Use only 5% of your capital to double your returns!
Today, I'm going to show you a simple strategy that'll allow you to potentially double your portfolio's gains (or more).
It's also a great way to protect your investments in a market downturn.
And, if the markets go bad, it can add another level of protection to your portfolio.
And the best part… When increased volatility makes the market tough to invest in, this strategy really comes into its own because it allows you to trade the market in both directions.
How you can double your returns with this trading strategy
Take 5% of your total portfolio (as little as R5,000) and put it towards the safe trading and investing strategy. At the end of every quarter, take out your gains and add it to your long term investment portfolio. Doing this will ensure that you never lose more than your initial R5,000.
Now, let me warn you upfront: Not all your trades are going to be winners.
And that’s ok. By setting your stop loss at 2% of your exposure on the trade, you’ll ensure your losers don’t wipe out your winners.
Let me explain...
Let’s say you believe MTN looks like a good short-term buy at R138. So you buy a SSF contract on MTN when the share’s trading at this level. (The contract price would be a bit higher since SSFs include financing costs in the price.) The margin you need to open this position is R1,250 per SSF contract. Each SSF contract gives you exposure to 100 shares.
Remember, you’re only looking for a 4% move in the share price. This means you’re looking for MTN’s share price to climb to R143.52 (R138.00 x (100%+4%)) before you take profit. If you get out at your take profit price, you make R552 ((R143.52 – R138) x 100 shares [excluding trading costs]) on your margin.
That’s a 44.16% gain (R552.00/R1,250).
To protect yourself from losing your shirt on the trade, you’d set a 2% stop loss at R135.24 (R138 x (100%-2%)). If MTN trades at this price, you’d take the loss and close your position by selling your SSF contract. Since you’re ten times geared, this equates to a 22.08% loss.
It’s realistic to maintain a win rate above 60%. This means out of the eight trades you put on each quarter, at least five of them should be winners. Obviously, you want to have as many winners as possible but, as I mentioned earlier, not all your trades can be.
Note: 5 of 1 vote