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Trading platforms, Go Long, Go short - How does it all work?

by , 29 May 2019
Trading platforms, Go Long, Go short - How does it all work?
Q. “Hi Timon, I'm looking into trading Forex and I want to first make sure I have the best trading platform. Can you tell me which is the best software to buy and what must I make sure the platform has?”

A. You should never have to pay for a trading platform Jacque. 
Nowadays, the best brokers and market makers offer you these platforms for free. You see, with the high competition of trading firms out there, they have to compete with each other and ensure they each have free, live streaming, cutting edge and easy to use platforms to offer to their clients.  
As to what criteria a trading platform should have here is my must-have checklist:  
Make sure they have: 
Item #1: Trading indicators and oscillators
Item #2: Real time charts 
Item #3: Time frame options of: 1 hour, 4 hour, daily and weekly
Item #4: Chart types - Line chart and candle sticks
Item #5: Live streaming news for example: Non-farm payrolls, earnings announcements, live speeches and SENS (Stock Exchange News Service) 
In fact, we have a few recommended brokers that offer you these free and advanced trading and charting platforms.  Read here for more.
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Q. "Hi Timon, would you please clarify your last Red Hot Storm Trader e-mail to me which contained the following information.
Go short AMS CFD’s
Entry R662.00
Stop loss R695.00
Take profit R625.00
Go short means to sell. I do not have this trade in my portfolio yet. Has it been running for a long time?
Even so, I still do not understand the above figures. How can one have a stop loss greater than the entry price? What do I do when this comes up?" 
A. As a trader we can profit in two different ways with the markets.  
The first method is known as going long a market. This is where you buy a CFD of an underlying market at a lower price and sell it at a higher price for a profit.  
This method of trading is known as buying a market or (going long), where we anticipate that the market will rise in price.  
With regards to where the trading price levels should be placed:
The stop loss will need to be placed below the entry level, while the take profit needs to be placed above the entry level. 
The second method is known as shorting a market. This is where you sell a CFD of the underlying market at a higher price and buy it back at a lower price for a profit.
When you go short a position, you anticipate that the market direction will drop in price which you can profit from.  
To do this you'll open a NEW trading position where you sell a market (you don't have) in order to buy it back (when it hits the take profit level) at a lower price for a profit.  
This rather unusual way to profit from a market dropping in price, is known as short selling or going short a market.  
With regards to where the trading levels should be placed with a short position:
The stop loss will need to be placed above the entry level, while the take profit needs to be placed below the entry level. 
When you get a notification to short a market, here's what to do using the previous example:
Go short AMS CFD’s
Entry R662.00
Stop loss R695.00
Take profit R625.00
Method 1: Trading platform
Go onto your trading platform, search for the market and open a market trading order. 
Choose the 'Sell' option, place your entry, stop loss, take profit and allocate the number of CFDs or 'Value per trade - with spread trading" then click on execute to take the trade.  
Method 2: Call or email your broker
The second way is to call or email your broker telling them this:
“I want to go short X number of CFDS in AMS market. Please place the following trading levels:
Entry at R662
Stop loss R695
Take profit R625
Please confirm once the trade has been placed and accepted.”
That's it. To conclude the two methods of trading. 
1. You can buy (go long) a market and sell it at a higher price for a profit.  
2. You can sell (go short) a market and buy it back at a lower price for a profit.  
Please note: Each broker and market maker have their own accessible number of markets to trade and short. So if you want more markets to trade, I'd suggest you open an account with two brokers. 
“Wisdom yields Wealth”
Timon Rossolimos,
Analyst, Red Hot Storm Trader
P.S: If you have a trading question or you’d like to share your feedback and experience about Trading Tips newsletter or Red Hot Storm Trader, send me an email to timon@fsp.co.za and you'll stand a chance to be featured in one of our Trading Tips articles.

Trading platforms, Go Long, Go short - How does it all work?
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