If you’ve read the ‘about’ page, you’ll know that I’m a school teacher (secondary /high school). As a teacher, when I reach midway through a unit, I normally do some sort of assessment with my pupils. This could involve getting my pupils to sit a full or partial past exam paper in class or I might set my own test. Taking stock of my pupils’ learning is really valuable; it allows me to assess ‘what went well’, what could be ‘even better if…’. Crucially, it tells me which teaching strategies are effective for my class and which strategies are not yielding the desired results (every class is different – what works for one class may not work for another class).
Now, this practice is not exclusive to the teaching industry and can be applied to pretty much any endeavour in life. I’ve been trading on one of the platforms I use for about half a year at the time of writing this article. So, why not assess myself midway through the trading year? Let’s see ‘what went well’ in my trading and what I could have done better.
X-O
The ‘about’ page mentions that I started trading in 2010 but had to cool my interest in trading due to the demands of teaching. The lockdown in early 2020 presented many people with a huge opportunity to get into trading (or in my case, get back into it). Even though I wasn’t a complete newbie, the reality is that the technology and tools to trade on the stock market had changed vastly since my trading days a decade ago. As such, I decided to treat it as if I were a complete beginner (by the way, you won’t have to feel like a complete beginner if you enrol on my 30 Day Trading Programme).
I signed up to X-O because MoneySavingExpert said it was one of the cheapest around. Another thing that attracted me was the ‘no strings attached’ element. A decade ago, I was using Interactive Investor, but I decided not to rekindle my relationship with them because the pricing was not straightforward. Frequent traders enjoy cheaper trading fees, but I wasn’t sure I’d become a frequent trader, so I took the safer option and signed up to X-O. Price considerations aside, there are plenty of good things about Interactive Investor - I have friends that love it- but I took this opportunity to try something different.
I stayed on X-O for a few months but then outgrew it, and with that came time to move on. X-O is a seriously basic service. I’d love to be able to share a screenshot with my stats, but X-O doesn’t provide that facility. It literally is an execution only (‘X-O’) service. Talk about doing what it says on the tin!
When I started on X-O, I was a value investor (someone that seeks stocks that are under-priced (‘value’), buys them and sells on at a future point at a higher price). I enjoyed some capital growth, and occasionally, a dividend or two in that time. As a strategy, it was ok, but it was a bit slow. I also tried some different strategies. For example, I would analyse what the directors of a company were doing. If lots of directors were buying shares, I also bought shares in that company. I reasoned that if so many directors were risking their own money, they probably knew something outsiders didn’t. I had mixed success with this strategy. I also used this time to acquaint myself with research tools, both free and paid. There is a service that I paid for at the time that I would not pay for now. In fact, I would not use that service even if I got paid to use it now. Other paid services were great (which I still use). As for free ones, I mostly used HL.co.uk (for instance to help me ascertain if a company is ‘earning’ money from interest), which I still use along with some others. Other articles discuss these in more detail.
What I learned in those few months was more important than what I earned. I earned between £500-£600 after taking into account trading fees, tax, exchange rates, etc. To put that into context, as a teacher I could have moonlighted as a tutor and charged £40 an hour. So it would have taken me around 15 hours of tuition work.
It’s really important to contextualise things: would I have been better off tutoring instead? I understand tutoring works for some people, but it’s not for me. For starters, £40 an hour is a small fortune for most families. I wouldn’t feel comfortable charging this sort of money to the average family. Tuition requires travel (and a good tutor does preparation beforehand) so it’s not a simple case of doing 15 hours of tuition. But even if I could overcome these two points, I couldn’t overcome the next point. I get into school around 8am and leave just before 6pm. Teaching already takes up so much of my time. Now, when I don’t have to be in school, do I really want to do more teaching? As a teacher there’s an inevitability that home and work life will blur into one (marking, lesson planning, etc.) and this cannot be avoided. But I wanted to be able to switch off for my own sake where I could.
Freetrade
After I decided to stop actively trading on X-O, I moved on to Freetrade. I have to confess, my first impression of Freetrade was not good. I downloaded the app after seeing the advert a countless number of times. The UX (user experience) element was pretty good. It was quite smooth - intuitive, nicely laid out and responsive. I later found out the hard way that the actual trading itself wasn’t as smooth –but that’s a story for another article.
