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[DOWNLOAD FREE] CFD Risk Trading Calculator

by , 21 April 2022
[DOWNLOAD FREE] CFD Risk Trading Calculator
Q. “Hi Timon, I have a R250,000 portfolio and I am using the special 2% risk rule per trade as you have taught us. Based on your last trade with Shoprite with the entry being R242 and your stop loss being R232.00 does this mean I should buy xxx CFD contracts in this trade?”
Hi Pete,
The number of contracts purely depends on the how much money you deposit…

So if you have a portfolio of R250,000 and you risk 2% (R5,000).

Then to work out the No. contracts you’ll simply follow this calculation.
CFDs = Risk per trade / (Entry – Stop loss)
          = R5,000 / (R242.00 – R232.00)
          = 500 CFDs

If you wish to be accurate every time you take a trade, you may use this Risk Calculator  by
clicking here

Reply: Thank you Timon, that has cleared it up for me perfectly. I now know how much to buy or sell with all my trades.


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Q. “The Brent Crude trade Pickpocket Trader sent out was massively out of my trading scope bracket. I want to follow my 5% risk rule but 5% of my portfolio is not R20,000! Should I change the broker or what would you suggest?

Hi A*,

I have an answer from Trader X himself and afterwards I’d like to provide my 2 cents…

Here’s Trader X’s response…

TRADER X: I think I might have created some confusion with the Brent trade setup.

Some traders on our service were a bit put out by the high margining on the trade. Others were concerned about the depth of the stop loss.

They had a look at the minimum projected loss and thought:

“This is madness! We can’t trade this big.”

Let me tell you straight off the bat that’s totally fine. There is nothing wrong with skipping a trade here and there.

But I’d rather send you extra trades (when I see them) than sit on my hands and think:

“Some subscribers won’t be able to make the size requirements.”

I feel, if I see a profitable setup, I want to share it with you!

Let’s run through the trade as an example to try and clear up the confusion.
The risk might have been high for some, but it wasn’t for others.

First, we need to understand that not all instruments are created equal. When
you trade equity CFDs, the minimum quantity you can trade (or the minimum “lot size” if we use stock market jargon) is usually 1 CFD.

There are some exceptions, Asian stock exchanges for example, but 90% of the time the minimum lot size would be 1 CFD.

So, if you place a trade with an entry at R100 and a stop loss at R90, you know your risk will be R10 per CFD that you trade.

If you have an account of R10,000 and you do not want to risk more than 5% (or R500) you then know that you can trade 50 CFDs to keep your risk at R500 if it goes to stop loss.

The calculation goes like this:

50 CFDs x R10 price move = R500 loss

That’s how simple equity CFDs are.

Other CFDs however (like commodity and forex CFDs) work a little differently.

The Brent Crude Oil trade has a “lot size” of 100.

This means, unlike the equity CFDs (where the lot size is 1 CFD), Brent requires you to trade 100 barrels of oil at a time.

Technically speaking this is because the CFD is based on an underlying oil future which is a fungible contract for 100 barrels of oil. Most platforms will show you this information under the “Symbol Info” section.

That means on this trade you had to take at least 100 barrels of oil.

The high volatility has also meant the margin requirements on Brent have increased (meaning a higher initial deposit that usual needs to be put down).

At the moment, you have to put down a percentage of the total value of the trade down as margin.

On Brent that margin requirement is 6.2%. Previously when I sent out trades on Brent, it was trading below USD90 a barrel which meant you had to put down a smaller amount upfront compared to now where Brent was trading above USD110 a barrel. And this was all because of recent volatility.

But it isn’t just the higher capital requirement that had some of our traders hot under the collar.

I put my entry at USD111 and my stop loss at USD125, or USD14 away from my entry. That’s a pretty wide stop loss.

Now if you’re trading 100 barrels of oil, you need to multiply that stop loss offset by 100 to get your potential loss.

That works out to USD1,400. You then also need to multiply that by the
USDZAR exchange rate (currently at about 15.16) to get R21,224.

That was my risk on the trade. Obviously too big for some accounts.

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Timon’s final words:
I understand that each broker and market maker have different costs and deposits with each market.

I know some trading platforms where Brent Crude is cheap to buy but where indices are expensive.

Unfortunately, there is no perfect platform which will have all affordable rates with every market.

I personally wouldn’t open an entire new trading account because of one or two markets.

However, I would definitely only take certain trades which fit with my trading risk profile as you are quite smartly doing.

If I find there are more than 10 markets that have a wide margin (deposit) then yes, I would look to open another account and trade them separately.

[DOWNLOAD FREE] CFD Risk Trading Calculator
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