Transcript Slide 1

Shaun van den Berg
MarketWorx:
Technical Analysis & Trading
11 October 2011
Agenda
Investor
Make
Money
WEN Charting
Day
Trading
Technical
Analysis
Swing
Trading
Trader
Equities
SSF
CFD
Position
Trading
Share Market Analysis
Share Market
Analysis
Technical
Analysis
Fundamental
Analysis
Macro
Fundamentals
Micro
Fundamentals
Price
Volume
Technical Analysis
Technical
Analysis
Fundamentals
Volume
Price
Supply & Demand
Trends
Patterns
Market Psychology
1st Stage
Things
would not
always be
rosy
3rd Stage
Things
will get
better
forever
2nd
Stage
Improvement
Is actually
underway
1st Stage
Things are
getting
better
3rd Stage
Things
can only
get
worse
2nd Stage
Things are
deteriorating
Technical Analysis
• Price Charts
–
–
–
–
–
Closing Line Charts
Bar Charts
Bar Volume Charts
Point & Figure Charts
Candlestick Charts
• Breakout Trading
–
–
–
–
–
Cycle & Trend Analysis
Support & Resistance
Trend Lines
Continuation Patterns
Reversal Chart Patterns
• Swing Trading Strategy
– Moving Averages
• 10-day SMA & 30-day
EMA
• 200-day SMA
– Technical Oscillators
• OBOS & Momentum
• RSI & Stochastic
• MACD
– Volume Analysis
• On Balance Volume
• Volume Price Trend
– Relative Strength Analysis
• Relative to Sector
• Relative to JSE Overall
Price Charts: Closing Line Chart
Price Charts: Bar Chart
High
Close
Open
Low
Price Charts: Bar Volume Chart
Price Chart: Point & Figure Chart
Point & Figure Charts –
Double Top Formation
Point & Figure Charts –
Double Bottom Formation
P & F Charts - Variations of the Double
Top & Bottom Formation
Point & Figure Charts –
Bullish Signal Formation
Point & Figure Charts –
Triple Bottom Formations
Point & Figure Charts–
Formations in Combinations
Point & Figure Charts –
Variations on the Triple Top
P & F Charts - Variations on the Triple
Bottom Formation
Point & Figure Charts –
Bearish Signal Formation
Point & Figure Charts –
Symmetrical Triangles
Point & Figure Charts –
Triple Top Formations
Point & Figure Charts –
The Broadening Formation
Point & Figure Charts –
Bullish & Bearish Catapult Formations
P&F Charts– Bullish & Bearish Signal
Reversed Formations
Point & Figure Charts–
Bullish & Bearish Support Lines
Point & Figure Charts–
Bullish & Bearish Resistance Lines
Horizontal Count (Upside)
The upside target in the chart below =
(14 x 5 x 3) + 0 = 210c
Horizontal Count (Downside)
The downside target in the chart
below = 100 - (6 x 5 x 3) = 10c
Price Chart: Candlesticks
Gather Information:
Technical Analysis Checklist
Trending
(Up/ Down)
Cycles
Support & Resistance
Moving Averages
Trend Lines
Overbought/
Oversold
OB/OS & Momentum
RSI & Stochastic / MACD
OBV & VPT
Outperformance/
Underperformance
Relative Strength
Analysis
Trends & Cycles
Bear
Bull
Corrections
Rallies
Sideways
Trends & Cycles
Bearish Trend
Bullish Trend
Bullish
Trend
Market Cycles - Bull
Higher Highs,
Higher Lows
Market Cycles - Corrections
Market Cycles - Bear
Lower Highs,
Lower Lows
Market Cycles - Rallies
Support & Resistance Reversals
Support & Resistance
Resistance
Resistance
Resistance
Resistance
Support Support
Resistance
Support
Support
Resistance
Support
Support
Resistance
Support
Resistance
Support
Support & Resistance levels highlight
possible “turning points”
Support & Resistance
•
The more times a share price has touched these areas, the more valid
these levels are & the more important they become.
•
The longer these support & resistance levels have been in play, the
better the outcome when the share price finally breaks out.
