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Q&A: Why I don't trade 5 minute charts and two exposures you need to know as a trader or investor

by , 04 March 2020
Q&A: Why I don't trade 5 minute charts and two exposures you need to know as a trader or investor
Q. “Hi Timon, I see when it comes to Red Hot Storm Trader, you do not trade using the 5 minute time frame. Is there a particular reason why you don't and have you ever thought about trying it out? Thank you in advance for your usual support.”

A. To answer bluntly…
 
No, I don’t trade it at all…
 
Believe it or not, I used to trade the 5 minute time frame about 10 years ago...
 
And during that time, it was a complete disaster, and it felt like I was grinding back in a 9-5 job.
 
What’s interesting is, I traded the exact same system I use for Red Hot Storm Trader, and the results were similar.
 
I generated similar returns with the same win-rate, but with one big difference.
 
My adrenaline, anxiety and stress levels went sky-high.
 
I just couldn’t leave my seat as I had to watch the markets very carefully for the next trade lining up.
 
Trading on a 5 minute time frame was like being at a train station – there is always another train on the way…
 
Sometimes you can take up to five trades a day. And if you have a job already, this can be very difficult to create a balance in your life without any stress.
 
And so I stopped trading the 5 minute time frames and turned to only using daily time frames for the following reasons… 
1. You don’t need to take more than two to three trades per week.
 
2. You do not need to spend more than 10 minutes on your trading platform with each trade you take.
You don’t need to feel the stress, being glued to your screen all day and holding onto five trades at a time.
 
________________________________________
 
Did you miss ANOTHER triple-digit gain this last week?
 
Those canny Pickpocket Traders didn’t - this time a 323% gain from a US500 index trade.
 
And this isn’t a one-off lucky strike. In the last week, Trader X and his followers have banked gains of 15.80% from Merck... 51.57% from Brent Crude and 323% from the US 500!
 
 
________________________________________
 
What a Trading Tips reader has to say:
 
 Congratulations to a professional attitude towards your subscribers.
 
- Jakob Salmon Olivier
   
________________________________________
 
 
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Q. "Hi Timon in the previous article you mentioned the differences between 'margin' and 'exposure'. However, I see when it comes to investing in the markets, there are two types of exposure. Can you explain the differences between these two?"
 
A. Luckily these two terms are very easy to understand once you have grasped the difference between margin and exposure.  
 
Here's a quick summary from the previous article:
 
Margin is the initial amount of money you'll deposit to enter a trade.  
 
Exposure is the amount of money, you'll be exposed to based on the initial margin you deposited.  
 
Now there are two types of exposures when it comes to investing or trading. 
 
Financial exposure and market exposure. 
 
Financial exposure is the amount of money that you are exposed to, and stand to lose, when you invest in a financial asset such as shares.  
 
When you buy shares of a company, the money you deposit is the maximum amount of money you can lose if the share goes to zero.
 
Let's use our example from last week with Anglo Gold.  
 
If each share was trading at R315, and you wanted to deposit R1,000 you would buy three shares which will cost you R945. 
 
This means, your financial exposure will be R945, which is the maximum you can lose should the share price drop to R0. 
 
The next form of exposure is known as 'market exposure'.
 
Market exposure is the amount of money you'll be exposed to based on the initial margin you deposited on a geared instrument such as CFDs or Spread Trading. 
 
Let's explain this more simply with the Anglo Gold trade example. 
 
Let's say you have a portfolio of R10,000 and you wanted to buy R1,000 worth of ANG CFDs. 
 
With a gearing of 10 times means, you'll need to deposit R3.15 (R315 per share ÷ 10 times gearing) in order to buy one Anglo CFD. 
 
And when you buy one ANG CFD for R3.15, you'll be exposed to one ANG share or R315.00 (R3.15 X 10 times gearing). 
 
With R1,000 you'll be able to buy 317 Anglo Gold CFDs which sums up to a total initial deposit of R998.50 (317 ANG CFDs X R3.15 per CFD).
 
And because the gearing is 10 times, this means you'll have a total market exposure of R99,855 (R998.50 deposit X 10 times gearing). 
 
If the Anglo Gold price strikes R0, you'll lose a total amount of R99,855. 
 
That's why its super important to place a strict stop loss with every single trade you take. 
 
This is why I have run my Red Hot Storm Trader service since 2013 and Trader X has run Pickpocket Trader for the last three years – for anyone who wants precise trading buy and sell alerts and know when to cut their losses short and maximize their profits at the same time. 
 
Trade well,
Timon Rossolimos,
Analyst, Red Hot Storm Trader


Q&A: Why I don't trade 5 minute charts and two exposures you need to know as a trader or investor
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