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Four metrics to calculate any international CFD stock position size

by , 03 March 2022
Four metrics to calculate any international CFD stock position size
In our QA mailbox this past week...

Q. “I am with Pickpocket Trader and before I take a trade, I would like to know how to calculate the number of international CFDs I need to buy to risk 3% of my R55,000 portfolio. Let's use the example from the most recent trade sent out on 11 February 2022”.

A. You'll need four metrics to calculate the number of international CFDs you'll need to buy.

As you suggested we'll use the most recent trade example with MBG (Mercedes Benz Group).

Here are the metrics we need.
Metric #1: Entry price = 70.50 Euros
Metric #2: Stop loss = 68.00 Euros
Metric #3: Euro/Rand = 1 Euro = R17.60
Metric #4: Risk amount in trade = R1,650 or 93.75 Euros
(R55,000 X 3%)
Next we'll need to calculate the ‘Risk in trade’ which is the price difference between the entry and stop loss.
Risk in trade = (70.50 – 68.00)
                   = 2.50 Euros
To calculate the number of CFDs you'll buy, you'll simply divide the amount you're willing to risk by the 'risk in trade'.
No. CFDs to buy = (Risk amount per trade ÷ Risk in trade)
                        = (93.75 Euros ÷ 2.50 Euros)
                        = 37.50 CFDs
Make sure you always round down the no. of CFDs you'll buy, to prevent risking more than 3% of your portfolio.
This means, you'll buy 37 CFDs of MBG (Mercedez Benz Group) to not risk more than 3% of your portfolio for this example.
What a Pickpocket Trader has to share:
“The best trades that I had made me about R8,000 from Brent crude and USD/ZAR. I also made money on Merck, US 500 and DE30. I am none the less keen to get in on my next lot of trades.”             ~ Arius
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Four metrics to calculate any international CFD stock position size
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