Support & Resistance - Bull
Resistance
Support
Support
Resistance
Support
Resistance/ Support
Support & Resistance - Bear
Resistance/ Support
Support
Support
Support
Resistance/ Support
Support
Resistance
Resistance
Trend Lines
As long as the price stays
above/ below the Support
or Resistance lines, the
trend is either bullish or
bearish
Resistance
Trend Line
Support
Trend Line
Resistance
Trend Line
Support
Trend Line
Trend Lines - Bull
Resistance
Resistance
Support
Resistance Trend Line
Support Trend Line
Support Trend Line
Trend Lines - Bear
Support Trend Line
Resistance
Trend
Line
Support
Trend
Line
Support
Trend Line
Resistance
Trend
Line
Resistance
Trend
Line
Support
Trend
Line
Resistance
Trend
Line
Failed Breakouts
Entry Points
•Once prices are set to close above a
resistance level, a trader will establish a
bullish position.
•When prices are set to close below a support
level, a trader will take on a bearish position.
Exit Points
•
How long am I planning on being in this trade?
(Depends on what type of trader you are: Position, Swing or Day Trader)
•
How much risk am I willing to take?
– Setting near-term profit targets that execute at opportune times to
maximize profits.
– Here are some common execution points:
• Retracement levels.
• Trend line breaks (Support & Resistance).
• Any other technical points.
– Developing solid stop-loss points that immediately get rid of
holdings that do not perform.
– Creating exit strategies based on technical factors affecting the
short-term.
Exit Points
•
Where do I want to get out?
– Many people become irrationally attached to their holdings & hold these
equities when the underlying fundamentals of the trade have changed
– Traders sometimes worry & sell their holdings even when there has been
no change in underlying fundamentals.
•
Both of these situations can lead to losses & missed profit opportunities.
– Set a point at which you will sell takes the emotion out of trading.
– The exit point itself should be set at a critical price level, i.e. technical
points e.g. Retracement levels
Rectangle Formation
24 to 30 = 6
Triangles
Ascending Triangles
TP
Descending Triangles
TP
Flags
Pennants
31 + 6 = 37
27 to 33 = 6
Triangles
Triangles
Triangles
TP
TP
Breakout Trading: The Steps
1.
2.
3.
4.
5.
6.
7.
Identify the candidate
Wait for the breakout
Set a reasonable price objective
Allow the share to retest
Know when your trade has failed
Exit at your price target (TP)
Be patient
Breakout Trading: The Steps
137 + 19 = 156
Resistance
118 to 137 = 19
Support
Breakout Trading: The Steps
Resistance
Resistance / Support
Support
Support
Breakout Trading: The Steps
Resistance
Resistance / Support
Support
Support
Double Tops
Double Bottoms
Triple Tops
Triple Bottoms
Double Tops & Bottoms
Triple Top
Double Bottom
Double Bottom
Double Tops & Bottoms
Double Top
Triple Top
Double Bottom
Head & Shoulders
Head & Shoulders Target Price
Head & Shoulders
Head & Shoulders
Head
LS
RS
Neckline
Target
Price
Inverse Head & Shoulders
10.0 + 1.5 = 11.5
8.5 to 10.0 = 1.5
TP
Inverse Head & Shoulders
Target
Price
Neckline
RS
LS
Head
Inverse Head & Shoulders
Neckline
RS
LS
Head
Inverse Head & Shoulders
Target
Price
Neckline
Neckline
RS
LS
RS
LS
Head
Head
Falling Wedge
Rising Wedge
Falling Wedge
19.55% in 5-days
Falling Wedge
10.19% in 3-days
Breakout &
confirmation
Increased
volume
Rising Wedge
- 8.38% in 13-days
Breakout Trading: Conclusion
• Breakout trading welcomes volatility.
•The volatility experienced after a breakout is likely to generate
emotion because prices are moving quickly & in a volatile
fashion.
•Using the steps & information covered will help you define a
trading plan that, when executed properly, can offer great
returns & manageable risk.
