Dubai: If you have been on the fence about investing your money in stock markets, here’s how a 17-year-old stock trader in Dubai managed to make a profit of $31,000 (Dh113,832) since he started trading in June last year, after having invested his savings, alongside investments from his family’s businesses.
Mohammed Salahuddin, who built up the confidence to trade by himself in June last year, amassed Dh100,000-plus in savings since then, after having personally invested $3,000 (Dh11,019) of his savings in the initial months.
This was gradually followed by over $60,000 (Dh220,381) in the form of two separate investments from his family’s businesses, after he proved he was able to manage money, trade effectively and bring in significant returns with the amount of capital he had.
What were my initial investments when I started out?
“Before I started, my family company was discussing an initial investment that was going to be around $3,000 - $5,000 (Dh11,019-Dh18,365),” said Mohammed Salahuddin.
“But after trading for a few of months using ‘paper trading’ (using ‘simulated’ or pretend money) and showing them the profits I had maintained, they decided to (first) invest $30,000 (Dh110,190) into my account.”
“After a little while, another family company decided to invest another $30,000 (Dh110,190), which bumped up my total capital to $59,000 (Dh216,708) providing me some flexibility with trading,” he added.
Paper trading is simulated trading that allows investors to practice buying and selling stocks or any investment asset. Paper trading can test a new investment strategy before employing it in a live account. Many online brokers offer clients paper trade accounts.
Paper trading allows novice investors to simulate the stock market experience by buying stocks and assets with fake cash. With $100,000 (Dh367,302) in pretend capital, you can build a portfolio and test strategies without taking on any real risk.
Simulated trading helped me gain the needed skill-set
Mohammed Salahuddin was managing $1 million (Dh3.67 million) of simulated money and profited $50,000-plus (Dh183,651-plus) in under a month.
After proving his ‘simulated’ trading skills to his family, his family entrusted him with $60,000 (Dh220,381) in two separate investments worth $30,000 (Dh110,190).
Today I manage investments worth $85,000 after having taken out about $31,000 as profits for the investors
“Today I manage investments worth $85,000 (Dh312,206) (in both cryptocurrencies and stocks) after having taken out approximately $31,000 (Dh113,832) as profits for the investors.”
How did I start trading?
“I did my first 2-3 test trades in late May 2020 with my real account (not ‘demo’) and built up the confidence to trade properly in June,” Mohammed Salahuddin explained, while adding that he was able to triple his initial savings by utilising the brokerage or exchange platform’s ‘leverage’ system.
What stocks did I invest in?
“I invested in a wide variety of securities, from Coco Cola (Trading symbol: KO) (which is very fundamentally stable and provides dividends to its shareholders) to extremely volatile companies like Tesla (TSLA), which has gone up over 500 per cent since last year,” he added.
Mohammed Salahuddin lists out a few US stocks, namely Apple (AAPL), Microsoft (MSFT), VIrgin Galactic (SPCE), Nvdia (NVDA), Netflix (NFLX), Berkshire Hathaway (BRK), Fiverr (FVRR), Spotify (SPOT) and Zoom (ZM), as his favourites. Also, he favours an exchange-traded fund (ETF) that tracks key US stock market benchmark, the S&P 500, which comprises the 500 largest companies in the US.
How did I allocate my investments?
“As I was constantly buying and selling, there was never a fixed percentage as to how much I invested in each company,” he added. “However, I would invest larger percentages into companies which are less volatile and more fundamentally sound, such as Berkshire Hathaway and Apple.”
“Always diversify your portfolio. Never place all your eggs in one basket,” Mohammed Salahuddin reiterated.
For those starting out, I recommend a $1,000 (Dh3,670) to start off your initial investment.
What do I recommend for those starting out?
“For those starting out, I recommend a $1,000 (Dh3,670) to start off your initial investment, to avoid emotional play on your market-related profits or losses whilst they maintain playing larger trades on their paper trading account.”
How did I manage to make market-related profits this pandemic?
When the current health crisis hurt markets and most investors’ investments, Mohammed Salahuddin explained how he was able to triple his savings during the course of the last 7-8 months.
“The simplest way to make money through trading in the stock market, crypto market, forex market etc., is by predicting future outcomes: If your prediction is correct and you took action on it, you get paid,” he said. “This is obviously easier said than done, as it is impossible to predict the future.”
How did I understand the market and its workings?
The general share market has two different types of analysis conducted by most traders and investors - the "fundamentals" and the "technicals" of a stock.
