Tell us a bit about you and what got you into the share market in the first place?
I first arrived in Australia in 1983 as a refugee when I was 10 years old. I was born in Cambodia just before the civil war of 1974-1979 which saw over 2 million people (25% of the population) slaughtered during the genocide. I lived through this period of intense suffering and starvation and have seen horrific things during my childhood. Things that no child should be made to see.
Two of my bothers came to Australia first around 1980 and they later sponsored me from a refugee camp in Thailand on the borders of Cambodia. My parents and three of my brothers and sisters are still living in Cambodia to this day. I arrived in Australia as a 10 year old with no education and could not speak a word of English. So I started my first year of education learning the English language through an ESL class (English as a second language), a year later I was put into year 6 and started my journey through the formal education system.
I completed high school in Sydney’s West and ended up with a TER score of 62, but because I was disadvantaged as a child the education system kindly discounted this and bumped my score up to 72. This wasn’t enough to get me into anything fancy but I was able to apply for a Bachelor of Science at UNSW. Up until this point I have no idea what I wanted to do in life so I ended up choosing psychology as a major as I was having many personal issues with myself at the time.
It didn’t go very well, 18 months in I lost focus. I was alone, I felt lonely, I was completely lost and gave up. In 1993 my brother asked me to move to Darwin for a while to work for him in his business as a seafood wholesaler. During the next 13 years I also ended up working as a mud crab fisherman, a taxi driver, a truck driver, a farmer, and a market stall operator.
I met my wife in Cambodia in 2004 when I visited my family and we got married in 2005. When she arrived in Australia in 2006 our net worth was a beaten up Mazda, about $7,000.00 in cash that we’ve saved from the wedding gifts, and our wedding rings. Unfortunately not long after she arrived, the cash, the wedding rings and both our passports were stolen from our rented unit. This marked the lowest point of our lives and had brought us both to tears.
During this time I went back to work for my brother at the seafood business. Then in 2007 he had a fallout with his business partner which saw the business to be dismantle and assets auctioned off. I saw an opportunity to salvage parts of the business, but I was penniless. After some discussions with my brother he agreed to loan me $50k so that I can buy some assets through the auction. He also helped me to secure half of the fishermen who supplied the mud crabs to the business.
Looking back this was the leap of faith that I’m glad I took, as I was scared and have never operated a business before. On top of that we were penniless. But through sweat and tears we were able to pull through and slowly build our wealth from there.
Then in late 2011 a telemarketer rang me and asked if I knew anything about the stock market. I said no, so she asked if there is a proven way that they can show me to make money from the stock market through “technical analysis” would it be something that I would be interested in? I grudgingly said yes so she said she will send me an obligations free information pack through the mail for me to look at.
The information pack did come – in the form of a very glossy posh looking booklet. In the centre fold is a graph showing a 100% guaranteed verifiable way that they have turned $2,000.00 into $56,785.83 within 26 months using their system. They even showed detailed trades that got those figures on the following pages. This sparked my eyes! Now, I have received similar booklets about proven ways to win in horse racing before – but I never believed it because I blew a lot of money in the casino trying to beat the system in my earlier years. There is something about the stock market that has always fascinated me though.
Maybe because I’ve seen many movies about people getting filthy rich from the stock markets. I also used to day dream about seeing my net wealth ticking along on a dashboard – much like the live portfolio value we see in our trading accounts today. But I always thought the stock market isn’t for ordinary people like me with zero qualifications or knowledge in that area.
The very reason why this sparked my interest, because they assured me I don’t need any skills. The software they sent me cost me $9,000.00. They showed me how to set up my trading account with CMC and import EOD data to their software so that it churns out a list of recommended picks. I found out months later that it was a dud as it even churned out stocks that were suspended for months. The 1300 number were also disconnected when I tried to ring for help.
Can you share a bit about your journey from where you started to where you are now?
So I bought my very first share on 24/11/2011. I can’t remember what it was but I remembered my first win occurred soon after with a company called Maverick Oil & Gas ( MAD). It made me around $13k and that was big deal at the time. I got really excited and thought if I give myself another 6 months to learn I’d be making money easily. So over a period of 6 months I decided that I would put in $100k into my trading account.
It was an amount big enough to give me a material return but small enough that if I lose it all it doesn’t profoundly affect my family life. I did this on the belief that if I lose it all then the share market isn’t for me and I will quit. But if the share market is workable then that amount is enough to build upon.
