# “I'm so frustrated”

by , 30 May 2018

Q. ”I'm so frustrated Timon, I keep closing trades too soon. Last week, I could have banked a decent profit but instead ended up breaking even? What can I do to stop closing my trades before I should?”

It's simple.

The only way you can stop yourself from closing your trades early is by being away from the screen as soon as you've taken a position.

By having these automatic levels, you can get out of your trade if it hits any of your chosen levels.

In fact, you can even set an alert for when a price of a market is above or below a certain level.

This way, you won't have to worry about not knowing about any freak anomalies. Because you'll be alerted via SMS or email.

There’s an old saying: “a leader who loves status quo soon becomes a follower.”

I reckon that’s true in a lot of cases. Fact is, most people simply don’t want to upset the apple cart.

They’re happy making their money in a wage packet. And that’s fine.

I guess...

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Q. “I am a subscriber to your Red Hot Storm Trader service Timon but I never know how many CFDs I must buy to trade your 2% risk rule. Can you help me with an example to the last trade you sent? I really need to understand this?”

I’ll break this answer up into three steps using a R10,000 portfolio.

First here are the specifics for the previous trade sent out.

Share: Anglo American Platinum

Entry: R361.40
Stop loss: R340.00
Take profit R393.50
Margin per CFD: R72.25

Step #1: Calculate 2% of your portfolio that you'll risk

Portfolio: R10,000
2% Risk: R200 (R10,000 X 2%)

Step #2: Calculate rands risked in the trade

Rands risked in trade=(Entry - Stop loss)
=(R361.40 – R340.00)
=R21.40

Step #3: Calculate how many CFD contracts you’ll need to buy to risk only R200

No. CFDs =(2% Risk of portfolio ÷ Rands risked in trade)
=R200 / R21.40
=9 CFD contracts

You now have these two simple steps, you can use every time to calculate the number of CFDs you’ll buy and risk only 2% with Red Hot Storm Trader.

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Q. “Timon you spoke about the 200 Moving Average in this week’s article with your prediction on what’s going to happen to Shoprite. Before I start trading with Moving Averages, can you please explain what they are and how they work mathematically? I like understand things before I risk my own money.”

I’m exactly the same.

Before I put a cent into anything I do, I need to understand how it works, why it works and what the risks are.

To put it in simple English, a moving average is a trend line.

Basically, this line cuts out the jumpiness and “noise” on any chart and shows you the general market trend.

To understand how the moving average works on a share, let’s use a 5 day moving average.

For example, let’s look at five days of the closing prices of a share.

Share price for day 1=R100
Share price for day 2=R95
Share price for day 3=R103
Share price for day 4=R106
Share price for day 5=R108

Now you have the previous five days closing prices, now all you’ll do is add the share prices (SP) and divide them by five days.

So you get,=SP 1 + SP 2 + SP 3 + SP 4 + SP 5
5 days

=R100 + R95 + R103 + R106 + 108
5 days

=R102.4

This means that the R102.40 is the average price over the five days of share prices.

This R102.40 will be added as a point on the chart.

And every day, new points will be added.

Once you connect the points (dots) you’ll see a moving average created.

When you’ve accumulated a few weeks of data, you’ll see the average price of the share will move up or down.

The same math’s apply to a 200 Day Moving Average.

Instead of adding the 5 days of share prices and dividing it by five. You’ll add the 200 days share prices and divide it by 200 days.

This is why you’ll see the line will smooth out the noise so it makes it easier to identify which direction the trend is headed.

Always remember, “Wisdom yields Wealth”
Timon Rossolimos,
Managing editor, Red Hot Storm Trader