The Share Wealth Systems team is often asked for feedback from our customers regarding our products and services. What better way to gain some insight, than to read an interview with a long time customer, recently published in Your Trading Edge – July/August 2012 edition. Tim has been a customer for a number of years, and we really appreciate him sharing his story with everyone.
Get to know your fellow traders: Kel Butcher speaks with equities trader Tim Sutherland.
Tim Sutherland works from his home in Salter Point, Western Australia. He has been involved with rural property sales for much of his working life. Tim is also involved in property development projects in Perth and in other centres in Western Australia. He is an active trader of Australian equities and enjoys breeding stud sheep and goats. In his spare time Tim enjoys wood carving and stick-making in the English tradition. He also enjoys water-colour painting and is a keen cyclist.
How and when did you first become interested in the markets?
The introduction of compulsory superannuation created the opportunity to manage my own super fund. I have always thought that no one else can look after your money as well as you look after it yourself. In the earlier stages I entrusted my funds to a stockbroker with carte blanche to make all buy and sell decisions. I soon learnt that this was not such a good idea. It was then that I decided there had to be a better way. After I moved to the city upon ‘retirement’, my interest in trading was stimulated when I attended a wealth creation course over several months.
And then what happened?
After that course, believing I had now gained the knowledge to start trading, along with all the right words with which to instruct a broker, I engaged a stockbroker and began trading. I was to make the decisions on buying and selling options and stocks on the ASX, and he was to lodge the orders on my behalf. That worked for some three months before I became disenchanted with the mix-up in orders and the exorbitant fees charged. My then broker suggested to me that with my knowledge I would be better off trading online. I began to do so in November 2002.
How have you been able to educate yourself about the markets?
I threw myself into the learning process by attending as many seminars as I could in Perth; and even travelled to Sydney for a couple. I joined a Sunday Traders Club; and, best of all, read and studied more than forty books, which are still in my library. I say ‘best of all’ because the books are where I believe I learnt most. For the cost of a book, there is a far greater benefit than can be gained from attending a seminar. The books are always there to refresh the mind. That’s not to put seminars down – I have attended some excellent ones and gained considerably from them. The best-value and lowest-cost seminar or course that I attended was conducted in Perth by a private trader I met at a trading club. Her efforts in putting together a down-to-earth, well-documented set of papers, along with her presentation, were second to none. It was during this course in 2004 that I saw the software used by Share Wealth Systems (SWS) demonstrated. I considered it more user friendly than the software I had been using until then and duly made the change. In all, the learning process has been one of the most challenging I have undertaken, but it has been well worth the effort. Having said that, learning is an infinite in the world of trading. It just depends how far you want to take it. Even if you are happy with a given status quo, there will always be more to learn. I consider the quote most apt to trading is Lao Tse’s “He who thinks he knows, doesn’t know; he who knows he doesn’t know, knows”. This quote is on my wall adjacent to the computer to keep me from becoming complacent.
Did you make mistakes when starting out?
Yes, of course mistakes were made – without mistakes we can’t learn. Fortunately none of mine were major and I’ve come through relatively unscathed. Although hearing that question certainly triggers memories of cold panic and frozen thinking!
Would you define yourself as a discretionary trader, a mechanical trader or a combination of both?
I’m not keen on categorizing myself into a particular box but, I guess, I could be defined as a mechanical trader who uses discretionary common sense.
Who have been some of your mentors and role models? What impact have these people had on you personally as well as on your trading style?
Without question Gary Stone of Share Wealth Systems is the most influential person I have met in my trading journey. He has delivered to me a safe and effective trading system that has made trading a stress-free pleasure. Quite some time after purchasing the SPA3 methodology from Share Wealth Systems I was jolted into reality. The guest speaker at a Sunday Traders Club meeting was explaining how he traded the E mini S&P futures contract online. He was obviously a gun and making big money. There were some forty people in attendance and the speaker, trying to gauge the experience of his audience, asked who was earning x percentage from their trading, starting at around five per cent. By the time he got to 30 per cent, there were only a couple of hands up and at 40 per cent there was only one. This person traded SPA3 (Sustained Profit Advantage) with SWS. I believe he is still trading the same system successfully. That was in 2006. I made the decision to trade with the SWS SPA3 system. I have traded this system, and the SPA CFD system, ever since. Even though we have been through some fairly challenging times, my trading results consistently outperform the All Ords Index. Another person worthy of mention is Tony Oz. His books have taught me how to trade effectively with systems for short-term and day trading.
Can you give us a brief overview of your trading style?
Because I am more than seventy years old and have no other form of income, I am fairly risk averse. You will appreciate that at this stage in life you don’t get a second crack at it. Therefore my trading style and the system I trade need to be sound. I must have complete faith in them. The SWS SPA3 system delivers this for me. It is a medium-term ‘active investing’ system that suits my style and the time I have available. I also trade a SPA3 CFD portfolio; but in these uncertain times I have elected to stay out of that market. From time to time I indulge in short-term trading with CFDs as a bit of a hobby and for something different to do. I was the first Australian CFD client of MF Global, who have since folded. I now consider the risk of a broker going broke greater than the risk I take in trading.
