After spending eight years in Asia as NAB’s head of trading Doug Goldsmith returned to Australia in 2005 to assist in re-building the bank’s local and global treasury operations following the institution’s $360 million illegal trading and foreign exchange debacle.
Six months later Goldsmith put his extensive experience across all products to the test and went out on his own.
He pulled together his knowledge of macroeconomics, fundamental analysis and charting to establish his portfolio.
“I have always erred on the side of caution and I’m probably more conservative than ever now because it’s my money,” he chuckles.
“You feel the pain a lot more when you’re trading your own money as opposed to the bank’s capital.”
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Goldsmith trades stocks, foreign exchange and commodities. The resource sector is heavily favoured in his portfolio.
His many years in Asia gave him insight into China’s growth potential and while analysts were still arguing about BHP’s prospects Goldsmith was solidly backing the mining giant.
He emerged unscathed from the volatility in January and February, avoiding getting hurt because he was quick to pull the pin on losing positions and was content to sit on the sidelines until the market rallied. “I don’t hang onto things and I never fall in love with a trade. When you become emotional you become irrational and get into the pray and hope mode,” he says.
The Big Australian has time and again afforded Goldsmith his greatest wins. He is reluctant to reveal specific details, stating that he doesn’t get bogged down with minute-to-minute results but rather views trading from an annual income perspective.
To Goldsmith trading is purely a job.
“I’m not there to care about whether I win or lose second to second or day to day. I take a portfolio approach. I start off with a certain amount of money at the beginning of the year and by the end of the year I want a return of around 30% to 40%.
“If it’s higher that’s great but I don’t want to put pressure on myself,” he says.
“The guys who get blown up are the ones who are doing it for the wrong reasons.”
Those who get it wrong, says Goldsmith are the ones who trade for the thrill. “If you want to be a punter go to the track,” he says. “This is a business and you want to take every bit of guesswork out of it. For long-term sustainability you need to do research and look at charts not just roll the dice and hope.”
Goldsmith’s information is sourced from a variety of news outlets and he regularly exchanges ideas with a network of trading professionals, creating what he refers to as a type of dealing room environment.
He is not married to one specific way of trading and doesn’t have a system per se. He combines fundamentals, economics, charts and common sense and ultimately relies on a gut instinct cultivated over 25 years in the business.
He views trading as a risk/reward exercise and his stops are determined by the volatility of the stock.
Goldsmith will occasionally trade intra-day but usually he assumes a medium to longer-term position.
He is well aware of where the moving average points are but his trades are not dictated by them.
“There’s an old adage that at the bottom of every ship wreck you’ll find a chart-house. People rely too much on charts,” he says.
Goldsmith has many courses under his belt, courtesy of the various investment banks at which he has worked but prefers a simple approach and cautions against the temptation to over-think a trade.
He likes Bollinger Bands and Fibonacci Points and is a big believer in Market Momentum.
He has dodged serious losses due to a strong philosophical stance against over-leveraging. “It’s better to chip away consistently than have a big swing and hope for the rainmaker,” he says.
His advice is to never believe that you’re infallible and when the inevitable does occur “don’t beat yourself up, just keep on rolling and looking for the next trade”.
It’s all about timing, he says. “Good traders fall on the sword quickly.”