Commercial pilot Vimal Mehta often has hours to kill in hotel rooms during stopovers between flights. But he deliberately chooses not to spend this time trading.
The 36-year old says that while this may seem like the ideal opportunity to work the market he finds that the situation puts too much pressure on him to make decisions.
“Always in the back of my mind is the fact that I’ve got to go to work in X number of hours,” he says.
“I prefer to make trades at home on my days off knowing that I don’t have other work commitments.”
Mehta, who is still relatively new to trading, admits that while he is inherently conservative by nature, knowing he has time on his side he is prepared to back himself if he believes in a position.
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“The biggest lessons I’ve learned is not to average down and to take heed of stop loss positions,” he says.
His biggest loss, which occurred early on when he was still experimenting, came when he averaged down AMP while it was still on a down trend, causing the loss to be a lot greater than it should have been. The total loss was around $10,000.
After share trading for three years 12 months ago Mehta opened a CFD account primarily to go short.
So far he has made very few CFD trades but is confident that as he gains more experience he will switch to using it more.
He confesses that the hardest thing to get his head around is the leverage that is offered by CFDs.
“It’s all about risk management,” he says. “A small movement against your position magnifies your loss so having a predictive management strategy in place is critical.”
His transition from shares to CFDs has brought home the importance of starting small and having in place a good credit risk management strategy.
Mehta’s interest in the market was fostered by his father. He began using his father’s broker and changed to online broking as his knowledge increased.
Trading started after he had completed a Graduate Diploma in Finance and Investment through the old Securities Institute of Australia.
“I did some technical analysis subjects and that’s what sparked my interest. Having done that I went on to read up on the market. It’s all been self-study,” he says, his philosophy being that ‘experience is the best teacher’.
In hindsight he maintains that while it is nice to have the wisdom from his formal, tertiary level study in the back of his mind, in terms of making decisions simple analysis works best.
“It really all comes down to the simpler you can make something the better it is,” he says.
“I got a lot of theoretical knowledge from the course but when it comes to actually applying it I’ve learned that you don’t need all that information.”
He started out as a discretionary trader, blending fundamentals and charts and ultimately going “by a gut feel”. He is now looking more towards a mechanical system but as yet nothing concrete is in place.
“Having done the technical analysis subjects I looked at many different things but came back to something pretty simple, which is trend lines and moving averages,” he says.
“The other thing I’ve started to look at is RSI and divergences.”
His preference is to use candle stick charts and bar charts because he finds the information more visually appealing.
While not necessarily looking at the patterns that are formed by the candle stick charts, he finds it easy to glean data from them because of the way the information is presented.
He has fairly consistent medium-sized wins, in the vicinity of $1000 to $1200, but has no intention of making trading his primary source of income. “Maybe when I’m retired,” he chuckles.
As an Australian Investors Association (AIA) member Mehta has access to publication, interest groups and seminars, all of which he finds far more beneficial than chat rooms.
“I’d rather read a good publication,” he declares maintaining that sifting the wheat from the chaff on the net is just a waste of time.