The Formula for Success Read online

  I believe there is a way to win on pretty much anything. For me to bet on a horse or the football pools would be gambling, because I am not interested in the form and results of those sports. Instead of going to Ascot for an expensive day out, I would rather take my £500 and invest it in a stock with a track record of returning of 15% per year and that pays out 3–4% per year in dividends. To me, that makes perfect sense.

  Take risks patiently

  To finish this chapter on taking risks, I want to share with you a principle which will serve you well throughout your trading career. Yes, there are times when you might trade quickly, but that tends to be more the case in the financial markets and Forex trading. With stocks and shares, my advice is always to be patient, make measured unemotional decisions, and base everything on data over gut-feeling.

  I have already quoted one of my great distance-mentors earlier in the chapter, but it is so important I am happy to save you turning back the page: ‘Be fearful when others are greedy and greedy only when others are fearful’ (Warren Buffett). Sometimes you just have to be patient and ride out the storm or the panic. In many ways, the best time to make money in a trading environment is when everyone else is losing their head and chasing their tails.

  I have a saying that, ‘you can be a bad trader forever, but you are only a failed trader when you quit’. I've seen good traders, bad traders, and quitters. In fact, I've often been tempted to employ, or invest in, some of the persistently bad ones because they have value too: if someone is always losing, I would simply create a reverse algorithm to do exactly the opposite of what they do. That way we'd both make money.

  Atish is one of the most level-headed members of my team and is a great example of how a measured approach to risk is a smart approach to prosperity.

  Meet Atish Patel

  I had been self-employed since I left full-time education and was looking for extra income and part-time side-line opportunities. Through a Google search, I came across Samuel's profile and was impressed, although a little cautious, with what he had achieved at a such a young age. I made an application, although I probably wasn't really that suited and certainly not qualified, but we got on, and the conversation progressed to me joining the JTP.

  Within a few months I became a full-time member of the team, and now, four years later, I have the absolute privilege of teaching the programme to others. This involves coaching and ongoing support, and I love seeing other people benefit from the same opportunities that I had been given myself.

  My other business is a Sports Bar (the Sakee Bar and Restaurant in Pinner), and that has massively benefited from my involvement in Samuel & Co Trading too. Working with Samuel has opened my eyes to what is actually possible if you approach life with the right mindset and application. Being around like-minded individuals, especially those who are so willing to share their own visions, passions, and positivity, is truly inspiring.

  One of the biggest lessons I have learned is to not rely on one source of income. Whether that applies to your trading profile and the number of opportunities you are working on, or to running several businesses at one time, you cannot put all your eggs in one basket. Why would you rely on just one source of income? What if it fails?

  Because I have various, totally independent incomes, it simply does not matter to me if one of them is not going too well. Of course, I care enough to attend to the issue and correct it, but because I am not reliant on its income, I have no emotional attachment to it whatsoever. As a result, I can make smart, informed decisions that will fix the problem quicker and more effectively.

  Another strong lesson that I drum into students is to learn to manage their expectations. Patience is one of the greatest weapons that a successful trader has at their disposal – that and a good education. Both these things go hand in hand, in many ways, because taking the time to invest in your education takes patience. The fact is that anyone can become a trader! You don't need to learn, you don't need qualifications, you don't need to know how to read charts or study the news; you can just set up an account and trade. It is a massive flaw in the industry and is the cause of much disappointment, heartache, and loss of life savings. It is criminal that people can trade without being qualified.

  Human nature is to want everything now – to become a truly successful and prosperous trader takes time. Anyone can achieve that goal if they are prepared to give their all, but it does take time.

  ‘Betty Liu made my day, that morning, and we all made a lot of money.’

  Chapter 10

  THE REBELLIOUS TRADER

  So, here is the chapter I've been a little bit nervous about sharing. The reason is that it brings up the subject of ethics and treading the fine line of legality. In the same way that people always say that you should never discuss religion or politics with your work colleagues, ethics is also a subject that you should approach with great caution. The problem is that wherever opinions and emotions mix, there is the potential for taking offence.

  For the sake of non-trader readers, it is important that you understand a few basic terms before I reveal any more.

  Stocks and shares: the sum of a corporation's shares is described as its stock. The full worth of the corporation stock, as determined by the market's valuation at any given time, is then divided equally among the number of shares that it has issued. This causes individual share values to fluctuate according to the perceived stock value within the market.

  Spread betting: this involves speculation on the price movement of a stock or other security. A company will typically quote two prices, the bid and the offer (known as the spread), and traders will make a call based on whether they think the price will be lower than the bid or higher than the offer. This does not involve buying shares; it is just speculation on the price movement. Spread betting is also a way in which trading companies in the UK can go short on a stock, to benefit from the potential fluctuations of the share price over any given period of time.

