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“I did not know how to trade CFD's. Now I am learning very quickly.”

by , 11 June 2020
“I did not know how to trade CFD's. Now I am learning very quickly.”
Q. “On Tuesday I bought 100 Remgro shares and when I woke up on Wednesday to check the markets, I was holding 69 RMH (Rand Merchant Bank Holding) shares instead. Please can you explain what happened?”

A. Believe it or not, the exact same thing happened to me.
Remgro went ahead with the unbundling process in Rand Merchant Bank Holdings to its shareholders.
Unbundling is a process where one company’s shares are distributed by another company to the unbundling shareholders.
There are many reasons why a company would go ahead with the unbundling including to:
Raise funds
Cut down costs
Reach new customers
Sell off non-essentials of a company
With Remgro, they decided to unbundle 28.2% of ownership and shares in RMH to their shareholders.
With the unbundling, each Remgro share holder will receive 0.699 RMH shares for each 1 Remgro share they own.
If you owned 100 Remgro shares on Tuesday, you would have woken up to 69 RMH (100 X 0.699) shares on Wednesday morning.
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Q. “I have a question for you. A real one. And I need a real answer. The last three trades Trader X gave us, all went in the opposite direction.
All three failed.
How do we trust you again?
What if the next trade or two trades also lose us money?
How do you trust yourself again?”
Answer by Trader X:
Trading the market on a short-term, day-to-day basis, is by nature at the highest point of the risk spectrum.
It is not the easiest thing to do.
It is the very reason why even the best traders out there, struggle to maintain a winning record of more than 50%.
But it’s not about how many times you win, but rather how big you win when you do.
As long as you manage your risk properly and make sure that your winners are bigger than your losers, then over the long-term your portfolio balance should grow and stay in the green.
As traders, we need to accept that not every trade will be a winner.
And that we need to accept the risks to come as losing streaks are part of the trading success journey.
As the saying goes, “you need to spend money to make money”.
The same goes for trading.
“You need to risk money, and accept the losses, to make money”.
Trade well,
Timon Rossolimos,
Analyst, Red Hot Storm Trader

“I did not know how to trade CFD's. Now I am learning very quickly.”
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