a scalper, day trader, position, or swing trader.

You must first understand the concept of floor price and the floor ceiling, also know as the support and resistance. Why? Because this will help you understand the breakouts and breakdown with the candlesticks,

You can also use the RSI, to know if the stocks is overbought or oversold, or the moving average to know the buy signal. There are various purposes of indicators. But most importantly, this will help you enter and exit the market on a great time.

A stands for Assessing yourself 

Assessing chart movements is useless if you do not have risk management and control over your emotions. As Alexander Elder quoted, “the markets are unforgiving, and emotional trading always results in losses”, and I guess you wouldn’t want that either!

D stands for Don’t forget to read and do a strategic application

After all these points to remember, always enjoy learning and re-learning over and over again.

Charlie Munger: The game of life is the game of everlasting learning. At least it is if you want to win.

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Featured Trader for the Week: Tardigrade Trader a.k.a. @tardigradetrader

For this week, we would like to congratulate our featured trader: Tardigrade Trader a.k.a. @tardigradetrader!

This trader was able to spot a sleeper. $ALLHC or AyalaLand Logistics Holdings Corp. was not talked about not until it broke out of its initial base supported with enormous volume. Tardigrade Trader a.k.a. @tardigradetrader is an active member of the Investagrams community who endlessly spreads his knowledge on Technical Analysis along with his complete thought process in each of his stock selection.

Along with his qualitative assessment about the said stock, he also exclaimed about how minimalism can be applied in trading as well. As mentioned in the previous posts regarding the featured traders, whether the strategy of a said market participant is basic or advanced, their performance will always depend on the end-user itself.

Tardigrade Trader highlighted the importance of an initial consolidation phase before a much-awaited breakout. Patience is the key to spot market leaders. There will be countless times that it will take several weeks or months for a trade to blossom. Moreover, he also added the significance of RSI (14) 70 breaches along with massive volume in the breakout of the pivot high, which further solidifies the said trend.

A breakout of the 1.9 to 2-peso area was an ideal buy point as it was the breakout of the initial base or the symmetrical triangle supported with increasing volume on its up move. It is a low-risk, high-reward trade, as the stop loss levels for the said breakout point could be below 1.8 (-4.5%) if you bought it on a symmetrical triangle pattern. On the other hand, the stop-loss levels for the said breakout point could be below 1.9 (-4.5%) if you bought above the 2-peso psychological resistance level. Take profit areas could be the structural resistance at 2.5 (24%-33%).

It is a must for this stock to hover and sustain above the 2.5 psychological levels to further signify its ascendency. If it does, we may see it consolidate from here. The next significant resistance level would be the 3-peso area being the next structural and psychological levels, along with the 3.8-peso levels being the 52wk high of the said name.

It is a non-negotiable for traders to wait for the right setup. A setup where you could spot names to emerge just like $ALLHC. Waiting for the right moment to click the buy or sell button when all your parameters are finally aligned with a particular name is the ultimate embodiment of professional trading.

Congratulations to those who were able to maximize the technical swing of $ALLHC. Lastly, kudos again to Tardigrade Trader a.k.a. @tardigradetrader for sharing his trade analysis. Your FREE 1 Month InvestaPRO access is on its way!

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Mastering The Trendline: A Guide to the Most Basic Charting Tool

If you are a technical trader, chances are, the trendline is one of the first charting tools that you have learned to use. Its elegance comes from its simplicity: just trace the line and either follow the trend or wait for a breakout. However, like supports and resistances, trendlines are prone to both fakeouts and shakeouts. If you find yourself a constant victim to these fakeouts and shakeouts, then maybe your trendline strategy is missing the most important component: confluence.

In the world of trading, confluence refers to the convergence of different trading strategies. An example would be a set of moving averages, structural supports, and fibonacci retracements all indicating the same critical level for a certain stock. This critical level is often referred to as an area of high confluence. The idea behind the importance of an area of high confluence banks on the fact that different traders use different trading strategies.

From time to time, a high number of traders will consider a price level critical in accordance with their strategy. Once the price reaches this level, there will be a surge in the number of buyers/sellers since a lot of traders consider the price as a critical level. In a nutshell, areas of high confluences often equate to higher probabilities.

Incorporating areas of high confluences with your trendline strategy is as easy as making sure that the price touched an area of high confluence before approaching a trendline. This removes the small errors from mistakes in drawing your trendline as well as irregular market behavior.

Essentially, the key takeaway is that trendline breakouts and breakdowns are invalid if the price did not come from an area of high confluence prior to the breakout/breakdown. This strategy goes well with both breakout trading and trend following since a breakdown from the trendline without a bounce from an area of high confluence is probably a shakeout and not a trend reversal.

