How to take on the cruel mistress that is the markets.

When it comes to making money from trading on stock exchanges – look east, look south, look west but always think global; so says one of the most seasoned traders in  Africa.

All you need is an insatiable thirst for information, a head for analysis, a laptop, a fast internet connection, $10,000 in capital, and more than your fair share of luck.

“Over one year period, two-year period, absolutely minimum return you have to set yourself is 25 percent,” says Aly-Khan Satchu the Kenyan-based trader in the markets,” That is going to be your risk-free rate of return, if you are good you are going to be a lot higher than that and you should be looking at doubling that return.”

If you are a lucky genius the sky could be the limit, but what about the risk of losses?

“Traders must be always ready to take losses, but you don’t want it to be terminal, you want to stay in the game. The first point of risk management is don’t bet it all on one trade, if you lose you are going to be out on the street.”

Satchu said when he was younger he took greater risks than he does now and admits the that trades he lost the most on were the ones that he had the most conviction about.

“Let me tell you one thing the market is a mistress and it is a very cruel one,” he says as he outlines one of his more forgettable trades of the year in short US Treasury Bonds where he lost out on a huge 60- point move that could have made him a fortune.

“I had heard that interest rates were going higher, I had sold US Treasury Bonds, it hit my stop (stop loss) and went down in a straight line. It caused me quite a loss, but if I had kept that trade the returns would have been, I was trading futures, 900 to 1000 per cent.  It gets very upsetting because it didn’t happen to me once, it happened twice this year,” he says.

“The problem was I was too greedy and put my stop too close to where a massive development was coming; I should have been more careful and traded better…I tried to be too clever.”

Bearing all that in mind, what is his advice to young entrepreneurs starting out in the markets with their laptops and $10,000. Where will the opportunities emerge?

“I think there is a chance that all of the East African governments are going to have to divest themselves of parastatal stakes. If they are sensible they are going to sell them cheap where people can make a profit. The first lesson of any divestment is to let the people make a profit so the pipeline still starts flowing,” he says.

“Where ever you are in the world, the global macro environment is presenting traders with the most extraordinary opportunities I have seen for 30 years. Don’t limit yourself to the Kenyan stock exchange, think global. In Kenya itself, I think the best opportunity right now is Equity Bank. I think it is about to break out, it is in six countries now and on a high growth path. I also like some of the undervalued agricultural stocks, but you have to be patient with those; they trade at a very big discount, and their net asset value is ten times what the stock is trading.”

Satchu’s family has been betting on Kenya since the day his family washed up on the shores of Africa in 1884. This was the same route taken, at about the same time, by the family of the youngest billionaire in Africa Mo Dewji, who ended up making a life for themselves in Tanzania.

“Like many folks who came from India, they came in a  Dhow. They took advantage of the monsoon winds and ended up in Zanzibar then Dar es Salaam and Kenya and now they are scattered all over the world,” says Satchu.

“My great grandfather was actually, curiously, an auctioneer who spoke many languages. My grandfather was a lawyer, my father was a lawyer and I studied law as well.”

Satchu went to Westminster School, in London, where he used to sing hymns every morning at assembly in nearby Westminster Abbey. He was at the school with former Liberal Democrat leader Nick Clegg who is now head of global affairs for Meta. He made a name for himself in the City of London and returned to trade in Nairobi and the rest is history.

Without stretching the comparison too far, when it comes to trading  Satchu has a similar view to that of Napoleon, who preferred a lucky general to a good one.

“I know highly intelligent people who are unlucky and I know very silly people who are very lucky,” he chuckles.

Happy trading entrepreneurs and may lady luck smile on you!