How to prevent losing 30% of your portfolio

by , 23 October 2018
How to prevent losing 30% of your portfolio
Q. Here is my urgent trading story: ”The market is crashing at the moment. two weeks ago I decided to open 10 trading positions and set my stop losses in a way I don't risk more than 3% per trade. I now see that this was not a good idea as I have 30% of my portfolio at risk.

In the future, I'll never have more than four trades opened at once. But for now what do you suggest I do to prevent my portfolio from losing 30%, if all trades move against me?”
 
A. There is only one thing you can do now that all 10 trading positions are opened.
 
Choose six trades that you’re happy to close.
 
Next, adjust your stop losses closer to where the market is trading at.
 
This way, if your stop losses get hit, you’ll reduce your trading positions, where you’ll lose a lot less than 3% per trade and you’ll have a fresh start to trade again the more risk-averse way.
 
The best lessons are sometimes, the ones where that don’t cost too much in ‘school fees’.
 
________________________________________
 

If you can read a sms then you can start collecting R8,589 a month as a trade
 
If you think trading stocks involves complicated charts, software, loads of money and a steep learning curve, I have news for you: There’s a much simpler way to pull money out the market.
 
All you need is the cell phone in your pocket, and you too could collect an extra R8,589 in the next 30 days.
 
No training. No special skills. No fancy software. No complicated charts. Just your regular old cell phone.
 
And you can get started today.
 
________________________________________
 
Q. “When I take a trade from Red Hot Storm Trader, I’m given two options of orders: Day Order and a Good Till Cancelled. What is the difference between the two and which should I choose?”
 
A. A ‘Day Order’ option instructs your broker to hold your trading order until the end of the trading day. This means at the end of the day, your trade order is automatically cancelled until you put in a new trade order.
 
These orders are mainly used for intra-day traders who don’t wish to hold a trade overnight.
 
The ‘Good ‘Till Cancelled’ option tells the broker to keep your trading order in the market until you as the trader decides to cancel.
 
As Red Hot Storm Trader is a service that looks at holding trades over a couple of weeks, you’ll need to use the ‘Good ‘Till Cancelled’ order each time you take a trade.
 
Q “I’ve subscribed to a newsletter that provides share trade suggestions on a daily basis. There are four trading terms that keep popping up, with every issue and I just don’t understand them. Can you please explain to me what these words mean: Long, Liquidate, Short, and Cover?”
 
A. These are four of the most important words you’ll need, to open and close a trade position.
 
You get two types of trades.
 
1. When you buy low and sell high for a profit and
 
2. When you sell high and buy low for a profit.
 
Long and liquidate refers to the first type. Short and cover refers to the second type.
 
I’ll give you my brief explanations for all four terms…
 
Long:  
 
When you buy, or go long, a trade to open a position with the idea you’ll sell at a higher price for a profit.  
 
Liquidate:
 
It means to sell your (long) trade by closing the position.
 
Short:
 
When you sell, or go short a trade, to open a position with the idea you’ll buy it back at a lower price for a profit.
 
Cover:
 
To buy a trade position back, from a short trade, by closing the position.
 
Q. “Timon in the Brent Crude artricle, you mentioned that the Brent Crude price will always go up as there is high demand and high supply.
 
Did you not mean because there is high demand and low supply?”
 
A. It’s nice to know my post Economics Degree comes handy once in a while.
No - Oil is a commodity that will always have a high demand.
 
Brent Crude is known as an inelastic product (see chart below). This means, as the demand and supply for oil goes up, the price will also go up.
 
However, the demand and the supply move is only marginal. 
 
Why I say that is because the general public and companies will always need oil for electricity, food and transport.
 
This means they won't cut back on oil as the price increases.  
 
Hence a high demand and high supply, may lead to a rise in price.
 
“Wisdom yields Wealth”
Timon Rossolimos
Head of trading, FSPInvest.co.za 
 
 


How to prevent losing 30% of your portfolio
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