Trader Success Story: Erica Bacon
November 1, 2017

Erica Bacon is a 58-year-old full-time trader. She had been a public servant for most of her working life. Currently, she is the chief navigator for an indefinite nomadic existence in a serious off-road caravan. Originally from Brisbane, after finishing work early in 2013, Erica and her husband have been touring Australia as “grey nomads” with no fixed address. 

I came to realise without any resentment, albeit late in our marriage, that if I wanted more for us financially, then I would have to make it happen.

She has been trading on and off for the past 7 years and consistently for the last 18 months. Erica mostly trades Australian shares in the Top ASX200.

Q1. How and when did you first become interested in the markets?

When I turned 50, I decided that I needed to take more control over our financial affairs/ future, something my husband and I had neglected in the past. My husband Ken is an accomplished theatre nurse and a gorgeous human being. He has very straightforward needs, goals, and aspirations. I came to realize without any resentment, albeit late in our marriage, that if I wanted more for us financially, then I would have to make it happen. Couldn’t and shouldn’t leave it up to Ken, as he just wasn’t interested. I was an absolute novice at wealth creation and needed to learn some strategies quickly.

I enrolled in a share trading course and dragged my long-suffering husband along for a couple of weekends as we learned the absolute basics. It occurred to me,  how hard could this be? I soon discovered, how demanding, time-consuming and heartbreaking it is without the right knowledge, skills, and
experience. At the time we owned no other assets besides our home and industry-based superannuation funds.

Q2. And then what happened?

I was not only as green as grass but also very impatient (code for greedy), and so I went off to explore a range of trading strategies, particularly ones that promised high returns. It felt like a kid in a candy shop, with eyes bigger than her stomach. I spent considerable amounts of money on several weekend courses in Options, CFDs, and Futures. 

Like most traders who go down that path, I crashed and burnt big time. I had my ever-supportive nurse husband begging me to apply a tourniquet to our life savings because for him it was simple; a good nurse never lets a patient hemorrhage. Referring to risk management, it was a profound metaphor for me. This was very confronting, as I just could not believe in failure. I had enjoyed success with almost everything I had undertaken in my life and failure did not compute.

Yet, here I was feeling absolutely devastated. Ken asked me to stop trading, and I remember ringing my broker to cancel the account when he asked if I had heard of Wealth Within courses. He strongly recommended I contact them before quitting, and consequently, through the fog of my bruised ego and a very depleted account balance, I made the call and I am so glad I did. 

Q3. How have you been able to learn and educate yourself about the markets?

Even though I was a monumental failure and had tested Ken’s patience to a breaking point, I could not quit without one last attempt at a well-orchestrated fightback campaign. Ken and I agreed that this was my absolute last chance to succeed and that in order to become the turtle and not the hare I must apply myself to the course with rigor and discipline, and not trade fast markets. Whilst completing the Diploma in Share Trading and Investment course in 2011, I realized how much I enjoyed the actual process of trading and the learning process. 

The study was not daunting as I found a passion for it. It was intrinsically rewarding as I started to enjoy the journey and stopped trying to speed through the process. Given my past, I still didn’t have the courage to trade live at this point. I finally started trading live in early 2013, when Ken and I gave up work and became nomads having sold our home the previous year. The learning experience was so good that I enrolled in the Advanced Diploma, as an interest while we were on the road, exploring Australia. Ken agreed to have a reliable Internet connection so I could complete the course and start trading.

I completed this in December last year and remember doing the last exam from a campsite overlooking the Bass Strait in Tasmania. It was absolutely beautiful. I attended their annual Art of Trading workshop in 2013.  During that some significant pennies dropped and I found the confidence to start trading again in earnest. I revised my trading plan by back testing until I eventually landed on a strategy based on Time, Price and Pattern that I feel comfortable with. It was a wobbly start for the first 10 months. Break even didn’t happen until about July when I found the courage to stick to my trading rules and my account slowly started to increase. 