The Trading Plan
“A good (trading) plan today
is better than a perfect
(trading) plan tomorrow”
General George S. Patton
The Trading Plan
“Trading provides one of the last
great frontiers of opportunity in our
economy. It is one of the very few
ways in which an individual can start
with a relatively small bankroll and
actually become a multi-millionaire”
Jack D Schwager
The Trading Plan
1. Know Yourself, Know Your Purpose
2. Trading Goals
3. Markets, Instruments & Timeframes
4. Tools of the Trade
5. Before the Market Opens …
6. Risk & Money Management
7. Exit Strategy
8. Trade Strategies, Setups & Entries
9. After the market closes …
10. Discipline
11. Golden Trading Rules …
Who needs a Trading Plan?
• Unless you are
consistently
profitable trader
over a sufficient
length of time to
encompass a
number of different
market conditions
– then YOU need a
trading plan!
• If you have achieved
this:
• – Refresher course
– Open your eyes to
new aspects of
trading that can
improve your
profitability
• Consistently profitable
What will the Trading Plan Do?
•
•
•
•
Makes the act of trading simpler
Limits your opportunity to make bad trades
It will prevent psychological issues
Act like a roadmap / Personal GPS
– Either something in the plan is not working
– You are not adhering to the trading plan
• Take away much of the decision making
– Emotional & irrational decisions
• Enable you to trade outside comfort zone
– Prevent letting losses run & cutting profits short
• Instill a large measure of discipline
1. Know Yourself, Know Your Purpose
•
•
•
•
•
•
•
Understand your psyche & sentiment
Decide what you want to achieve, ask why &
how trading is going to provide it?
Why do you want to be a trader?
What sort of trader are you?
What are your strengths & weaknesses?
Are you in the right frame of mind to trade?
What are your income targets?
2. Trading Goals
•
Setting goals are essential
– Beacon to work towards
– Track progress
– Motivation required
• Define goals in terms of your development as a
proficient trader
– Annual Trading Goals
– Monthly Trading Goals
– Weekly Trading Goals
– Daily Trading Goals
3. Markets, Instruments & Timeframes
•
•
Decide which markets will you trade?
Which instruments will you trade?
– Basket of shares / whole market?
– SSFs / CFDs – Top 40 / Mid Caps?
– Currency Futures – Currency pairs?
• Which timeframes will you trade?
– Day Trader – Minutes & Hours?
– Swing Trader – Days & Weeks?
– Position Trader – Months & Years?
4. Tools of the Trade
•
What financial vehicle will you use to trade?
– Equities, Warrants, CFDs & SSFs?
• What broker & trading platform will you use?
• What Live Prices are you going to use?
• Which charting software will you use?
5. Before the Market Opens …
•
What is your daily pre-market routine?
–
–
•
What are the general market conditions?
–
•
Have you analysed yesterday’s trades?
Do you have any positions open?
What will you do today – hour by hour?
Which instruments are on your watch list?
6. Risk Management
General Risk Management
• What is your attitude
towards risk?
• What is the overall
market risk?
• What is the sector
risk?
• What is the broker &
hardware risk?
• What is the strategy
risk?
Specific Risk Management
• What is the probability
of a successful trade?
• What is the RiskReward ratio?
• What is your risk per
trade?
• Where will you place
your stop loss order?
• When will stop trading?
6. Money Management
General Money
Management
•
Large draw downs
& profits
•
•
What will you do?
Which money
management
approaches will
you utilise?
Specific Money
Management
•
•
Will you lock in
profits?
How will you
determine your
position size?
7. Exit Strategy
•
Losing trades
– Will you exit before your stop is hit?
– Which signals will see you exit early?
• Winning trades
– Which signals will see you exit completely?
– Which signals will see you close half?
– Which signals will see you close the
remainder?
8. Trade Strategies, Setups & Entries
•
•
•
•
Which strategies will you trade?
What are your trade setups?
How will you find your setups?
Which signals will trigger your entry?
9. After the market closes …
• Have you recorded today’s trades?
• Did you execute your trades according
to your trading plan?
• Have you completed your trading
journal?
10.Discipline
•
•
Back test or forward test?
