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Becoming A Billionaire Trader?

In the stock market, there are basically two types of strategies: fundamental analysis and technical analysis. I see the main difference between the two as being based on the time one is willing to hold on to their investments.

Folks who use fundamental analysis tend to make an investment and hold it for years, sometimes decades. A trader on the other hand, tends to hold their investments for maybe a few months, a few days or even just a few seconds. If you are just starting to learn about investing, a good question that you might be asking yourself is “Which should I learn?”

I would just like to share, how I went about making my choice. Of course, at the end of the day, you have to make your own decision. You could perhaps even choose to mould parts of both strategies into one that suits you personally.

In any case, when I first started, the objective of investing seemed quite obvious to me: I wanted my money to work for me, I wanted to make more money. So, when I went around researching the number of billionaires who made their fortunes through the use of fundamentals-based investing, I found many. Many billionaires on Forbes’  list, such as Warren Buffett, Charles Munger, Bill Ackman – or even investors in Asia such as Li Ka-Shing and Richard Chandler – can be viewed as investors who are grounded in fundamental analysis.

On the other hand, I too tried to find a billionaire trader whom I could learn from. Perhaps my research abilities on the internet are not up to par, but I only came across one name: John Douglas Arnold, who was deemed as the “King of natural gas” as he had earned his billions trading energy products. Arnold started his career at the now infamous energy company Enron as an oil analyst. He founded a hedge fund after Enron collapsed, made his fortune, and retired at the age of 38.

So, while it seems that you are able to make huge amounts of money by utilising either strategies, there does seem to exist a huge statistical advantage in being a fundamentals-based investor.

Personally, I think there are also reasons that make it much harder to be successful as a short-term trader in the long term. And, these reasons are: 1) the use of leverage, and 2) the concept of black swans. I’ll be back with more on the dangers of leverage and how black swan events can wipe out all your earnings and more. So, stay tuned!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.