The memories of those earlier devastating losses trading CFDs are etched into my psyche.

Q4. Did you make mistakes when first starting out?

Definitely, the memories of those earlier devastating losses trading CFDs are etched into my psyche. Now I know I sabotaged some of my early trades last year by panicking and not sticking to my trading plan when the market retraced. Fear of loss caused me to adjust my stop loss and cut trades before they had a chance to cook.

Q 5. Would you define yourself as a discretionary trader, a mechanical trader or a combination of Both? 

I would definitely define myself as a mechanical trader, which is important
in my development because it is about honoring the work I invested in backtesting my strategy and trusting my analysis. In time, with consistent results and greater confidence, I will permit myself to indulge in what others refer to as the “Art of Trading” rather than the science.

Q 6. Who have been your mentors and role models? What Impact have these people made on you personally as well as on your trading style?

I feel enormously privileged to have been taught and mentored by Dale Gillham and his wonderful team at Wealth Within. I am constantly amazed and delighted as each new technique presented sheds more insight into how markets unfold and how they sometimes don’t. They inspired my healthy respect for the language of bar/ candlestick charts as well. I am convinced
that learning this language is a lifelong pursuit and not something to be learned in a weekend, as many other educators would have us believe. I really appreciated the systematic and thoughtful way the course was designed
and delivered.

Every skill taught was then thoroughly tested by me, which is why I was able to confidently apply. I desperately needed this kind of structure, so that now, when I am managing my trades, there are fewer surprises and I can relax knowing that I have managed my risk. It was drummed into my thick head that trading well is 90 percent psychology, i.e. having a calm mental and emotional state. Therefore, I make sure I am in the best physical, mental and emotional state in order to support my trading efforts. To this end, I find a daily yoga practice particularly helpful. I will sit in a lotus position if my knees won’t agree. The market will move when it is ready and not a single moment before.

Q 7. Can you give us a brief overview of your trading style?

Currently, my trading is aimed at generating cash flow to supplement income until retirement, whilst our “nest egg” delivers growth. I have two portfolios based on a short to medium term strategy of 3 to 18 months trading the top 200 Australian shares. These are selected on technical analysis primarily by starting my analysis on monthly charts. Subsequently, when my criteria are met, I proceed to the weekly chart to fine-tune my analysis for an entry or exit. It is difficult to judge how much time I actually spend on managing them. Backtesting goes on to determine whether my strategy actually suits a stock before I include it on my watch list.

Q 8. Is there anyone trade (win or loss) that had a profound effect on your development as a trader? If so, what did you learn from the trade? 

I was long in a CFD on Transfield Services just after the Global Financial Crisis. I thought that the market had turned, so along was a sure bet. Unfortunately, it went into a trading halt.  When it resumed, trading opened at about 20 percent below the previous close. Ouch! It hurt. This was the moment I realized enough was enough as I had incurred too many losses. In hindsight, I now know that I was trading on speculation, NOT confirmation. Speculation is now an absolute “no-go” strategy.

Q 9. Can you tell us about your best and worst trades? 

The above-mentioned example would have to be my absolute worst trade ever. For me, any successful trade is one in which I have remained absolutely faithful to my trading plan: win, lose or break even. However, I must admit, profitable ones are the best. One I currently still hold is Aquila Resources.
Although I haven’t exited from this yet, I am enormously pleased with how I have traded it. After backtesting this stock and achieving a 90 percent hit rate, I concluded it would be an excellent stock to place on my watch list.

Entering on a weekly chart using Dow theory it initially dropped to within $0.01 of my stop, and then went up approximately 30 percent before falling away again to just below where I entered all without giving me an exit trigger. The stock is now trading well above that and I now have a trailing stop, which if
triggered, will deliver a 60 percent profit. I would never have been able to trade this way with confidence without the benefit of back testing . Time will tell how this trade unfolds. But so far, this would have to be my best trade ever. 

We have the funds to continue with another year of our wonderful adventure around Australia. We would have been looking for jobs otherwise.