Showing discipline when investing

MANY months ago, I talked to a young man who was sharing his experiences trading foreign exchange.

It was quite the cautionary tale.

He was 19 years old then and serving National Service. Influenced by friends who were into investing and trading, he signed up for an online account that allowed him to trade foreign exchange with 400 times leverage. His initial capital was S$2,000 of his own savings.

In the forex markets, the tiniest movement in exchange rates can be magnified. The very first night he traded, he took positions with a S$150 margin such that each pip (0.0001) that moved would gain him or lose him S$3.

In other words, if he took a favourable view of the euro when it was equivalent to 1.1325 US dollars …