What are your promises to yourself?
–
–
•
What questions do you ask after a winning trade?
What questions do you ask after a losing trade?
What steps do you take to learn more about
trading?
11.Golden Trading Rules
•
•
•
•
•
•
•
•
•
•
Protect & preserve capital!
Always set a stop loss, always!
Cut your losses short – Let your profits run!
Trade what you see – Not what you think!
Never chase your losses, ever!
Never average down, ever!
Keep excellent records!
Maintain discipline!
Keep it simple!
Plan the Trade – Trade the Plan!
The 3 M’s
The 3 M’s - Mindset
“While a trading plan cannot predict the
future, it can lay down how you react to
the possible outcomes. This is why a
trading plan is essential. It is a list of
strategic responses to events beyond
your control. You control the only thing
you can control – YOURSELF!”
Alpesh B. Patel [Author of the book “Trading Online”]
The 3 M’s - Mindset
• Attitude - How you react
• Self Confidence - Belief in yourself
• Objectivity - Increase impartiality
• Patience - Watching & waiting
• Discipline - Stick to your plan
The 3 M’s - Mindset
"The longer I live the more convinced
I become that life is 10% what happens to us
and 90% how we respond to it.”
…Charles Swindoll
The 3 M’s - Mindset
“Successful trading requires us to
be aware of our emotions.
It often requires us to go against our
natural inclinations or emotional
responses in order to see profits.”
The 3 M’s – Mindset
Greed
Fear
Caution
Moderation
Greed
Fear
Trading
Investor
Make
Money
WEN Charting
Day
Trading
Technical
Analysis
Swing
Trading
Trader
Equities
SSF
CFD
Position
Trading
Agenda
Investor
Make
Money
WEN Charting
Break-out
Trading
Technical
Analysis
Trader
Equities
SSF
CFD
Swing
Trading
CFD Product Description
Derivative - A contract whose value depends on (or derives from)
the value of an underlying share e.g. share – ANG, BIL, SOL
Go ‘Long’ & ‘Short’ with CFD’s on Top 100 JSE listed shares
Margin deposit requirements
15% Top 40 shares / 17.5% on next 60 shares
Variation margin required for adverse share price movement.
Brokerage = 0.4% per transaction
Breakeven = 0.92% (VAT included)
Zero UST
Financing at competitive rates:
Current borrowing rate 6.50% (± Prime – 2%)
Minimum Exposure per trade of R25 000 (R4 500 margin)
Top 100 Shares: CFD Margin
15% Top 40
17.5% Next 60
List reset after each Quarterly futures Close out
Important notes on
CFD Long & Short Positions
• Pay interest at SAFEX
+ 2 % p.a. (± Prime -2%)
• The holder will receive a
synthetic dividend
– Dividend is not earned tax
free as a CFD is a
derivative contract
– In the case of a Long CFD,
a holder of a long contract
will be paid an amount
equal to the dividend by
issuer.
– This is seen as an income
and is subject to tax
• You pay a script lending fee
of 1.5% p.a. (Min R456)
• Receive interest at SAFEX
-2 % p.a.
• The holder is liable for the
dividend
– Dividend is not earned tax
free as a CFD is a
derivative contract
– In the case of a short
CFD, a holder of a short
contract will have to pay
the dividend to the issuer
Pro’s & Con’s of CFD Trading
Advantages
• Low trading costs
• No expiry date
• Hedge your current
portfolio
• All the benefits
Disadvantages
• Gearing & Risk
• No voting rights
Comparison with traditional shares
CFD
Traditional Equity
No physical equity holding
Do not pay UST
No voting rights
Earn synthetic dividends
Physically hold equity
Pay UST of 0.25%
Voting rights
Earn real dividends
Leveraged trading
Settle only collateral (15% - 17.5%) plus top-up if
required
Gearing provided at cheap rates (Safex +2% or roughly
Prime -2%)
Not leveraged
Must settle full exposure amount
Expensive to borrow against shares
Settlement Period
Settled T+1
Settlement Period
Settled T+5
Taxation
Considered a Trader
Added to personal income
(Trading Instrument)
Taxation
Capital Gains Tax (CGT)
(Investment Instrument)
Easy to short
Suitable for both hedging & trading opportunities
Typically long only
What are SSFs?
