How and when did you first become interested in the market?
I first heard of the stock market in high school around the late 1980’s. We were given a project to select a company and follow it. I selected BHP and would look up the share prices in the paper every morning and track how it performed over a period of time. However, after the project was finished I did not really follow it at all.
I then became interested again in 1998 after a friend put the idea in my head about investing money instead of spending it all on the modern day equivalent of wine, women and song. I started doing some research; I read a few books including “Making Money Made Simple” by Noel Whittaker. These inspired me to get involved in the share market. With shares I could dribble my way in and then sell some if required. But I had no idea of how or what to trade or where even to start, so my friend put me in contact with her broker to have a chat. At that time, I did not have any real experience with the market except for an older friend who had lost a “heap” of money in the 1987 crash.
I think this scared us all. I was left with the notion that the share market was dangerous and that I would lose all my money if I got involved. I still have friends today (actually most of them) who think this way, which is why they will be working until they are 65+ years old. I spoke with the broker about my fear and what risk profile was and he suggested that I look at Suncorp Metway 8% Exchanging Instalment Notes Series 2. This would be a low risk way to enter the market with a set return. The cost of the notes was $7.10 being $4.00 initially and then $3.10 in November 2000 with 8% fixed rate of interest paid annually. It came across as a pretty safe bet. I only had a few thousand dollars so I also borrowed $7,000 from the bank. I saw this as a type of forced savings and applied for the issue.
I applied for the issue but I did not receive all the notes that I applied for because the offering was oversubscribed and I received a refund. I did some research and opened a CommSec online trading account and used the funds that was returned to me to purchase mainly blue chip stocks including Woodside & BHP at a time when both were well under $10!
And then what happened?
By late 2001 I had paid the loan back and the shares were going along increasing in value and paying dividends. At that time I was looking at buying a residential property to live in. I found a property that I liked- made an offer, which was accepted. As I had little or no savings, I had to sell my shares for the deposit so I was out of the market.
In 2007 or 2008 a friend was talking about how a friend of his father traded options. It peaked my interest and I did a bit of research. I signed up for a weekend course on how to trade a particular strategy, which did not require much capital to start. But after the weekend I never did anything with the knowledge and kept going on my merry way with property and a minor share portfolio. Then in 2012 I started to think that if I didn’t want to work till the age of 65, I would have to be proactive and do something about trying to retire by 55. I was in my study one day and saw the folder that I had from the initial options trading course that I had done all those years ago. I rang Traders Circle and got some info, did some research and booked into the Traders Mastery Program. For me the cost of the course was a large cash outlay but there was a payment plan, which made it easier and if after the first weekend if you were not happy, they would refund you the initial payment and it would have only cost you time. I completed the course and consolidated my knowledge by sitting on the additional webinars of groups completing the Trading Mastery course.
How have you been able to learn and educate yourself about the markets?
In the early days I read various newspaper and magazine articles about companies etc. I also used free information from the CommSec website to get an understanding of a company’s fundamentals.
In 2008 I did a weekend course with Traders Circle on a particular Options Trading strategy but after the weekend I never did anything with that information.
In early 2013, I did the Trading Mastery Program with TradersCircle. I paper traded and used real money, and I sat in on a number of refresher online webinars to consolidate my knowledge. As part of the TradersCircle service I receive a daily “Market View” every morning, which recaps the events of the world markets over night. There are also “Market Updates”, which is usually released before 1:00 PM on most days and this gives a summary of what has happened so far during the day.
For me the Market View & Update are really useful because it has most of the information that I want to see in one place, thus saving me from going to multiple sources. Being a standalone trader can at times be lonely existence and it is good to hear other people’s point of view, to both ground you and point you in the right direction. Another useful source of daily info is the Finance News Network http://www.finnewsnetwork.com.au/, which I do enjoy but often, don’t have the time to watch.
Approximately 12 months after I had started the Trading Mastery Course with TradersCircle, I signed up to do the Elite Training, which taught new strategies and allowed access to more sophisticated online training.
