Success Stories

Brisbane trader is counting his money while many others are counting their losses

David Smith's Trading Story, July 2008

Many people dream about ways to supplement their income so they can reduce their mortgage and relieve some of their mounting financial pressures. One Brisbane engineer has gone a step further and found a way to do just that. At 35, David Smith has spent the past few years learning to successfully trade the Australian stock market and the results have been worth all the hard work.

In the first quarter of 2008 when the Australian stock market plummetted and lost over 20% of its value, David Smith saw his trading float increase 174.93%*. At the beginning of 2008 his trading float was $6,000 and by the end of March his float was $16,495.52.

These results saw David win the HomeTrader 2008 1st Quarter Gun Trader competition.

"I feel very encouraged that if my system is working and I manage my risk I can make money. My float is small and therefore I am reinvesting most of my profits back into my float," said David.

David trades Contracts for Difference (CFDs) which enables him to make his small float work harder for him. He trades multiple systems to ensure he is prepared for varying market behaviour. Given that David works full time he has designed a number of his systems so that he only needs to manage them weekly. This means that on the weekend when he has more time he can adjust his trend following systems as required. In addition, David uses a trading strategy called 'dip buy' or 'mean reversion' which requires him to check the system every night when he comes home from work. This strategy is applied to both the long and short side of the market. On average, David manages about 10 to 20 open positions per week.

David's trading results have not always been so good. He initially started trading the stock market using fundamental principles. He subscribed to newsletters about which shares to buy and sell, plus he read the business news. Unfortunately, this resulted in some losses.

"I also initially lost money on CFDs and then realised that I needed some education if I was going to continue. I was nervous about spending money on education after losing a fair bit trading."

"I spent most of 2007 learning how to develop my own technical trading systems and most importantly how to manage my risk so I wouldn't watch my money disappear again. I would have spent hundreds of hours in front of the computer designing my systems."

"One of the biggest lessons I have learnt while attending the HomeTrader classes and through trading experiences was that I needed to reduce my risk significantly to protect my capital. I didn't like seeing my trading account fluctuate so much," said David.

David puts part of his success down to being fairly scientifically minded and therefore he finds it relatively easy to stick to his system. He also attends regular meetings in Brisbane with other traders to problem solve and discuss trading strategies. "My biggest losses were made when I deviated from my system."

"For anyone starting out in the stock market I would suggest they don't use too much money in the beginning and they allow enough time to recognise how you cope with intra-trade drawdown," said David.

In the long term, David would like to use his trading profits to reduce the mortgage and finish the garden of their newly built home, for his wife and 2-year old daughter.

Remember that CFDs are geared and can result in losses that exceed your initial deposit. They may not be suitable for everyone, so please make sure that you fully understand the risks involved.

All testimonials are provided voluntarily, without payment, inducement or other benefits.

*Past performance is not a guarantee of future performance.