A standardised contract.
Of a standard quantity (100) of a specific underlying listed share
Requires a fixed margin deposit to open a position
(around 15% of the total value).
Expiring on a predetermined future date:
Third Thursday of every March, June, September & December.
Gives the owner the right to close the contract at a price agreed
when entering the contract, including all relevant dividends & interest.
SSFs are listed on the South African Futures Exchange (SAFEX),
a subsidiary of the JSE.
SSF contracts equate to100 shares of the underlying instrument.
SSFs are created at the close of trading.
All unmatched SSF orders expire at the end of the trading day.
All partially matched orders will be cancelled at the end of the day.
Comparable to Equities
INVESTOR A (Share Trader)
Confident that Sasol shares
will increase.
She has R35 000
which she can invest.
Sasol’s share price is R350,
therefore she buys 100 shares.
3 months later the price has
increased by 10%
so she sells her shares to
make a R3 500 profit.
Her return on her
investment is 10%.
INVESTOR B (SSFs Trader)
Confident that Sasol shares
will increase.
Sasol’s share price is R350,
therefore she buys 1 contract.
The initial margin set by the
broker is R6 000 which
is paid by the buyer.
After 3 months the price has
increased by 10% & the investor
closes out his
position & sells out of the
Sasol SSF contract.
His profit is R3 500
but his return on his
investment is 58%.
Comparison between SSFs &CFDs
Single Stock Future
•
•
•
•
•
•
•
•
•
•
•
•
•
Regulated by JSE/FSB
Exchanged traded product
Expiry Date= Rollover costs
Set principle amount
Interest agreed upfront
Wholesale interest rates
Best execution
Free markets
Transparent
Guaranteed by SAFCOM
No dividend paid/received
Fungible financial instrument
Can take physical delivery
Contracts for Difference
• Unregulated
• Trades OTC
• No Expiry Date
• Principle amount could change daily
• Interest fluctuates daily
• Retail interest rates
• No best execution obligation
• Captive markets
• Opaque
• Not guaranteed by SAFCOM
• Manufactured dividends
• Never physical delivered
SSF Margin
Initial
margin
per
contract
(Central) SSF Order Book
Top 40 Shares
ALSI & ALMI
Copper, Gold, Platinum &
Silver
WTI Crude Oil
(Central) SSF Order Book
Margin = R27 000
Exposure = R270 000
Cost R25 per contract
100 points move = R1000
(Central) SSF Order Book
Future Price = Spot Price X 1 + (IR x t)
SSF Order - Short
(Traditional) SSF Order Book
Swing Trading Strategy
• Step #1: What Market Stage?
– Stage 2 or Stage 4
• Step # 2: Elliott Wave Cycle
– Wave 2 or Wave B
• Step #3: Trading Trends
– Uptrend = Higher Highs & Higher Lows
– Downtrend = Lower Highs & Lower Lows
• Step #4: Trader’s Action Zone (TAZ)
– Buy Pullbacks & Short Rallies
• Step # 5: Swing Points
– Entry – Swing Points Low (SPL) – Bullish Candlesticks
– Exits - Swing Points High (SPH) – Bearish Candlesticks
Swing Trading Strategy (Cont.)
• Step #6: What Candle Stick Pattern?
– Bullish Candle Stick Patterns
– Bearish Candle Stick Patterns
– Neutral Candle Stick Patterns
• Step # 7: Money Management
– Position Size
• Step # 8: Risk Management
– Technical Stop Loss level
Step #1: What Market Stage?
Long
Short
Step #1: What Market Stage?
Anglo (AGL)
Stage 3
Stage 2 or Stage 4?
Stage 4
Stage 2
Stage 2
Stage 1
Stage 1
Step # 2: Elliott Wave Cycle
Step # 2: Elliott Wave Cycle
Anglo (AGL)
Wave 5
Wave 3
Wave B
Wave 2 or Wave B?