Freetrade is a mobile-only app (at the time of writing this article at least) and they were able to build the app from the ground up. For example, they were able to build in statistics specifically representing the user. Statistics normally relate to a stock, so being able to see my own performance as a trader was a very nice touch.
By the time I joined Freetrade, I was changing my trading style. Instead of holding stocks for long periods, I favoured holding stocks for shorter terms. I also began to risk a lot more money. During my X-O days, although I looked at micro factors, I was mostly concerned with macro factors. But on Freetrade it was the opposite because my average holding time was shorter. Macro-factor effects take a longer time to affect stock prices, and when it does, it’s gradual. Micro factors, meanwhile, can collapse a share price almost instantly. Luckin Coffee is a good example. When it was discovered the management were engaged in fraudulent transactions, the share price collapsed- it went from $40 a share to $1.39 a share.
My trading strategy on X-O worked, but it wasn’t great. The percentage yield would have been around 4%. That’s still over 6 times better than the instant access savings account profit rate Al Rayan offers, Alhamdulillah.
To say my jaw dropped when I saw my trading statistics on the Freetrade app would be an understatement! I knew I had become a better trader, but even I surprised myself. My returns on Freetrade for the first six months of trading was an astonishing 53%. Alhamdulillah.
As can be seen from the screenshot, the FTSE All world ETF would have returned 14.77%, and that’s a really good return. I won’t reveal the exact amount I made because that will not be of benefit to anyone. Put differently, the investor that risks £100k would have ended up with a return of £53k with a 50% return, but the investor that only puts in £200 will end up with a return of £106. The return you get is relative to how much money you risk. Alhamdulillah, all I will say is the amount I made would not have been possible to achieve via tutoring on the side (unless I left my job (which I love)).
eToro
I initially joined Freetrade because it offers commission-free trading. But these days there are plenty of free trading platforms, such as eToro. I found Freetrade too unreliable. For example, if one of my stocks were performing poorly and I wanted to sell it, quite often the trade would be rejected. I tolerated it for half a year but then made the decision to move platforms, so I began the process of selling up stocks and withdrawing the money (which can take three days from Freetrade to a bank account. I still hold some stocks in Freetrade (those that have dipped below the price I paid for them) – I’ll wait for the price to recover before I sell. At present, the value of my eToro portfolio is very small compared to the size of my Freetrade portfolio at its peak (I’ve had to pull out a lot of money for a house purchase).
I found eToro better in almost every way. To keep this article a reasonable length, I won’t get into the details (I’ll do that in another article).
So how much did I actually make? Bearing in mind I joined eToro a lot after I joined Freetrade, and some of my money was still in the Freetrade account, the returns I made via eToro are lower compared to eToro. My returns were around 23%
Considering Al Rayan bank pays around 0.6% profit on savings accounts, my return of around 23% isn’t bad at all.
You may notice the final column shows a percentage return and that they are all green (i.e. profitable). I’d love to be able to say the reason why all the trades are green is because I’m the world’s best trader. But of course, that wouldn’t be true. Perhaps some sort of explanation would be helpful here.
Making money is important, but not losing money is more important. With this outlook, I will accept a lower profit if it means my money is safer. You will notice some trades resulted in a 27% or a 31% profit. I would love for all my trades to be that profitable, but getting a high profit rate, and doing it with low risk is unrealistic. Most of my trades are much lower than this. However, because I buy and sell stocks frequently, the ‘profit percentage’ stacks up very quickly. In addition, I am able to ‘recycle’ my initial investment over and over again.
You may notice that some stocks were held for a short amount of time. Quite often, when a stock does not perform as well as expected, I will sell it so the money is available for the next opportunity.
Overall feedback to myself:
Good effort, but there is room for improvement.
Lots of learning occurred, particularly from past mistakes.
Keep at it and do more research.
If you’re totally new to the world of stocks and shares and want to start trading and learning more, consider joining my 30 Day Trading Programme, where I cover the Islamic Principles of Invetsing, Basics of the Stock Market and how to trade using a trading platform.
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