Fundamental analysis measures a company's ‘intrinsic’ value, which is the measure of what a company is worth. With this information, you can determine whether a ‘security’ (a financial instrument/asset that has value like a stock) is a good buy or not and whether it will hold its value during a time of crisis.
The ‘technicals’ are the movements of a stock, which is generally viewed through the stocks chart. There are numerous indicators, which all aid traders predict future price shifts in different ways, and this will ultimately allow the trader to profit through the right trades.
“Many factors can affect a company's short term fluctuation (i.e. a new iPhone being released would affect Apple’s short term price movements), so it is vital to keep up with the news and keep ahead of information released by or about a company,” Mohammed Salahuddin added.
“Furthermore, technical analysis is primarily used by traders than investors as they try to create an income through duration price shifts. Investors can do technical analysis on a company if need be.”
What should be a newbie trader’s first steps?
“Learning the fundamentals and the technicals of trading was the first step I took,” Mohammed Salahuddin added. “Most traders try and learn the ins and outs of both styles of analysis before investing, but I decided to learn them in action.
“With this knowledge in mind, I asked for an investment from a family company in May of 2020. They allowed me to take 10 per cent management commission per month. Month by month, I started utilising different tools (such as the ‘Bollinger band’, to enhance my trading and increase profits.”
“I went from profiting 3 per cent of my portfolio per month to 10 per cent monthly profits in a matter of a few months,” Mohammed Salahuddin added.
“The cool part is that all of my information came from free YouTube videos, online courses and from my dad (who’s an experienced trader for more than a decade). You do not need a university degree to trade on the market, let alone a school degree.”
How did I practically apply your market knowledge?
“To ensure high profits and little or no risk, I used fundamental and technical analysis to draw out the companies’ strengths and weaknesses as well as identify trends in prices,”
“Common questions I asked myself were: “would a pandemic destroy this company and ruin its revenue sources?” Or “why does the stock turn downwards after hitting a certain price point?” – If you can answer these questions, then you would know whether or not to put your money in this company.”
How was it trading during pandemic-related uncertainty?
“Trading the entire second half of 2020 has been a crazy experience for me and many others due to extreme uncertainty and ‘volatility’ (when a stock price trends upwards or downwards rapidly due to uncertainty). Fortunately, 2021 has been much more stable and profitable than ever before!”
While many (including myself) were predicting that the market would take years to recover from the ongoing pandemic, it did it in just a matter of months.
“While many (including myself) were predicting that the market would take years to recover from the ongoing pandemic, it did it in just a matter of months. This was due to a large number of new traders flooding the market for its endless opportunities.”
“Moreover, you can make money if the market goes up (by buying) or if it goes down (by shorting) or if it goes sideways, by investing in options.”
Simply put, being short in a stock means investing in such a way that the investor will profit if the value of the asset falls. This is the opposite of a more conventional ‘long’ position, where the investor will profit if the value of the asset rises.
Options are contracts that give the owner the right to buy or sell an asset at a fixed price for a specific period of time. That period could be as short as a day or as long as a couple of years, depending on the type of option contract.
Options can offer lower-cost ways to go long or short the market with limited risk of loss. Options also give traders and investors more flexible and complex strategies such as spread and combinations that can be potentially profitable under any market scenario.
How much profits did I make during the pandemic?
“Having profited 9 per cent on my entire capital per month the last few months through careful trades, I strongly advise picking up trading and spend just an hour per day on it,” said Mohammed Salahuddin. “A second source of income during a time where many are losing their jobs and salaries is absolutely vital.
“My recommendation to those who wants to begin trading: open up a trading account through an exchange platform (i.e. Interactive brokers, eToro, TD Ameritrade etc.) and use their ‘paper trading’ feature.
Mohammed Salahuddin adds: “With paper trading, you will be given simulated money while getting to trade with real time price movements of stocks. This is where I started learning basic strategies, such as ‘dollar cost averaging’, which I could later apply to my real trading account.”
It is an investment strategy that aims to reduce the impact of volatility on large purchases of financial assets such as stocks.
It is an investment strategy that aims to reduce the impact of volatility on large purchases of financial assets such as stocks.
The method of dollar-cost averaging reduces investment risk but is also less likely to result in outsized returns. The pros of dollar-cost averaging include the reduction of the emotional component of investing and avoiding bad timings of purchases.
As you buy more shares when the cost is low, you reduce your average cost per share over time. Dollar-cost averaging is particularly attractive to new investors just starting out.