Wave 1
Wave 4
Wave 2
Wave A
Wave C?
Step #3: Trading Trends
Trade
Trending
Markets
Step #3: Trading Trends
Moving Averages (Long & Short)
Step #4: Buying Pullbacks (TAZ)
Step #4: Shorting Rallies (TAZ)
Step #4: Buying Pullbacks (TAZ)
Step # 5: Swing Points
(Entry & Exits)
Step # 5: Swing Points
(Entry & Exits)
Swing Point Low (SPL)
Swing Point High (SPH)
Step # 5: Swing Points Lows (Entry)
Secondary Technical Indicators
It must be remembered that no indicator should be used alone.
• Secondary Technical
Indicators
–
–
–
–
–
OB/OS
Momentum
MACD
RSI
Stochastic
• Volume Analysis
• Relative Strength Analysis
Overbought / Oversold (OB/OS)
OB/OS = Price - MA x 100%
MA
Overbought – Sell Zone
Oversold – Buy Zone
Momentum Indicator
Momentum = Price A - Price B x 100%
Price A
Overbought
Oversold
OB/OS & Momentum Indicators
RSI Indicator
14 = Down = 0
14
Bearish Divergence
14 = UP = 100
14
RSI =100- {100/ 1 + (U/D)}
Overbought
Oversold
Stochastic Indicator
14 = Hi = 100
14
Stochastic = Close - Low x 100%
High - Low
14 = Lo = 0
14
Sell
Sell
Sell
Buy Zone
Sell Zone
Buy
RSI & Stochastic Indicators
Bearish Divergence
MACD Indicator (OB/OS)
Overbought
Oversold
MACD – Crossovers (Trigger Line)
MACD – Crossovers (Zero Line)
MACD – Divergence
Bullish Divergence
Early
Warning:
Change in
trend
Volume Analysis
???
Volume Analysis
Indecisive
Market Bottoms
Consolidation
Low volumes
Low volumes
Market Tops
New Trend
High volumes
High volumes
OBV Indicator
VPT Indicator
OBV & VPT Indicators
Volume Accumulation
Volume Distribution
Neutral Volume
Relative Strength Indicator
Data 1 = Anglo
Data 2 = Top 40 Index
Under-perform
Out-perform
Under-perform
Market Perform
Relative Strength Indicator
Data 1 = Anglo
Data 2 = BHP Billiton
Under-perform
Outperform
Outperform
Technical Check List
•
•
•
•
•
•
•
•
•
•
•
•
•
•
What is the direction of the JSE Overall Index?
What is the direction of the Sector Index?
What are the weekly/ monthly sector /share charts showing?
Are the primary, secondary & minor trends up, down or sideways?
What are the important support & resistance levels?
Where are the important trend lines & channels?
Where are the 33%, 50% & 66% retracement levels?
Are there any price gaps, and what type are they?
Are there any major reversal patterns visible?
Are there any continuation patterns visible?
What are the price objectives from these patterns?
Which way are the moving averages pointing?
Are the oscillators overbought or oversold?
Are there any divergences apparent on the oscillators?
Make Quick Decisions
BUY
WATCH
SELL
HOLD
Make Quick Decisions
Creating a Watch List of Winners
Fundamentals = PSG Online website
Technicals = Wen Charting*
Hi-Liter Scanner (Step 1:Criteria)
Hi-Liter
Criteria
Hi-Liter Scanner (Step 2: Results)
Hi-Liter
Results
Hi-Liter Scanner (Step 3: Confirm)
View
Chart
Summary: Technical Analysis
• Price Charts
–
–
–
–
–
Closing Line Charts
Bar Charts
Bar Volume Charts
Point & Figure Charts
Candlestick Charts
• Cycle & Trend Analysis
– Support & Resistance
– Trend Lines
• Breakout Trading
– Continuation Patterns
– Reversal Chart Patterns
• Swing Trading Strategy
–
–
–
–
–
Market Stage
Elliott Wave Cycle
Trading Trends
TAZ
Swing Points
• Technical Oscillators
– OBOS & Momentum
– RSI & Stochastic
– MACD
• Volume Analysis
– On Balance Volume
– Volume Price Trend
• Relative Strength
The 3 M’s - Money Management
"The most important thing is
money management,
money management,
money management.