  Penny stocks: (also known as cent stocks in some countries) this is a general term used to describe smaller public companies, where the price per share is very low (i.e. counted in pennies and cents rather than pounds and dollars). Trading in these stocks can be particularly volatile with the potential to make huge losses or gains, and it has historically been the trading ground for many infamous scams.

  Incidents and ethics

  Here is an example of a short selling incident where a lot of traders made money, and some would question the ethics of how it all happened.

  On 2 June 2015, there was a major collision on the Smiler rollercoaster, at Alton Towers in the UK, where several people were seriously injured. Many professional trading companies will pay for professional news and would have heard about this incident pretty much as soon as it happened. A company called Merlin Entertainments owns the Smiler ride, and the educated assumption would be that news of the injuries would soon affect the company's stock value. Experience shows that these sort of one-off ‘accident’ events tend to generate a fear factor and panic-driven reaction in the marketplace. Understanding this, some traders would have taken a short sell position via spread betting on Merlin Entertainment's shares, banking on the (almost certain) response from the public when the story broke on the evening news. Later that day, or early the next morning, all the retail investors (non-professional traders and trading organisations) with interest in those stocks would panic and sell their shares physically – causing the price to fall rapidly and significantly.

  Any trading company (in the short sell position), would then have been able to close their position via their spread betting broker. A lot of people made a lot of money that day.

  Here is a circumspect view on the ethics of making money as a result of that incident. It was a business transaction which did not affect the cause or the outcome of the accident. The injured parties were no better or worse off as a result of the trading that was taking place around Merlin Entertainment's stock (in fact, some trading companies w
ill voluntarily give a percentage of their profits from these sorts of trades back to any support funds which are subsequently set up). Finally, while the incident was tragic and could have been avoided, statistically it is a very small proportion of the serious accidents that unavoidably happen each day. For example, in the UK there are an average of 500 people injured in car accidents per day, including 5 fatalities.

  For me, a far more unethical practice is blindly investing in steel companies whose production is likely to be used in the production of firearms for terrorism in third world countries. For legal reasons, I am not prepared to mention the names of any of these companies in this book, but the millions of illegal firearms that are killing people every day must come from somewhere.

  There are, however, some very public cases of large organizations being found guilty or fined for unethical activities. For example, in 2012, HSBC was fined £1.2bn when it was found guilty of money laundering. Its negligence and ‘turning a blind eye’ enabled Mexican drug cartels to move dirty money, and it also contravened sanctions so that it could do business with Iran. People might get all ‘holier than thou’ over spread betting on bad news, but many of them are still happy to bank with HSBC.

  Then there was BP's historic oil spillage off the Gulf of Mexico, in 2010. Eleven people were killed in the disaster, the natural habitat was irrevocably damaged, and many people's lives and livelihoods were changed forever. But I doubt there are many people today who still boycott BP service stations, and I wonder if the millions of people who enjoyed the movie (for the sake of cheap entertainment) felt that they were being unethical.

  It is easy to point the ethical finger and forget that life is made up of highs and lows, victories and tragedies, which most of us innocently benefit from or fall foul of each day without even knowing.

  My own private war on oil

  Before I go on, I have to say hand on heart that I never broke the law during my early adventures in the stock market' but looking back, I was often naively unaware that I was dancing fairly close to the line.

  In my youthful, idealistic mind, I built up a deep and genuine hatred of dodgy oil companies (based on their ethics, rather than the fact that they had ignored my previous requests to work on their oil rigs). So, in a kind of Robin Hood-inspired vigilante mission, I set about causing them problems wherever possible. On one occasion I nigh on collapsed one of these unscrupulous organizations in one day's trading. (Please note here that not all oil companies operate as these guys did – but I had done my research, and this one's existence was doing no one any favours.)

  They were a penny stocks company who were about to go for a re-round of funding. So, a group of my friends bought up a load of their shares individually, to stay below the radar of becoming a major shareholder. But this still created a powerful group of investors within the company. None of us owned more than 4% of the shares and only shareholders with more than 5% in a penny stocks company needed to be declared as such under the law. Without realizing quite how many of my friends were doing this, or how much each other had bought, we ended up owning quite a large chunk of the business.

  Because of the volatility of the stock, we gathered on the grapevine that some of the group had made 30–50% profits, so we all decided to sell up to avoid damaging each others' profits. We were also conscious of not wanting to shock the market too much. Some of the group even opened short sell positions, via spread betting, just as others were closing their positions. The large sale of shares resulted in the stock price plummeting, and some of the group came away with some very healthy profits on what was a very good day's trading.

