On: January 22, 2018 In: Expert Advice, Most Popular, Trading Mindset Comments: 0

John Zahra is a mechanical supervisor and trader, currently living in Sydney. John has previously travelled and worked overseas and around Australia in the construction industry. He also spent time following his passion and competing in Ironman distance triathlons. Four years ago, John decided to take a break and concentrate on learning about trading the share market.

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

I started following the share market when I was in my twenties, but it was mainly buy and hold. I had no idea how to trade.

  1. And then what happened?

I had a friend who was asking about the share market and how to go about trading. I had no experience, as I was a buy and hold person at that time. However, I offered to assist my friend in finding the necessary information. Around that time, I had been watching the Sky Business show Your Money, Your Call and remembered seeing that Dale Gilham and his company Wealth Within run the Diploma in Share Trading and Investment, so I decided to give them a call to find out more.

I liked how Dale was answering questions from the general public that were phoning in for advice. What he said was easy to understand and just made sense to me.

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

When I first went to the Wealth Within website and looked through the course material topics, there seemed to be a lot of content to each module. A big plus for me was that the course was also accredited. So as it turned out, I decided to take the plunge and educate myself.

Over the next 3 years, I completed all the Wealth Within courses including the Diploma of Share Trading and Investment, the Advanced and CFD courses, which ultimately set me on my way. Whilst I did not fully appreciate it at the time, this was the best move I could have made.

  1. Did you make mistakes when starting out?

Of course…who hasn’t, it’s all part of the learning process. Some of the mistakes have been not sticking to my trading plan and backing myself to exit on my rules after doing my analysis. While doing the courses has given me the confidence to trade and I have still been successful with my trades, I have at times pulled the exit trigger too soon and seen a good trade turn into a fantastic trade without me on it, which has been frustrating. However, I am getting better with my psychology, which is a massive part of trading.

  1. Would you describe yourself as a discretionary trader, a mechanical trader or a combination of both?

I am more of a discretionary trader now, but this is mainly due to the stocks I have been trading, as I have been trading them for a while. Therefore, I have confidence in how they will react in any market conditions.

  1. Who have been some of your mentors and role models? What impact have these people made on you personally as well as on your trading style?

My main mentors while doing my courses have been the assessors Kay and Jenny at Wealth Within, who have shaped the way I look at my trading. Janine has also been a big help in checking my analysis. This is extremely important when starting out as it gives you confidence knowing that your educators are seeing the same things that you are on a chart, so it reaffirms that you are on the right track.

To be honest, if I had to learn on my own, I do not believe I would have been totally committed. I am old school, so for me having a course that continually builds your learning and assigns you a mentor to ensure you understand the content is the key to success. The beauty of having mentors is that they continually challenge my thinking, which at times is quite frustrating but well worth it in the end……I really did have some sleepless nights thinking about analysis!!!

I learnt how important it is when starting out to not rush into the analysis and trades, and how valuable it is having a systematic approach and to just work through the process, as this helped me build confidence. When I first started, I was all keen and as the old saying goes I was thinking ‘’Let’s make some money”, although I soon realized just how much work there was to cover.  I now know that it is all about the process, get that right and the results and money follows….

 

  1. Can you give a brief overview of your trading style?

As part of the discipline provided with my training, I always start analysing stocks using a monthly chart so as to get the big picture, then I just bring my information down to the weekly and daily charts. I make my trading decisions based on this.

This way it is easier to see the overall direction of the market and what trends are in place. If you know this, you can consequently trade with the direction of the market. Therefore, you will not get spooked if a stock changes direction on a smaller time frame, as you learn that this change will usually be a short-term counter move to the overall direction of the market longer term. “The trend is your friend” is a saying I often recall. It is instilled in the education that shorter term trends on daily or weekly charts always conform to longer term trends. This helps me think of the bigger picture when volatility increases.

I currently trade CFDs, so I look to trade anywhere from 1 day to 3 months. I like to trade both long and short and this has given me opportunities in the stocks that I follow. My strategy has been successful to this point.

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

My first year of trading began really well. I remember doing all my analysis on ANN, CBA and TLS. I had all my rules in place and finally pulled the trigger. Over the next nine months I watched as the stocks moved in my favour. I exited on my exit rules and was thrilled with the results.

I learnt that if I follow the process and have everything written down in my trading plan, I gain a lot of confidence watching the trades play out. It’s all about the process and following it, no shortcuts.

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

I bought ANN at $19.90 and exited at $28.75 over 9 months and I shorted DMP using CFDs over 36 days for a 119% return.

The worst mistake I made was not following my rules and getting out too early on the short side with TLS, which has continued to fall.