Did you make mistakes when first starting out?
I sure did and probably still do, but hopefully I am making fewer mistakes these days. I actually think if you aren’t making mistakes you are not trying.
One of the most common mistakes that I have made is the ‘one more day’ mistake, which can come in 2 forms:
– This trade has gone bad but I will give it “one more day” to see if it turns around, and after that day it totally gets away from you and you lose more than you should have and often there is no hope of recovery. You need to either learn to limit your losses or be prepared to lose more/everything!!
– Wow this trade is going really well maybe I should get out, but I will give it ‘one more day’ to see if I can make even more. We all know trades can turn really quickly and the market is going to move and not always how we would expect. If you make a good profit TAKE IT, GET OUT and look for another trade. Don’t try to turn a good profit into a great profit unless you are willing to take a loss, make your profit decision on the information that you have today and NOT on what might happen tonight/tomorrow.
Psychology is very important in trading, so try not to get too affected by a losing trade if it goes south. Learn from it and get over it. Focus on the next 1000 trades and not the last one, as losses are part of the territory. Make sure that your trading has a positive expectancy, which means that the profit from your winners should not be outweighed by your losses. If I have 10 winning trades but one losing trade wipes out the profit from these, it is going to be difficult to make any money.
Would you define yourself as a discretionary trader, a mechanical trader or a combination of both?
When I first start trading options I was a mechanical trader. TradersCircle taught us a set of rules to follow; this was for our own safety so we would not wipe out our bank account. We were taught to look for entry signals before getting into a trade and exit signals for when to get out. These rules taught us to be conservative and protect our capital so we could live to trade another day. Now I am a more discretionary trader, but some of this discretion is based on rules, which I probably could not explain to you. It is more of an instinct and that is hard to teach/learn, as there are no real hard and fast rules.
Can you give us a brief overview of your trading style?
Currently I am mainly trading options, as these are giving me the most flexibility and ability to generate a regular income, regardless of whether the market is going up, down or sideways.
The strategy that I have been using recently is a bit of a variation on Covered Call, but instead of buying the share, I buy an Option on a stock where the strike is deep in the money with a high Delta and the expiry is 6 to 18 months away.
Is there any one trade (win or loss) that had a profound effect on your development as a trader? If so, what did you learn from the trade?
Early in my trading I realised that I needed to own my trades. Whether they were a recommendation from TradersCircle or my own trade, I needed to take responsibility for them and manage them the way I wanted. There were times that I got out of recommended trades early and other times where I stayed in longer. Even with recommended trades you need to own and take responsibility. I work different scenarios on trades and ask myself various questions.
I do remember a strangle trade on CSL in Nov-14 with the following:
Sell Call $82.00
Buy Call $81.00 Cost $0.27
Buy Put $80.00
Sell Put $79.00 Cost $0.37
A week after opening the trade, the share price had fallen below $79.00 and we closed out the Bear put for $0.78. I was going to leave the Bull Call open because it was basically worthless there with still a week to expiry. However, I was called and asked if I wanted to close it and after costs I think I received an extra $300. The next day CSL kept going up. On expiry it was over $83.00 and I would have closed out for max profit. To me this just highlighted the fact that you need to OWN your trades, you need to educate yourself and make your own mind up, take on board what others are saying but at the end of the day it is up to YOU.
Can you tell us about your best and worst trades?
I think my worst trade was a XJO Bull Put spread that went against me and I keep rolling it. I would have been better off just taking the loss and looking for the next trade to make up for it. We all hate losses but we need to work on the process not the money, just smile and look for the next trade… I am still getting to this place!
Looking back at my trades, I think one of my best ones was a CBA where I made $880 or 12% in three hours. I just got in and out quickly. I could have stayed in the trade two or three days longer and potentially made more money. However, I was happy to take the profit and eliminate the risk.
Would you classify yourself as a short-term or long term trader? What advice would you offer to people getting started as traders?