  Another time, with another even more crooked oil-based organization, my friends worked their way into a position where they owned over 60% of the shares of the business between them. The company was looking to dilute its share price by about a thousand to one, to raise additional funding. That was clearly not in the shareholder's interest and, discussing it over a pint that night, we all agreed it was an obvious sign of poor financial practices within the company. So, we decided to vote down the decision – as was our right as public shareholders. The next thing we knew, a press release had been issued stating that the majority of shareholders had voted to allow the dilution. Even the maths I had learned under duress at Bushey Hall School told me that a 60% ‘no’ did not represent a majority ‘yes’. So, being diligent and dutiful shareholders, quite a few of the group got on the phone with a tip-off to the FSA.

  The whole episode was quickly turning into an ethical nightmare. With the company trying to fix the polling, and then my friends flagging up the situation to the FSA, it opened up a whole can of worms, and loads more nasties soon started creeping out of the woodwork. Ironically, we all lost money on that trade (quite a lot actually), but the fact that that company is no longer in existence today gives me a warm fuzzy feeling. It was a victory of self-sacrifice and giving up a financial reward for the sake of doing the right thing. I can honestly say that I enjoyed that loss immensely.

  Just to cover all the bases here, I also know with as much certainty that I possibly can, that any innocent employees who lost their jobs at that company would have easily found work (hopefully with more honest and ethical employers) with other oil companies. Such is the nature of the industry.

  And giving to the poor …

  The thing that I think many traders do not realise is that they can be a real influence in the world around them. If you understand the algorithm of how trading works, human reactions, bigger picture intentions, and the power and importance of research, you can make a genuinely positive impact. You can create prosperity for ethical causes, you can generate wealth for yourself and those you love, you can use your own wealth and prosperity to the benefit of others, and you can support and promote companies you believe to be working for the greater good.

  My goals are now way beyond simply creating my own lifestyle and looking after the things that good fortune never showered upon my family. I want to inspire others, better educate young people, help people in less fortunate countries than my own, pay my dues (taxes and service) to support the UK government, promote business ethics, and continue to expose and weed out trading scammers. And that is only possible through applying the algorithm of prosperity and continuing to grow and become a better version of Samuel Leach.

  Back then, in my rebellious trader days, I did a bit of giving to the poor, too. There was one company, in the green energy sector, which had developed this amazing recycling technology to extract waste heat from a boiler and use it to generate electricity. I know there is a lot more of this going on today, but back then it was the first time I had come across this sort of thing. As much as I was impressed by this company and its green innovation, I was equally surprised at the lack of volume and liquidity in the stock. It seemed that no one in the commercial world cared or would take them seriously. So, I decided to try and give them a boost.

  Every time their shares dropped to a low level, I would buy them up, in effect creating a floor in the market to allow them the appearance of financial stability. This meant they would have a consistently stable stock price and market cap from which to keep investing in their technology and growing their business. That company is still trading today, very efficiently and profitably I might add, and they still don't know what I was doing behind the scenes to prop them up – just because I could and because I believed in their vision for a greener energy future.

  On another occasion – it still brings a smile to my face thinking of it now – I was sitting in my hotel room in Surrey, overlooking this fabulous golf course, trading on my laptop with Bloomberg News on in the background. There was a little bit of discussion going on with a group of my friends and the stock on another small, but highly ethical, green energy company was moving up rapidly. It hit around 50% on the open market and was already getting very exciting. Then, just to my right from the direction of the TV, Betty Liu (Bloomberg's glamorous news anchor) said: ‘We don't often talk about
the penny stocks in the market, but while everything else is in the red there is one stock which is up 50% in pre-market trading.' Betty Liu made my day that morning, and we all made a lot of money.

  Settling down and growing up

  There are many more stories I could share with you about my early days as a rebellious trader and some of the unconventional, innocent, possibly naive – but always within the boundaries of the system – trades and deals that my friends and I got involved in. As time moved on, however, and I started to employ people to help me grow a business and attempt to change the face of trading from the inside out, we decided to formalise everything.

  I could tell you exactly how I turned £2k into £178k, across 12 months, during my first year at university – while still studying for my degree. Then there was the day of my graduation when I was desperately trying to close the biggest single deal of my life, to date, on my phone while receiving my diploma on the stage: £110k richer, my mortarboard flew higher than anyone else's that day, I can tell you. I've had thousands of pounds worth of gold bars sent to me in the post, as thank yous for specific trading tips, just because I once mentioned that I liked them. And, one day, I might even share the details of the one that got away: the £250k deal that I still occasionally wake up in a cold sweat thinking about …

  Today, I am proud to say that Samuel & Co Trading stands out as a beacon of ethics: in the way that we trade, the quality and support that our training programmes deliver, and in the way that we help charities and other great causes in the UK and around the world.