  1. Would you classify yourself as a short term or long term trader? What advice would you offer to people getting started as traders on the relative merits or otherwise of each?

I am a short term trader, up to 3 months.  I currently trade CFDs, as I am looking to build my funds up for a longer term portfolio.

If you are trying to create wealth slow and steady without too much risk for retirement, then long term trading is where you should start. I like this type of trading as it doesn’t take too much time to monitor once your analysis has been completed on your portfolio of stocks.

My advice to someone wanting to start trading is that it is easier to analyse a slower moving timeframe, so why make things harder than they need to be. I believe that a trader is better prepared to gain experience trading longer term before moving to faster moving timeframes. If you cannot trade a longer term portfolio successfully, then forget about short term or day trading.

If you are looking to generate cash flow, then short term trading and the use of leveraged instruments such as CFDs is the area of interest. According to my mentors, 90% of your portfolio should be in a medium to longer term portfolio and 10% in higher risk investments/leveraged instruments.

I actually traded medium to longer-term portfolios for three years to ensure I was successful with this type of trading before attempting CFDs. Now that I have the experience, I enjoy trading CFDs mainly because I can play both sides of the market long and short. I only have four open positions at any one time to manage risk while trading these leveraged instruments and like to stay in control, as it can get a bit tricky. I would recommend anyone wanting to trade CFDs to get an education before attempting to trade these instruments. They require a different strategy to become competent and it’s not like trading shares.

  1. What markets do you trade and which markets do you prefer? Do you have a favourite and why?

I basically stick to the ASX200 for trading shares. Although when trading CFDS, I try to stick to the ASX50, however, occasionally I see something forming on a chart that is not conforming to its usual movement and it jumps out at me so I place the trade for a quick gain. These have been short trades. I have focussed on the ASX200 for shares as these are the biggest companies on the ASX and liquidity is an important factor. I always want to know that I can get out of a trade if I need to.

As of now I have been successful with these markets and do not feel the need to change…Keep it simple!

  1. What makes your trading style different from others? What sets you apart from other traders?

As traders, we all need to develop our own style and what we feel comfortable doing.

Being able to understand the stocks I am trading is my main focus. I like to watch stocks and see how they react in certain conditions before I begin to trade them and it helps me get in tune with its personality, so to speak.

While I am thorough when analysing stocks, my ability to also be flexible in my approach has helped me read the market in context and then be able to pull the trigger when required, taking trades both on the long and short side. Without proper training I may have struggled to do this. I think many traders are too rigid in their style and cannot adapt or they simply do not have the skills to adapt. This is where I really differ from others.

Having learnt how to trade short has opened up so many more opportunities. Therefore, my style is still evolving, which is exciting.

  1. Do you have a favourite trading rule?

I use a combination of rules: Elliott Wave, Gann’s 50% rule, Dow’s theory of the markets and Timing cycles.

As my mentors say, “Trade on what you see and can confirm, not what you think”.

This has been critical in my trading, as I know that I do not need to second guess the market. I let the market tell me where it is going.

  1. Ed Seykota says, ‘’Everybody gets what they want from the markets.” What do you get from the markets?

I like to be challenged and there’s no better place to learn what I am made of than trading the markets. Now looking back at how far I have come and developed as a trader, I get a real sense of achievement.

  1. How has trading affected your lifestyle?

It has given me the ability to generate extra income in my own time, as trading does not have set hours of work and gives me great flexibility.

Having the extra money has helped with extra purchases of many things like sporting equipment that did not need to come out of the normal household budget. This is great as it is not only rewarding, but it also greatly reduces the normal stress around money, and as a family, this is a big win.

Learning to trade properly also means that unlike many other traders, I can set up my trades and just let them play out without being glued to a screen 24/7. I would really rather just be spending time on my own hobbies and interests.

  1. What books, seminars and courses have you read or attended and which would you recommend?

‘Reminiscences of a Stock Operator’ by Edwin Lefevre and ‘How to beat the managed funds by 20%’ by Dale Gilham.

The Diploma of Share Trading and Investment, the Advanced and CFD courses by Wealth Within gave me the structure and knowledge I needed and this built my confidence to trade well. I appreciated the mentors at Wealth Within that were there to help me during the course education.

  1. What does the future hold for you?

Currently I use trading to generate a second income, as it provides some balance in my life without the extra pressure that can come from being a fulltime trader.

At this stage, I plan to go overseas in 2018 to catch up with family and friends. I have taken a few years off from Triathlon racing so that’s likely to make a comeback, as I have more time now. As far as retirement goes, I will take that one step at a time- but 6 years from now seems about right, all things going well.