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Your basic CFD trading questions answered!

by , 28 January 2021
Your basic CFD trading questions answered!
Q. “In the middle of January I received an email from Red Hot Storm Trader where you banked 75% on the ALSI CFD trade.

This is one trade I missed, as I was still on holiday.

Could you give me a good idea of what I would've made if I deposited R7,700 into the CFD trade?”
 
A. First of all, it’s for these reasons why I always trade whenever I go on holiday.
 
I never know if one trade could pay for the entire trip. And in fact, I’m going to Durban next month because of the great month we had in January.
 
Going back to your question. Yes here is an easy calculation to work out how much you would’ve made if you took the ALSI CFD trade.
 
A. If you deposited R7,700 into your trade you would have made a 75% gain.
 
To explain this, let’s start with an easier value to see how it works.
 
If your initial margin (deposit) was R1,000, in this trade your gain would have been R750. You’ll simply multiply the deposit amount by the percentage gain you would have made.
 
Here’s the calculation…
 
Gain = (Initial deposit amount X percentage gain)
          = R1,000 X 0.75
           = R750
 
Now that you see how it works, we can now plug in the value of what you would have deposited.
 
Gain = (Initial deposit amount X percentage gain)
          = R7,700 X 0.75
          = R5,775
 
Hope that helps and don’t worry. I just looked at the markets and the JSE is showing a ton of these high profitable trade ideas coming our way with Red Hot Storm Trader in February and beyond!
 
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Q. “Timon, I only have time to set up my trades with Red Hot Storm Trader when I get home from work. COVID-19 has resulted in my work load going up, but finishing a lot earlier. So I have one main question.”
 
Can I put in my trading levels as soon as I get home after 5pm or do I need to wait for the stock market to open the next day?”.
 
A. Great question Jacques. No you may prepare and execute your trading order when you get home or any time, whether the stock market is opened or not.
 
The way it works is that when you execute an order into the market, all you’re doing is sending a simple instruction saying…
 
For a long (Buying) CFD trade:
 
If (X Share) trades through Y price, buy (Z amount of CFDs the share is based on).
 
For a short (selling) CFD trade:
 
If (X share) trades through Y price, SELL (Z amount of CFDs the share is based on).
  
I guess the only warning I have to tell you is this. The market may or may not move away from our entry price after some time elapses. That’s why I normally give a lee-way of around 20 minutes before I myself get into the trades. If this is the case, then a bathroom break or a lunch break is all you need to get into your trade…
 
Hope that helps…
 
Trade well, 
 
Timon Rossolimos,
Managing Editor, Trading Tips


Your basic CFD trading questions answered!
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