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Questions I've never been asked in 13 years of trading

by , 27 October 2016
Questions I've never been asked in 13 years of trading
Timon Rossolimos answers all your most important questions on trading for the week. This week's mailbag includes questions on Forex, stop losses, candlesticks, CFD contracts, Options and more.

Enjoy today's Q and A session…

To place a stop loss or not to place a stop loss?

 
“Is it necessary to place a stop loss if I watch my account closely from 9 ‘till 5?”
 
Answer by Timon Rossolimos:
 
Through my experience absolutely, without question...
 
Sometimes you'll see the market will take a quick fall and it will touch your stop loss... By the time you've put in your order, it will be too late and you'll lose more than what you expected...
 
When you place a stop loss, it helps with the discipline of following the strategy. If I didn't put a stop loss and the market went to my fictitious stop loss, I would add it in lower and then the risk will be higher than the potential reward...
 
Having stop loss will be the safe guard for your trade.
 

What if I want to trade Options?

 
“Hi Timon… Do you have any trading tips that you offer to option traders who want to subscribe to you?
 
Do you know any options trading platforms that you might recommend that have plenty of tools?” 
 
Answer by Timon Rossolimos:
 
Options are very popular in America and the UK...
 
Not so much in South Africa...
 
In fact, I don't know any Forex brokers that offer Forex options let alone an options trading platform...
 
The closest you can get to trading options is through an instrument called Yield-X.
 
Or in South Africa, you can trade warrants (which are similar to options.)
 
You can phone Standard Bank to about warrants and the Yield-X instrument you can use to trade Forex.
 

Do I pay the full R10,000 or only R1,000?

 
"Let’s say I have R 10,000 in my portfolio I want to take a CFD trade.
 
As you explain there is a gearing on these deals:
 
So let’s say on average the gearing for a CFD is 10 times, and you’re dealing with the underlying share price movement." - from Red Hot Storm Trader..
 
Do I now play my full R10 000 or do I only play R1000?
 
I need to understand this please."
 
Answer by Timon Rossolimos:
 
The quick answer is neither…
 
I'll break this down into steps to answer your question on how much money you must put down to trade the CFD...
 
Step #1: Calculate 2% of your portfolio that you'll risk 
 
Portfolio: R10,000 
2% 
Risk: R200 
 
Step #2: Trade levels
 
Go long (buy) FirstRand CFDs
Entry R159.70
Stop loss R143.26
Margin (Initial deposit per trade) R15.97 (10% margin)
 
Step #3: How many CFD contracts you'll need to trade to risk only R200 
 
Rands risked in trade (Entry - Stop loss) 
(R159.70 - 143.26)
R16.44
 
Max risk per trade 2%=R200
 
No. CFD contracts=(Max risk per trade 2% / Rands risked in trade)
=R200 / R16.44
=12 CFD contracts 
 
And we know each CFD is R15.97 (From the margin requirement)
 
And we can afford 12 CFD contracts to risk 2% of your portfolio...
 
Therefore, you only need to pay R194.28 (12CFD X R15.97) to only risk R200...
 
So to answer your question...
 
"Do I pay the full R10,000 or R1,000?"
 
Neither, you only need to put in R194.28 to risk R200 in your CFD trade provided that the Entry and Stop loss is R159.70 and R143.26.

Trading EMAs and events

 
“Hello guys...Thank you for an excellent trading club...
 
May I ask if there is a trading platform that notifies you at certain occurrences.
 
For example: Crossovers with EMAs (Exponential Moving Averages)?
 
Timon how often do you conduct your courses sir?
 
I need to attend one. Thanks.” 
 
Answer by Timon Rossolimos:
 
There are new trading platforms that offer these automatic signals based on Moving Averages...
 
To name a few you can look at Metastock, IG Markets, Metatrader, Amibroker etc... Try them out and let me know...
 
I am going to do three more Forex courses this year and many events next year.
 
Keep reading Trading Tips and you'll get all the information you need.
 

How do candlesticks work exactly?

 
“Could you kindly send me info about candle sticks, as I saw you explaining on another Video…”
 
Answer by Timon Rossolimos:
 
Here is a video I did on how Candle Sticks work in a nutshell. Click below to watch it…



If you’d like to ask Timon or the other InvestorsClub.co.za mentors a question or, then click here and ask away!
 




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