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Investor profile
A veteran trader warns against complex systems
Jill Fraser - May 12, 2008
 Roeland Martin was a 21-year old soldier in the Australian Army when he became hooked on reading books about the sharemarket. “Everyone else spent their spare time boozing,” he says.
It was the early 1960s and the share-trading world looked very different to today. There were no charting programs and daily newspapers published just the top 20 to 30 shares by volume plus closing prices. Accessing stock information was difficult.
After Martin left the Army in 1966 there was a gap of two years before he started trading. “I was working in a business equipment company and invented a system for share brokers to automatically put their buying and selling notes onto an accounting machine (the forerunner of a computer) and because I had access to brokers I decided to use my commissions to start trading,” he says.
He devised a system for selecting stocks, which he likens to a technical analysis indicator used today called the On-Balance Volume. Only Martin’s was manual.
He would pick five or six companies and follow their progress every day in the newspaper. He watched how much they went up or down and multiplied these gains or losses against the volume of shares traded - adding or taking it off the balance.
Martin would phone in his stock picks to his broker, but invariably the broker would suggest a different stock - and Martin would end up with a losing trade.
After a while he gained confidence and no longer blindly accepted broker advice. The experience left him suspicious of brokers and what he perceives as their ‘agendas’ to serve their biggest clients at the expense of their smaller ones.
In 1977 Martin became the 12th person in Australia to buy a personal computer; a Tandy Colour Computer. He mastered his own programming and became one of the first MetaStock users.
MetaStock opened up a whole new world of share trading to Martin because suddenly everything became mechanised. He tried all sorts of fancy things on the trading program and when something didn’t work he would tweak the indicators he used, continually altering his system. Back then - the more complicated the system the better the results were likely to be, or so he thought.
He used the MACD (Moving Average Convergence / Divergence), the RSI (Relative Strength Index) and the Stochastic Indicator.
“I had to wait for all of them to fall into place at the same time before doing the deal. The only problem was, by the time they all gave the same signal the move up would be near its end. So I’d buy the share at the top and two weeks later find that the stock was going down at an enormous rate of knots,” he says.
“I kept on trying and trying and waiting for the thing to work and it never did. People are still trying today!”
In 1988 he came across books by Stan Weinstein and hasn’t looked back.
Weinstein’s system is straightforward, based on a 30-week moving average and suits Martin perfectly.
“All technical analysts want to make things complicated and the more they do the worse it is,” he declares.
Martin uses BHP shares as an example. According to his system, BHP shares have been moving in a channel - up at a rate of 30% per annum for the past five years. Martin says that he simply buys at the bottom of the channel and sells at the top.
He now uses a short-term 34-day moving average to compliment his 30-week long-term moving average.
Confessing that he has way too many stocks in his portfolio he reluctantly admits, 40. “I’m ashamed to say that,” he says. “There are two thousand shares in Australia and I feel like a boy in a lolly shop.”
Martin’s average trade is around $5,000 to $10,000. His greatest loss was $15,000 in the 1970s, and his biggest win to date (or should we say unrealised gain) is a stock that he currently owns, and that’s Linc Energy (LNC). He bought the stock at 30 cents and it’s currently $1.97. Martin owns a hefty $200,000 worth.
The key to successful trading he says is finding the right sector. He vows that he would never buy retail or banking and focuses only on oil, gas and mining.
His biggest failing as a trader, says Martin, is a lack of discipline. “I’m ex-Army and I believe in discipline in life but unfortunately when it comes to shares I’m terrible because I always believe I’m right. But this often means going against my system and that means downhill,” he groans.
Jill Fraser has 25 years' experience in the media as a radio producer on 2UE and journalist for News Ltd, Australian Consolidated Press and Key Media.
More articles from this edition of CompareShares:
Stock Tips: Broker Recommendations May 12th – 6 to BUY, 6 to SELL and 6 to HOLD
Stock Picking: Top down versus bottom up analysis
Investor profile: A veteran trader warns against complex systems
Market reports: Top Ten CFD stocks for the week
Stock pick: Stock of the week – Cue Energy Resources
Finance: Profits show big banks weathering storm
Companies: Westpac approaches St George over merger
Companies: China forms company to make jumbo jets
Economy: Ripper plays down WA minerals boom
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