The journey took a lot longer than anticipated. That holding in MAD did turned into a loss as I was in love with the company. Then came the shaale plays that was all the hype then. My initial holdings in BRU, CTP and NSE was a small win that all turned into big losses as I held and hoped it would turn around and multi bag. It never did. I was more of an investor then, I didn’t believe in TA as I couldn’t understand it.
Within a period of around 3 years my $100k account turned into just $23k. I almost given up then as it all seemed too hard. Then came my first big win in early 2015. It was a company called AZK (currently BRN), that put my account back into the black plus around $80k in profits at the peak of the run. It was my first eye opener and got me really excited. But I ended up giving back much of the profits as the run didn’t last long and again I was in love with the company. It took me just over a year to give back most of that money.
My biggest loss came from a holding in a company called XTV – that raked up about $50k in losses, or just under 50% of my entire portfolio value at the time. In late 2016 I was left with just $34k in my account, and that marked my second low point in my journey. I can’t remember what stocks contributed but I was able to get back to break even sometime during 2017 – that’s over 5 years since I bought my first shares! Then came the spec run of late 2017.
Over a period of 4 to 5 months I was able rake in about $300k in profits. By this time I was a lot more vary of giving back profits, so much so that in 2018 I cashed out 50% of my portfolio that to this day I never put it back. So with this reduced size portfolio I was able to slowly build it up to just shy of $500k in total profits right before the covid crash.
Starting out in 2011 I’ve never been through a major crash before so I was always afraid this day will eventually come. I was mentally prepared and pretty happy with my response then as I sold most of my shares just a few days into the crash. I remembered the fear and panic, so much so that I took most of the money out of my trading account then. I was too bearish at the time and missed much of the sharp rebound.
The volatility was still there until May which meant I couldn’t hold anything with conviction, but even as I traded lightly I ended up giving back about $115k in profits before the turn around from May onwards where I was able to scale back in. So I finally hit my first $1 million in late September, but I’m happy to report that this figure now stands around $1.6 mil.
Can you give us a summary of your trading strategy?
In short my strategy now focuses on catching a stock at the early stage of a trend change. This means hunting for breakouts on stocks. I would class myself as an active trader, I trade 5 to 10 stocks each week and do dozens of trades each week. All of my holdings are short to medium term from days to months. Where the trend is strong and intact and the fundamentals are sound I try to hold them longer to maximise returns.
There are stocks with good fundamentals but for one reason or another the market is not ready to mark it up. If I hold too many of those they become an opportunity cost to my portfolio – especially when the market is hot. So when I enter a stock I also have a time stop where the stock needs to perform otherwise I would exit and catch it at another time. Risk management is important and now becomes the backbone of whatever I do.
If there is one thing that I’ve learnt well over the years, it is that I must not allow any one trade or holding to do a major damage to my portfolio. I also have a simple over-arching risk management strategy that operates in any market conditions. And this is it: If my portfolio value pulls back 10% I’ve already started dumping stocks and reduce holdings. By the time it’s down 20% I’m practically all in cash save a few small holdings in stocks that still showed strength.
The reason behind this is simple: to lose 20% of my portfolio value is mentally and financially painful and either the market condition is bearish/ crashing or something is wrong with my strategy. I need to back right off. This simple strategy will also give me confidence in dealing with major crashes in the future. There is no need to guess whether a correction will turn into a crash as I’m already out by the time a crash is confirmed.
I can easily recover that loss if the market conditions recover but the more the percentage loss the harder it is to recover – mentally and financially. I’ve heard people who made millions in the good times only to give it all back in the bad times – that’s an example of bad risk management. To move forward quickly we need to be giving back as little as possible.
I used to be more of an investor than a trader. But every stock that I’ve held with conviction usually ended up with disappointment. The news that I waited and waited for never came, or even when it finally came the share price went nowhere or gets sold off. This gave me a profound feeling of hopelessness and frustration, and so much opportunities were lost holding such stocks.
My paradigm has since shifted towards TA. That’s not to say that other people can’t make money out of investing, but it is just not my area of competence. I now strongly believe that stocks with good FA will have a corresponding good TA. So my focus is always TA first before FA. By scanning and hunting for stocks with good looking charts, I can practically filter out most of the garbage out there and greatly improve my strike rate.