Anybody who is successful will tell you the same thing."
Marty Schwartz
The 3 M’s - Money Management
"Do not focus on making money;
focus on protecting what you have.”
…Paul Tudor Jones
The 3 M’s - Money Management
Capital allocation (Position sizing)
For each trade, how much of our capital do we commit?
– Trade with 50% of total capital (Earn interest & Variation Margin)
– Position Size - Number of Contracts/ Shares
Setting stop losses
For each trade, where do we place our stops?
– Initial Technical Stop (Support & Resistance)
Money Management
Position Size & Margin (Harmony)
• You decide to buy Harmony Gold at R80.10
• You set a 3% stop loss (R80.10 x 3% = R2.40 )
– R80.10 – R2.40 = R77.70
• You are willing to risk 2% of your capital = R2000.
• Take R2000 & divide it by the R2.40 per share that you
are risking
• Your position size = you can buy 833.33 shares
– (R2000 / R2.40).
• The SSF initial margin required is R1387.50
– 833 shares = 8 contracts = R1387.50 x 8 = R11 100
– Exposure = 8 x 100 x R80.10 = R64 080.00
Money Management
Position Size & Margin (Anglo)
• Assume you have a R100 000 CFD trading account
• You decide to buy Anglo’s at R339.05
• You set a 3% stop loss at R328.88
– R339.05 x 3% = R10.17 (R339.05 – R10.17)
• You are willing to risk 2% of your capital if the trade
goes wrong = R2000.
• Take R2000 and divide it by the R10.17 per share that
you are risking.
• That gives your position size.
– In this example, you can buy 196.66 shares (R2000 / R10.17).
– Margin = 197 x R339.05 = R66 792.85 x 15% = R10 018.93
– For SSFs, the initial margin will be R5700 x 2 contracts
= R11 400
CFD Order Book
Buy 100 Anglo shares @
100 Anglo shares = R33 905.00
R339.05
0.4% Brokerage = R135.62
Exposure = R33 905.00
14% VAT = R18.99
15% Margin = R5 085.75
Total = R154.61
R33 905 x 6.5% =
R2203.83/365 = R6.04
R305.15
Risk Management
The Stop-Loss Strategy
• The spot that represents maximum loss that
you will take on a trade.
• Original trade idea was incorrect.
• The market tells you when it reaches the stop
loss point.
• Cut your losses & move on.
Risk Management
Technical Stop-Loss Strategy
• The stop-loss comes from the chart.
• It is the first thing one needs to know about any particular
trade.
• Can decide how many contracts to trade so as not to exceed
the maximum loss per trade he has determined in the trading
plan.
• First step to following your stop.
– Have a contract size you can live with.
Risk Management
Technical Stop-Loss Strategy
• Placed at a logical point on the chart
– Breaking of a support or resistance level
– Breaking of a trend line
• Highly recommended because the chart “tells”
you where to place the stop.
Risk Management
Technical Stop-Loss Strategy
Step 1: Setup Price (Trigger)
Select
“Below”
for Longs
Enter
Technical
Price
Select
Price
Watch
Setup the Stop Order (Bullet)
Select
“Close”
Enter
Quantity
Enter
Worse-case
scenario price
Select
Stop
Order
Click Submit
Price Watch
& Stop Order
button
Summary: Trading
•
•
•
•
•
Step 1: Financial objectives
Step 2: Watch List of potential winners
Step 3: Mindset
Step 4: Method of Trading
Step 5: Money & Risk Management
“Many know, few do”
Justin Cohen
Conclusion
• Have you learnt how to “Make Money?”
• Feedback Forms
• Link to MarketWorx presentations
– Will be available soon!
• Open a Trading Account with PSG Online
– Online Trading Course
– Equity & SSF Simulator
– Research Tools
• DataShare Download @R169 p/m
– Software is FREE!
• Good Luck & Happy Trading!
Thank You
[email protected]
(011) 996 5200