Is there any one trade (win or loss) that sticks in your mind that had a profound effect on your development as a trader? If so, what did you learn from the trade?
One that comes to mind was a loss trade in an exploration company. This was from a tip given to me by a very old and valued friend who, years before, when I had no interest in shares, told me to buy Poseidon (before they took off), which I didn’t. With that sort of background and since he was highly respected in the mining industry, I thought I should now take his advice. This share just kept going down, despite some of the best deposits being confirmed. The company chose to keep exploring rather than mining and of course issued more shares to raise capital. This trade confirmed the oft-given rule for traders – not to indulge in tips. I have witnessed the same scenario with friends who keep taking ‘red hot’ tips. I am now content to check the technical analysis of such tips and watch from the sidelines.
Can you tell us about your best and worst trades?
For me, the past is the past. I don’t really recall any specific trades, either best or worst. I appreciate that many inexperienced people view trading as making great profits or great losses but I have found that, in reality, trading is a fairly mundane occupation and not the exciting and lucrative pastime that a lot of people perceive it to be. Having said that, I do recall that on a trip around Australia we pulled into Darwin and connected to the Internet to find that our portfolio had gained some $30,000. This was a cause for some excitement, but by the time we checked again in Broome the gain had disappeared. Ah well, this is where experience is useful.
Would you classify yourself as a short-term or a longterm trader? What advice would you offer to people getting started as traders on the relative merits or otherwise of each?
The term of a trading system is directly related to the amount of time and effort you are willing to put in and the amount of risk and reward that goes with each. That is, with a long-term buy and hold approach there is less reward for less effort; but there is little or no stress. With a short-term approach there is opportunity for greater rewards, but with that comes more effort, greater expenditure of time and some stress. The requirements for each person, and their risk tolerance, will be different. I think it is a matter of knowing who you are and aiming for your area of comfort. If you don’t understand your tolerances, the market will very quickly tell you what they are! The main thing before making any decisions is to write a trading plan, just as you would a business plan. This is essential before you start trading; and it will also help in forming a picture of yourself.
What markets do you trade? Which markets do you prefer? Do you have a favourite, and why?
I trade only stocks and CFDs on the ASX. It is the simplest market, with local currency and local brokers. SWS have been researching FX and US stocks with a view to completing their research very soon and releasing a system for these markets. I believe the US markets and forex will give me greater opportunities and I am interested in trading them.
What makes your trading style different from others? What sets you apart from other traders?
It is a well-known fact in trading circles that over 90 per cent of traders fail. Whilst I consider myself a good trader, it must be understood by aspiring traders that there are no shortcuts or golden bullets that will deliver you a fortune. Yes, it has been done and it is possible. But, as they say, “the harder I work, the luckier I get.” When I say I am a good trader, I don’t mean that I am smarter or making more money than others but merely that I am someone who is trading a good system and following the rules explicitly. I guess discipline is one of the traits of a good trader. What sets successful traders apart from those who do not succeed is their approach to trading. This includes trading a system that has been back tested over long periods in different market conditions. In trading any system, rules must be written to manage money and risk. The rules that you write into your trading plan must then be adhered to.
Do you have a favourite trading rule?
No. But if I did, it would be to follow all of the rules without exception.
Ed Seykota says, “Everybody gets what they want from the markets.” What does Tim Sutherland ‘get’ from the markets?
Trading has provided me with mental stimulation after leaving the workforce and gives me something to look forward to every day. It has given me a great deal of satisfaction after reaching a level of understanding of the markets. In turn, the monetary rewards have been a bonus to the learning journey. Whilst I am not making a fortune, trading has maintained our financial status through all the recent ups and downs and enabled my wife and me to enjoy a modest lifestyle with regular travel to different parts of the world.
How has trading affected your lifestyle?
That sounds as though you are looking for the downside of trading. The only downside I can relate to is that there is a commitment to be near a computer every day to maintain continuity of trading. At home, that is not a problem. It does sometimes become a bit of a nuisance when travelling, because of different time zones and areas that do not have Internet access.
What books, seminars and courses have you read or attended and which would you recommend?
Some of my favourite books on trading include ‘Reminiscences of a Stock Operator’ by Edwin Lefevre – the fictionalised biography of Jesse Livermore; ‘How I made $2,000,000 in the Stockmarket’, a true story by Nicholas Darvas, a great advocate for technical analysis and systems trading; ‘Technical Analysis of Stock Trends’ by Edwards and Magee – the bible of technical analysis; ‘Secrets for Profiting in Bull and Bear Markets’ by Stan Weinstein, a real all rounder; ‘Market Wizards’ by Jack Swager – interviews with top traders; ‘The Stock Trader’ by Tony Oz – the best book for short-term trading I have seen; and ‘Trading in the Zone’ by Mark Douglas, which is a great book for the psychology and mindset needed to trade. I would also strongly recommend studying technical analysis. This will help you to understand how systems work and will give you greater confidence in a system. It has provided me with an extra edge within the system I trade.
What does the future hold for Tim Sutherland?
The future for me is looking really good. At this stage of life my wife and I get to do the things we want, when we want. From a trading aspect it will be more of the same; enjoying the benefits of the SWS research and new systems as they develop.