How I Became a Consistently Profitable Stock Trader

It took me three years to figure out how to be profitable. So I was. I was teaching myself. And when I started.

I started by copying the only person I knew who. Who did it, my father and I. So I said, okay, so how do I invest in stocks? How does it. How does this really work? And he said, well, now you got to find good companies and you've got to buy them and hold them, and they'll go up over time, and you collect dividends, and then you reinvest the dividends and you save more money and you buy more stocks and you build a portfolio. Okay, So I started doing that, and pretty quickly I realized that, A, it was intensely boring, it didn't suit my personality at all, and B, I didn't really understand how it all worked because I lost money on every single stock that I bought. I would buy what I thought was a good company, and it would just go down in price. It's like, okay, that's not the way it's meant to work. And I tried for a little while on that strategy and realized that it wasn't for me. And I started looking around for other strategies. And I tried fundamental investing. I tried investing on themes like companies that I would see appearing in societies and growing. It's like, oh, they've got a shop here and here and here and they've got storefronts there. They're growing. I'll buy that company. And so I tried that, and then I discovered charts. And I started looking at share price charts, you know, the candlesticks and the prices going up and down and. And I started drawing trend lines and squiggly indicators and so on. On the charts and trying to do that, and that didn't work. And I tried lots of different strategies, and eventually I got to the point where I was sort of three, two and a half years in, and I was still losing money, not a lot of money, because I was. I'm pretty conservative, so I was just placing small trades, not risking a lot. I always cut my losses so that I didn't lose everything, but it wasn't profitable. And I got about two years, two and a half years in, and I was thinking, okay, I've either got to figure this out for real or give it away because it's not going anywhere. And I was spending three or four hours a night, you know, working on my trading, my investing and making decisions and everything. And I started reading this book. It's probably down here somewhere.

Yeah, you get it.

Market wizards. And I picked up this book and there's a whole series of them. There's about three or four of them. And.

The book is a series of interviews with professional traders and investors. And every one of them is different. And what I learned from reading all of those interviews was that there were many different investment styles. And the one thing that they all had in common is they were all 100% confident and comfortable with their strategy.

So they had a strategy that suited them, it suited their personality, suited their objectives, suited their lifestyle, and they could execute their strategy consistently with discipline. Every day it's like, okay, cool. And so I read through all those interviews several times and I basically looked at those people and I crossed off all of the ones that I could not relate to.

So there's some, you know, forex traders who stay up, you know, all, till all hours of the night watching charts. And they had charts in their bedroom, like computer consoles in their bedroom and in their bathroom. And they always were looking at the markets like literally every minute of the day. It's like, no, I don't want that life. Then there were others that would more like the Warren Buffett style that would really analyze the companies, then go in, interview the management and go and really research the industry. And I was like, that stuff sucks, I don't want to do that. And then there were other people that did all these different approaches. And I found in there that I was.

Really not excited about most of the strategies. But when I came to systematic trading, I was like, ah.

That feels right. And systematic trading is rules based trading. If this and this and this happen, you buy. If this or this happens, you sell. And there's lots of different rules that work. But the key is they're rules that you can codify and test.

Because for a lot of, a lot of people, they're buying it or buying into investments, hoping that they have a sensible approach. And hope's not a great strategy, right? It's, you know, it's, it might pay off, but you know, three years later you might still be losing money. You don't know. And so systematic trading really appealed to me because all of a sudden you could test the rules. And so what you can do is you can say, okay, under these conditions, this, this, this and this, if they all happen, I'll buy. And you can put those into the computer, into the software, and look at the past 30 years of stock market history.

And test how would those rules have played out over time. Would you have made money? Would you have lost money? How much would you have made? How big would the dips have been when 2008 happened, would you have been wiped out? You know, when the dot com bubble burst, would you have been wiped out? All of those sorts of things. And to me as a, I trained as an engineer, I never worked as an engineer, but I trained as an engineer. So the math and the numbers and all that really appealed. And so I got to systematic training. I was like, oh, that's my approach.

And I think this is the first real lesson that's really important. If you're going to be active in the market, you've got to have an approach that really fits you. And I talk about in terms of personality, objectives, lifestyle. If you're really a hyperactive sort of lots of action sort of person you can't buy and hold for 10 years, you're going to be bored out of your mind and you'll sabotage it. And similar for the opposite objectives is like, well, I want to spend 20 minutes a day doing this so that I can have the rest of my time free.

Well, if that's what your objective is, you can't trade a strategy that you have to look at the charts all day because it doesn't meet your objectives. And similarly objectives in terms of return and objectives in terms of risk, it has to meet your objectives and it has to meet your life, fit your lifestyle. A lot of people come to the markets and say, okay, I want to be a day trader. Day trader means you buy and sell and buy and sell and buy and sell and you make heaps of money because you place lots of trades every day, but they have a day job. And if you have a day job and you're trying to day trade at the same time, guess what? You can do a bad job day trading and you can do a bad job at your employed, your employment and you're probably going to get fired from your job and you're going to lose money in the markets and you'll be even worse off than you were before.

So I discovered systematic trading. Took me about two and a half to three years to find it. And as soon as I found it, I was like, I was hooked. And I spent three months, I took three months off work, unpaid leave to develop my first trading system. And I read book after book on systematic trading. I developed a system, I launched it, and from then on I made money. Not every day and not every week or even every month, but consistently over time I built my wealth. And so from then I knew it was, I was going to succeed. And then it was just a matter of building enough capital, paying down the debt, and getting to a position where my trading made more money than I needed to survive. And that, you know, that takes time. It takes years. Because if you start with, I started with $7,500. And, you know, you need a lot more than that to survive on your investment. So I added money to my trading account over time, and I grew up with profits, and eventually my trading account was making more money than I was in my job. And that was when I left the corporate world.

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