A. Sure, I’ll share with you an easy calculation from the most recent Brent crude trade we sent out via Pickpocket Trader on 28 October 2021.
Here are the trade specifics:
We went short (sold) Brent Crude CFDs:
Stop loss $89.00
Let’s say you have a portfolio of R200,000 and you want to risk 2% or R4,000.
Here’s how to calculate how many Brent Crude CFDs to sell with the above information.
No. CFDs to sell = (2% risk in the trade ÷ (Stop loss – Entry)
= (R4,000 ÷ ($89.00 - $85.25)
= R4,000 ÷ $3.75
This means, technically you’ll sell 1,066 CFDs.
Now, on most broker platforms (like Rand Swiss using Velocity Trader) each Brent Crude CFD equals 1,000 CFDs.
On your trading platform, you would therefore type in ‘1’ next to volume (no. of CFDs to sell).
I like to round down the number to the nearest 1,000 to ensure I’ll risk just under 2%, to keep to my risk tolerance.
That’s how to calculate the number of CFDs we’ll sell when trading Brent Crude…
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Q. “I’m looking to trade the FTSE (UK 100) with an entry price of 7,313. On the platform, it tells me that the margin (deposit) is 3%. I know that with international stocks, the margin works a bit different to local shares. How would I calculate in rands how much each FTSE 100 CFD would cost?
A. When you trade any international index CFD, we need to know what the base currency is.
With the ALSI we know the base currency is in rands.
With the Dow30 (American), the base currency is in US dollars.
And with the FTSE 100 (United Kingdom), the base currency is priced in Great British pounds (GBP).
And so, if we buy the FTSE 100 at an entry price of 7,313, with a margin of 3% per CFD, we have everything we need to calculate the margin (initial deposit).
Here’s how to calculate how much each CFD will cost…
Price of each CFD
= (Entry price X Margin per CFD) X South African rands per GBP (GBP/ZAR)
= (7,313 X 3%) X R20.48 -> Current exchange rate GBP/ZAR
= 219GBP X R20.48
And so, the initial margin (deposit) to buy 1 FTSE 100 CFD will cost you R4,493.
Analyst, Red Hot Storm Trader