This testimonial has been provided to us by an individual member. All testimonials are provided voluntarily, without payment, inducement or other benefits and are from genuine HomeTrader members.

David from WA was the HomeTrader Trader of the Year winner for 2003.

The Directors awarded first prize to David because his trading history demonstrated the key traits to long term successful trading.

He has a mechanical approach to trading and followed his system precisely (which is a key to successful trading). David continually evaluated the effectiveness and appropriateness of his approach.

David won the very first Gun Trader competition for first quarter of 2003 when he doubled his float in 3 months.

Trading Halt

A lot has happened for David since we first spoke to him. David and his family moved to Melbourne in June 2003 and he started running his IT business from there, while also training part time for HomeTrader. He soon returned to Perth and settled back into life, having halted his trading while all the moving was taking place.

David was trading a reversal system in CFDs using the CMC platform, but when CMC dropped their available stocks from 200 to 100, his trading system suffered and he pulled his account to consolidate and consider his next moves.

When CMC announced they were returning to the top 200 stocks early in 2004, David focused on tweaking his trading system and tested it with a variety of ATR Moving Average Angle gates in order to increase the number of trades.

Typical Trading Day

David spends about an hour each morning preparing his trades, checking the HomeTrader forum and daily scans, and logging onto his online broker to place his sell or buy orders as required. David is lucky enough to have a business that enables him to work from home and to arrange his client visits around his trading.

David and Debbie have a four year old daughter and another child born in July, so one of his priorities is spending time with his family, a lifestyle supported by his trading.

Trading Approach

David’s approach to trading is almost 100% system trading. At the moment he uses his discretion when a stock is in a long term uptrend and medium term downtrend.

“I sometimes use my discretion when buying stock. I don’t like saying it, as it goes against everything we’ve been taught, but there are some stocks that pass the ATR Average Moving Angle gate, but they’ve been in medium term downtrend for the last few weeks, even though they are in a long term uptrend.

Because my system is short to medium term, it’s like the odds are against my trading it. I am looking at how I can factor this in as a mechanical gate to eliminate these stocks. I have yet to analyse these stocks though and it most probably doesn’t make any difference, because I’ve noticed that some of the stocks I’ve eliminated have suddenly turned upward. In the end, I have to be able to live with the consequences of using my discretion with these stocks.

Out of curiosity, I would like to try a completely separate discretionary account, just to see how it compares to mechanical trading. Now that I know a lot more about trading, I’d like to see if the knowledge I’ve gained has actually given me the trading edge to be successful without a system. I think I know the answer, but I would still like to try it.

One of the main things I’ve learned through trading is that the trigger is not as important as the trend when buying stock. I’ve also learned to concentrate on the charts, rather than formulas. You can waste a lot of time trying to knock out poor performing stocks by randomly changing Metastock™ formulas and you’re really just stabbing in the dark. The charts are a visual reference and by regularly viewing them, it can trigger some new ideas for modifying your system.”

Going Live

A big hurdle for many traders is to start trading, actually buying and selling stocks in the live market. We asked David what he learned from those first few trades.

“The big difference between doing all the theory and practice is that when you really start trading, you can make mistakes. The time factor also makes a big difference.

Sometimes you don’t have enough time to take all the trades at the right time and slippage occurs. The slippage factor, may decrease as you get more competent, especially when you have quite a few trades to make in the morning. You have to be very organized and focused.

As a lot of traders will know there is a big difference between the liquidation value of your trading float and the stop loss value.

For example, if I sold up all my stocks now at their current price, I could be $5,000 in profit, but if all my stocks hit their stops today, my float may drop by $1,000. It’s often a huge difference, but it’s always there and that’s just how it goes! I don’t take any profits out until my stop loss value is higher than my original float.

Last year (2004) I had a drawdown that equalled 100% of my initial float. Fortunately, I had already made quite a bit of money, but it was still a tough time to go through. Sometimes you watch the market running away, but you have to let it move and go with the flow.”

Keeping the Enthusiasm

We asked David if he gets excited about trading.

“Well I didn’t for a while because I was taking my system trading very seriously. And when you’re trading a purely mechanical system, you’re not supposed to get emotional about it. I think that’s another reason I stopped trading for a while, because it became a chore. But then I realised I could still get excited about trading without letting my emotions affect the way I traded.”

So how do you get excited about trading?

“Well, when my trading is going really well, I’ll bring someone else in and tell them about it and get them excited too, like my wife. And I watch the market depth for a little while and get interested in who may be trading. If I see someone is buying an odd amount of shares I’ll know that they’re probably trading a system and could even likely to be a HomeTrader member. If someone else is buying say 5,000 shares I’ll know it’s a stock broker or someone who’s just investing. That type of thing keeps me excited, but doesn’t affect the way I trade”.

David logs onto the HomeTrader forum each day and has a quick look at the topics being discussed. If he has time he often contributes some “pearls of wisdom” to the discussion. He finds that this also helps keep him enthusiastic by sharing his experiences with others.

Reaching Goals

We asked David if he had reached any of the goals he first set out to achieve.

“I was sceptical about trading because I had traded for a long time and hadn’t made any money; in fact, I lost money when the market was going up. So I guess I joined HomeTrader to prove myself wrong. When I did prove myself wrong and realised that I could make money this way, I decided I’d trade in order to make an extra wage that was easy to do. I’ve also achieved that goal now.

I’ve bought a new car recently, which is something I wanted to do and trading helped me achieve that. It’s a family car and I suppose I’d like a nice sports car or something like that one day, but my current priorities are with my family.”

David’s motivation for trading has been a large factor in his success so far. His focus has been on finding a trading system that works for him and actually trading it, as opposed to focusing on the money that can be made. A lot of people focus on what they will spend their profits on, rather than just trading their system and that can be a big distraction.

David is only trading the Australian market at present.

“When I first started I was trading in four different countries, which was fun, but very intense. The huge liquidity in trading foreign exchange is very appealing. There’s a lot of money to be made, but it comes with high risks. I’ve done a lot of research into forex and you can’t really create a single system for the various currency pairs. There are no shortcuts and it is very time consuming. I’d like to look into it further when I have more time”.

Looking Ahead

What’s in the future for David?

“I’m now confident in my ability to make money from the market. I’d like to stay enthusiastic about trading and keep that excitement. In the short term, I’m going to concentrate on trading my current system. I’d like to start trading a couple of long term systems as well.

In the long term, my goal is to make money work for me and not have to work. My philosophy is closely aligned with the Capital Intelligence philosophy, which is why I became a member. I’d like to spend a little more time on building my business and get some deals happening where it’s less hands-on for me, so I can enjoy my children while they’re young. There are endless possibilities.”

To find out more about how HomeTrader helped David develop his trading system , come along to a free introductory class. Click here for dates and times in your city.