He had always dabbled in shares. For more than a decade now and even when he was still active as a medical general practitioner (GP) Alan Scotton had been buying and holding shares.

“Nothing serious then and I was usually losing money because I was getting tips here and there. I did not have my own strategy or trading plan to start with,” he said, remembering his early days in the markets.

Aside from his losses with his share trading Alan suffered a huge financial set back and was forced into bankruptcy when a fellow GP defrauded him.

“I used that time to regroup. I went to study and finish my Masters of Business Administration (MBA) and I also took up post graduate studies in financial markets. I was determined not to go bankrupt again,” he said.

Armed with his MBA and newfound knowledge of the financial markets, Alan decided to ‘look’ at the markets and see what he can do to get started in his wealth building process.

“It was not the easiest of times to get started trading in 2001. I dabbled into options and some shares, but not really in a big way. I was still trying to find my feet. Then I heard about contracts for difference (CFDs) which gave me more flexibility.”

About three years ago Alan decided to trade more actively – using CFDs as a hedge to his long-term portfolio. These days he’s trading mostly commodity stocks, indices and some foreign exchange – again mostly to hedge his exposure to US indices.

Contrary to the prevailing misconception that CFDs are mostly for short-term trading, Alan said he’s a living example and proof that CFDs can be used for long-term trading horizon. For example, he’s had several CFD positions that were open for several months and a few that have been running for almost two years.

“(For me) One of the benefits of using CFDs is that I can take a long-term view of the market, take a position and use CFD to hedge or take advantage of any market movement,” Alan said.

He likens trading CFDs to taking a margin loan. “You can actually treat it (CFD positions) as a margin loan. In fact it could be cheaper than taking a margin loan, plus you have much more flexibility. There is no waiting time or lag time between selling your position and getting your money,” he said.

When it comes to the nitty-gritty of his trading, Alan was quick to emphasize the importance of putting in the hard work. For him, it is a matter of keeping abreast with the big picture in the market – the macro economic level of details – and from there applying his technical analysis and charting methodology to determine entry and exit levels for each trade.

“I always monitor the overall market direction, but I never enter any trade without looking at my charts,” he added.

Having the big picture in his mind helps Alan take a long-term horizon with his trading. He said this means, “I can take a long-term view, open my positions accordingly, put the necessary stops on the whole portfolio and then I can still go away on holidays with minimal worry.”

Putting in the hard work also means following a daily routine that involves: checking his overnight positions every morning; looking at various finance websites for global market performances overnight; watching the market open for the first hour; deciding what positions to take or get out of just after midday; and watching the market close.

“This may sound easy and it may sound that I don’t spend a lot of time in actual trading. However, you must remember that I have put in a lot of the hard work already. I have massive spreadsheets and calculations that let me punch in the numbers and calculate my total risk for my positions.”

“Some people think that they can get successful in trading without putting any hard work, but I can tell you, if you put in the hard work first, most likely your success will follow,” Alan said.

As a dabbler in shares for more than a decade and as a full time active trader for several years now, Alan has a few words of wisdom to share:

Keep learning every day. There is always something new to learn from the markets. It takes a few years to learn, appreciate and get around the psychology of the markets. People get greedy and people get panicky. You have to find your niche and find your feet in the market.

Accept that losses will come and will be part of your trading. When you have losses, try to regroup and take small positions again to regain confidence in trading.

There’s money to be gained and lost in the market. Doing your home work and building various scenarios to calculate your risk and reward probabilities should be part of your trading plan and strategy.

For more information and guides to CFD trading, visit the BusinessDay Investor Centre