Fakeout vs Breakout
Shakeout vs Breakdown

Areas of High Confluence can be composed of (but not limited to) any of the following:

  1. Chart patterns
  2. Range support and resistance levels
  3. Moving Averages
  4. Bollinger Bands
  5. Ichimoku Clouds
  6. Fibonacci Retracement Levels

It is important to note that for your trendline strategy to be effective, you should not only consider areas of high confluences but also the plotting of the trendline itself. The price should touch the trendline at least two times, the more touches, the better. Including the wicks depends entirely on your judgement as a trader as well as the “DNA” of the historical behaviour of the stock. With all this said, let’s head on to some examples.

$ALI [DAILY][2016]

In the photo above, there is a defined trendline on the daily chart of $ALI. We can see that the 40 price level is an area of high confluence because of the following factors: (1) it is a psychological resistance, (2) it is the high of the previous uptrend, (3) the price is already at the top of the Bollinger bands, (4) the RSI is near overbought levels.

Because the price bounced from an area of high confluence before breaking the trendline, there is a high probability that the price action is a breakdown and not just a shakeout. As we can see through what happens next, the move is in fact a breakdown of the trendline. 

$SMPH [WEEKLY][2016-2018]
In the case of $SMPH, the 40 price level serves as a psychological resistance which the stock tried to break prior to the breakdown from the trendline. Aside from a trendline break, we can see that the chart actually looks like a normal bearish RSI divergence. This validates our initial hypothesis that the move is a breakdown and not a shakeout. Aside from this we can see that the MACD is showing bearish signs with the histogram expanding below zero. 

This trendline strategy shows us that although we should develop a trading system that is tailored to our specific needs, we should also be familiar with tools and indicators outside of our system. This helps us widen our understanding of where the market might be headed since we are not only tapping into one strategy, but to multiple ones at the same time.

The stock market is basically a psychological battle between traders of different niches after all. Normal trading rules (take profit, position sizing, and stop loss) still apply. All of these strategies will help you trade the confluence and hopefully take you one step closer to financial freedom.

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InvesTHINK! Who are you?

Never just invest, but invest with a clear mind, invesTHINK!

A good and great trader and investor must refrain from having a prejudice or biased preference. Lots of mistakes can also be rooted from a common mistake, which is then again, having a fallacious and biased concept about the stock market. Exhibiting and executing decisions based on emotions, peer influences, or your confidence towards the market, may happen at times. However, it is a sign of poor financial literacy towards the stock market.

What are your signals and indicators when you begin to enter and exit from the stock market? Were you just hyped among your peers? Have you monitored and checked the 20-day moving average and 50-day average? Here are the common biases you might encounter while creating decisions and analyzing your stocks. Who are you among these?

The Hyped: Social proof 

One of the most common biases and errors occur are due to being hyped with the decision of peers and trends in the community. People tend to be under peer pressure and follow the idea of the majority. Which on the latter, we deem it to be true. Now, the wrong thing about this is that we overlook on the importance and essence of doing our own analysis. It’s just like eating the same flavor of ice cream with your barkada, not knowing that it contains peanuts, which you are allergic too! Do you now realize the danger?

The Follower: Confirmation bias and Groupthink

“Ano gagawin mo? Bibilhin mo na ba ngayon?

Down market diba, mag-aaverage down ka na ba ng stock mo?”
This type of thinking shows a flaw, a misconception. Now following and agreeing turns out to be a bias if you try to prove and justify your decision based on the actions of someone else. You try to seek out the support and the same thinking among your peers. 

Now with groupthink, just because everyone else says that “babagsak na yan, benta mo na” does not always mean they are right. Once you set foot in this bias, you lose the discipline and creativity of solving your own problems.

The Madame Auring, Manghuhula: Hindsight bias

Regrets and disappointments run fast, once you begin to suffer. Some investors and traders try to predict the movement, value, and the future of the stock based on their indicators. “All time low siya noong 2020, 10 pesos na lang siya. Ngayon 11 pesos na lang, bilhin ko na ulit!” The misleading factor on this is that, you tend to look for a similar cause that would make you react whenever the market crashes. You try to create your own predictions and make poor decisions whenever a certain event have occurred. To avoid this, always examine, record, and journal your outcomes.

The Blind: Clustering Illusion

In order to analyze charts, we use several indicators such as candlestick patterns, moving averages, RSI, volumes, and support and resistance. It is also necessary to check on the historical performance of the stock, may it be a daily, weekly, monthly, or yearly basis. However, clustering illusion happens when people tend to become oversensitive and seeing patterns where actually none have existed. Is it possible? Yes. If a trader or investor sees that the market structure repetitively illustrates higher highs, higher lows, higher highs, higher lows, the investor or trader may think that the market is going uptrend. It may seem like it, but always be cautious on the movement. Never create assumptions based on seeking certainty on your own perception.

Conclusion

Always be grounded with a strong foundation of principles and rules, in dealing with the stock market. Decision making will always be difficult, and that should be recognized. However, to be able to create a sound decision takes a lot of learning and re-learning. Always have a discipline in your study routines. And one day, you will achieve success too.

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