There is also the issue of opportunity cost. You can have a stock with great FA but until the market is ready to mark it up then your holding is costing you an opportunity in holding something that is actually moving up. TA can address that because stocks that are rerating are always accompanied by good fundamental reasons and buying volumes.
If there is one strategy I’ve changed that has helped improve my returns lately it is that every one of my holding now has a time stop. Especially in a hot market I can’t afford too many holdings that just does nothing while plenty of other stocks are running. My win/loss ratio on a per stock basis (as oppose to number of trades) for the last 6 months sits at 47%/53%. My long term overall win/loss ratio sits at 40%/60%. That doesn’t sound very spectacular but the difference is my losses now are much smaller than my wins. In fact most of my biggest losses occurred during my first 5 years of trading where my portfolio was much smaller – the same reason I couldn’t become profitable.
To summarise my trading strategy:
* TA takes precedence over FA
* Risk management takes precedence above all else. I must be nearly all in cash if my portfolio sheds ~20%
* No one stock is allowed to do any major damage to my portfolio. Usually a loss of not more than 1% of portfolio (where it can be helped)
* Look for stocks with good chart structure
* Every holding should have a stop loss as well as a time stop
* Never average down as this will compound my losses in the likely event that I’m wrong
* On a new entry buy a test parcel first, then scale in as the stock exhibit strength and confidence builds
* Average up at certain price points on stocks which show good momentum and trend
* Go easy/scale out as market conditions are poor or I’m on a losing streak
* Vice versa get aggressive when market conditions are good or I’m on a winning streak
Let me just say that I am very much still a learner. I still make mistakes that I’m not proud of on a daily basis. But at the very least I am able to consciously eliminate those mistakes which are fatal to my portfolio. Going forward I am excited about what lies ahead.
Even as with the mistakes I still make I am able to make some meaningful gains in the market that I can only dream of just a few years ago. I am an active trader, this gives me a large enough sample size of trades to have a degree of confidence that my strategy is finally working. Obviously it may only work in good market conditions, which is why risk management is paramount in bad market conditions. Give back as little as possible in the bad times.
My advice to newer traders/investors is to try everything first and spend time in the markets as much as possible. Everyone have different strategies depending on their area of competence, be it an investor, a day trader, or a short term trader. Only time in the markets will we find out our area of competence. But above all else make sure to manage your losses so that it doesn’t throw you out of the market altogether. Everything else comes down to experience. You can read all the books you want but until you experience it you won’t know what works and what won’t for you.
How did you mentally recover from your biggest losing stock?
My biggest loss occurred not long after I had my biggest win at the time. It was a company called XTV (now NZS). That holding of heads and options made up around 80% of my portfolio value. The company only listed not long before that and I remembered falling in love with the tech and the backers and thought if only I can replicate what I did with AZK before that and the stock only 5 bag from my entry I stand to make substantial gains and finally really getting ahead in the game.
As months go by I kept waiting for news and hoping for the eventual rerate. Red flags kept appearing and by the time I sold my last shares 8 months later I was down around $50k, which was nearly 50% of my portfolio value at the time. It was quite devastating and has given me a sense of hopelessness and questioned my ability to pick stocks. To make matters worse at around the same time I also made another big loss in a holding in RFN. That loss amounted to around $30k and probably what dwindled my portfolio value to just $34k by the end of 2016.
The reason that kept me going was my previous big win in AZK and seeing others doing well in the markets. I thought if only I can find a few big winners like that I would be well ahead and this will give me more capital to deploy to other winners. I can remember almost giving up on a couple of occasions but all I did was take a bit of a rest and not really getting too involved in the markets. But there wasn’t much else to do so I just kept going slowly.
If there is one thing I’ve learnt from all my big losses, it is never to trust management or the fundamentals of a company. Good fundamentals with bad price action spells trouble. It may come good later but that doesn’t mean it won’t do a great deal of damage to my capital and the opportunity cost in holding such a stock.
I am so thankful to Stockrocker for spending the time and sharing his incredibly inspirational story. I hope this article motivates anyone who is thinking of throwing in the towel, to seriously consider pushing forward as you never know what successes might be around the next corner. If you want to to get in touch with Stockrocker or follow his tweets I have provided a link to his Twitter account here.