I would classify myself as a bit of both, I take a long term view of the Share/Options that I am going to buy and a short term view with the ones I am selling. Depending on how I am setting the strategy, I generally want the option price to go up in the long term but not too much in the short term, as I want the option I have sold to expire worthless, and to be able to sell another for a higher strike for the maximum premium.
My advice is that trading is not ‘easy money’. It takes a lot of time and effort to educate yourself on the markets, and the education needs to be on going. You need to always be looking for new strategies to test paper trading.
Find a way of trading that you are comfortable with and go with that. However, remember the market WILL change and you need to be able to change with it and find new ways to make money trading. Don’t be afraid to pull the trigger. Learn from your mistakes and you will become a better trader, mainly because you will not want to repeat them in the future.
What markets do you trade and which markets do you prefer? Do you have a favourite, and why?
Currently I trade the Australian Stocks & Options Markets, but down the track I would like to get involved in the US Market, not for the sake of trading a different market, but more for the fact that I would like to have an account and income in US Dollars. Moreover, if I am living or travelling in North, South or Central America, the hours would be more suitable to that time zone.
What makes your trading style different from others? What sets you apart from other traders?
I am not sure that I am that different to other traders. I think a lot of us want to exchange our day jobs for trading and still afford a comfortable living. On the other hand, some are happy to make a bit of extra cash on the side and others are happy to just follow recommendations from brokers. I think the really important thing is to develop a system/method that works for you and you are comfortable with. Don’t change it every time something goes wrong. Give it a chance and time to work. The thing about being a trader is that it is a lonely existence and often you don’t get to talk to other traders. Therefore, I can only guess what makes me different. I am often looking to learn new things, new strategies, different strategies for different market conditions and even different stocks in those market conditions.
Do you have a favourite rule?
I think my favourite rule is to make money, but in all seriousness I think the rules that I learnt during the Trading Mastery Course with TradersCircle have formed the basis of my trading. Some of the rules are so ingrained that I don’t even realise that I am following them, they are just second nature.
Has trading affected your lifestyle?
I think to be a successful trader your lifestyle has to change. Initially it takes a lot of time and effort to get an education about the market and the various products available to trade in the market. Once you start trading you need to spend time monitoring the market, share prices, option premiums, market volatility, data releases, oil prices and iron prices. These help you to form a view of the market. You also need to spend time reviewing your trades to see if there are any adjustments that need to be made or positions that need to be closed.
Going forward I am going to change my lifestyle by trading my 7:30 to 4:00 office job for a life as an options trader. Ideally I will have more time and flexibility to do the things that I want to do, such as travel. In January 2016 I plan on giving this a go and see where it takes me.
What books, seminars and courses have you read or attended and which ones would you recommend?
I have done the Trading Mastery & Elite Options courses with TradersCircle, plus I have read numerous books. I wish I had more time to watch the Elite trading webinars live so that I can watch and review the market at the same time. Believe it or not, YouTube can be a good source of information, as there are endless amount training videos. Nevertheless, you just have to be careful and question the source of information. You must ask whether it is relevant and applicable in your case.
What does the future hold for you?
In the next six months with everything going well I plan to quit my office job and replace it with trading! Currently, I have a very well-paying job but it also takes up a lot of my time and is pretty stressful. I love travelling and Asia has always been a favourite destination of mine, so I am looking at relocating to either Thailand or Vietnam, where the cost of living is much cheaper and I can have a similar lifestyle and enjoy more free time. Initially I plan on staying in one location for six months so I can focus on learning more and getting the processes in place. After that I would like to be able to travel around whilst keeping an eye on my trades and making adjustments as and when required. The beauty of Asia is that it is between 2 – 3 hours behind Australia, so in their time zone the Australian market would open at 7am or 8 am and close at 1pm or 2 pm. Therefore, this would give me the time to trade efficiently and still do the things I want to do for the rest of the day.
I am not sure if this will work for me, but I am going to give it a go and see what happens. I don’t want to die wondering!