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I'm taking my first trade but don't know what to say to my broker, PLEASE HELP?

by , 28 July 2016
I'm taking my first trade but don't know what to say to my broker, PLEASE HELP?
Q: "What buy instruction do I give to the broker? This is the first time I'm taking a trade I don't want to confuse the broker or myself" - W

A: I remember the first time I wanted to buy a share on the JSE in 2003, many years ago. The problem was…

I had no clue what to do or what to say to my broker.

Well, if you're a first time trader and you're not sure what to say to your broker, then…

You need to read this!


Step #1: Before you tell your broker what you’d like to trade, do this!


A trade is lining up according to the price you were waiting for. You don’t have time to go to your trading platform as you’re driving.
 
You call up your broker up to place a trade immediately. .
 
First thing you say is this:
 
“Hi it’s Timon here and I want to place a trade, can I give you my account name or number?”
 
Your broker will bring up your account details, so they can get you into your trading position.

Once they’ve picked up your account details, you’ll then be ready to tell them what to do.

Step #2: Choose between these two options, where you want to buy or sell


Option #1: The Market Order – which will get you into your trade immediately!

If you’re not fussy about where the market price is trading at, then a MARKET ORDER is what you need.

The market order will get you in, regardless of what the market price is trading at.
 
Whether you’re trading CFDs or Futures, you can get into your trade immediately using the market order.

Let me use an example, so you’ll know what to say to your broker:

“I’d like to place a market order. Please can you buy me 40 Bidvest CFDs at market now which should be around R264.00?”

And if you have specific take profit and stop loss levels, to manage your position, then you can say this.

“Please can you buy me 40 Bidvest CFDs at market, put my take profit level at R350.00 and my stop loss level at R240.00.”
 
However, and this is a big however. If you only want to risk 1% to 2% of your portfolio and you’re not sure how many CFDs you need to buy to risk it, then tell your broker.
 
“I want to buy Bidvest CFDs at the market price, set my stop loss level at R240.00 but make sure I don’t risk more than 2% of my portfolio”
 
Your broker will do all of the calculations for you, and will tell you how many CFDs he will buy on your behalf to not risk more than 2%.

Note: I don’t recommend you use the market order with illiquid shares that have high spreads between the bid and offer price. So, the next option will be best for you!

Option #2: The Limit Order - Get in at the market price you want only

If you’re not trading high volume traded CFDs or futures and you’re not that fussy where the share price is trading at, then a LIMIT ORDER is what you’ll need to buy your share.

A limit order is where you’ll place an order with a specific (limited) level you’re looking at.

So, let’s use an example so you can see what I mean.

“I’d like to place a limit order, please can you buy me 40 Bidvest CFDs at R264.00?”

And if you have a strict stop loss and take profit level as well, then you can say this.

“I’d like to place a limit order, please can you buy me 40 Bidvest CFDs at R264.00? Put my take profit level at R350.00 and my stop loss at R240.00.”
 
And if you don’t know how many CFDs you’ll need to buy to risk only 2% of your portfolio, say…
 
“I’d like to buy CFDs on Bidvest using a limit order at R264.00. Please tell me how many CFDs I’ll need to buy to only risk 2% of my portfolio should the trade hit my stop loss level at R240.00?”
 
Those are the options you can use to get into your long trade. Vice versa will be to sell (short) your trades.

But what if you want to close your trading position?


Note how I say CLOSE and not SELL… If you want to get out of your trade and you speak to a broker, just use the term CLOSE.

If you’re short in the market and you tell your broker to sell your CFDs, he will actually increase your position as you’ve already sold CFDs you don’t have in terms of shorting.

If this term shorting is foreign to you then you can read all about it at the end of the article.

But for now, if you want to close your trading CFD position, simply tell your broker that you’d like to close your trade.

And that’s it!

So now, print this and stick it on your wall, so you’ll know exactly what to say to your broker next time, you want to take a trade.

Always keep in mind,

“Wisdom Yields Wealth”

Timon Rossolimos

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I'm taking my first trade but don't know what to say to my broker, PLEASE HELP?
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