A. When you type the name of the share you want to buy or sell, there are two options you can choose to trade.
CFD and EQT
EQT stands for Equity which is another name for buying real shares or stocks…
You’ll use this option when you want to actually own a part of the company rather than just be exposed to the company.
CFD stands for Contracts For Difference. This is the derivative of the share where you’ll pay a fraction of the price and be exposed to the full value of the share…
With Pickpocket Trader, our analyst only takes trades using CFDs rather than (EQT) equities. This is because trading CFDs is the fastest way to profit from small share price moves.
This brings us to answering the next question.
To find the ticker of the CFD on your ProTrader platform you’ll simply type in company’s name on the top left hand corner of the chart.
In this example you’ll type in ‘Adidas CFD’ in the search bar and ‘Lloyds Banking Group CFD’.
I’ve illustrated below, with a red arrow showing where you’ll type in the company name as well as choose the CFD option…
If you the company’s name doesn’t show in the search bar, you’ll then need to call your broker and ask them to activate the international CFDs on your platform…
They should have it fixed within an hour…
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Q “Hi Timon and team… I am currently a Pickpocket Trader member and I have a risk management question with regards to the South African rand against the US dollar (USD/ZAR) trade idea you sent out last week.
I have a R120,000 portfolio and I never know how many CFDs to buy when it comes to trading the USD/ZAR.
Could you please assist with a formula using the 2% risk rule, so I can use it next time?”
A. The CFD calculation for the USD/ZAR currency pair is a little different to the calculation you need when you trade company CFDs.
Here's a formula you can use for next time. We’ll use the trade specifics as an example from last week.
Trade Idea:
Position: Short (sell)
Currency: USD/ZAR Mini
Instrument: CFDs
Portfolio value: R120,000
Entry price: R18.90
Stop loss price: R20.00
Step 1: Calculate the rands you'll risk in your portfolio.
Rands risked = (Portfolio value X Percentage Risk)
= (R120,000 X 2%)
= R2,400
Step 2: Calculate the pips risked in the USD/ZAR short trade position
Risk in trade = (Stop loss price – Entry price) X 10,000
= (R20.00 – R18.90) X 10,000
= 11,000 pips
Step 3: Calculate the number of CFDs to (short) sell
No. Of CFDs = (Risk in portfolio ÷ No. pips risked) X 10,000
= ([R2,400 ÷ 11,000) X 10,000]
= (0.2181 X 10,000)
= 2,181 CFDs
And so, in order to risk less than 2% of your portfolio, you'll simply type in the number of CFDs you’ll sell in your charting platform…
In this case it’s 2,181 CFDs, which you’ll sell with the USD/ZAR trade.
Trade well,
Timon Rossolimos,
Analyst, Red Hot Storm Trader
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