trading styles

[Electrox]

that was my point..thx vitorc.

[SimonPB]

and with a market crash .. it's not about one position wiping you out .. it is about your entire trading portfolio being trashed and wping you out ..

[#3]

That same risk you talk about also goes for people buying the shares outright, since my positions would not have been larger than buying the shares itself. Of course you can't short directly, and that's why I prefer to trade CFDs. Also it costs me 50% cheaper per trade on a CFD than buying the share itself. Yes the CFD is not backed by Safex, but if GT247 has survived the downturn till now, I think it'll be around a bit longer.

[SimonPB]

another black swan event to run through your money management system and see what happens (stress testing your system - which everybody does, right ??) .. you are short xyz stock and a take over is announced at 65% above current price ?? happened before and will happen again .. your SSF or CFD with gearing of 5-8x sees you down 325-500% .. sure your 2%&6% rule helps .. but that is still a massive massive hole that you have to make back .. remember one of the rules of trading is don't have large losses .. ever ..

[SimonPB]

well no .. because if I bought AGL above R500 I still hold an asset that may recover .. long in a derivative above R500 and a totally different story ..

an err GT .. well maybe .. it only took one client in the UK, and that was well before the melt down .. and then of course deal stream ..

[#6]

Simon, my definition of a swing trade is that it defines timeframes rather than entry styles. Entries could vary from pullbacks to double bottoms, but essentially you are trying to catch the direction over a couple of days to make profit. With regards to the profit you make, I agree with you 100%. You have to be able to outstrip your reward by at least 2 times, including slippage and transaction costs.

[Hedgehog]

Hi Simon I totally agree on trading the trends. Do you have any suggestion re finding ALSI40 warrants to trade as I am not particularly fond of barrier warrants and I do not like buying warrants priced under 40c, so my choice is a bit limited -

[SimonPB]

if the barrier is far enough away, it's not an issue .. check for days to excpiry more then 90 .. price high (always above 20c, but higher is always better) .. strike within 10-15% of spot .. gearing 6-8 for index ..

[Hedgehog]

Thanks - i will check it out

[GL]

Ja. Reminds me of the guys that were short EDCON a few years back. They were pretty much wiped out when the private equity buyout was announced. I recall you mentioning some chap in CT that lost R100k+ on that trade. But at the time I never figured out why they were short a share with a PE of less than 10 in what was at the time a massive bull market.

[SimonPB]

people are always shorting rising shares .. an buying falling shares ..

[#12]

That's exactly why I also like CFDs. I have lots of trades open at small amounts (CFDs have no minimum cost), some long, some short, and some on indexes. Never a large part of my capital exposed, and with this I mean underlying and not the gearing bit. I feel relatively blackswan-proof, except for my long term small cap portfolio held here at OST that I've bought on value principles. And the fact that GT247 learned some tough lessons from its European counterpart gives me more confidence in them.

[SimonPB]

well GT may have leart the lessons (or not, who knows) .. but they never paid for those lessons .. the clients in GTEuro paid for the lessons ..

[#14]

Easy solution right there Simon. Give us CFDs through OST at an affordable brokerage markup and I'll be your first customer.

[SimonPB]

deal .. give me a week .. or 3 ..

[#16]

Simon, can we infer from your response that OST is considering launching a CFD product?

[GL]

But why Simon? WHY? {sobbing gently onto keyboard}

[barry_1]

I nominate this as the best,most informative thread EVER!!!! Thanks Simon...Newbies print this thread down,y'll never getbetter advice!

[ACEP_]

Agreed Barry, well done SPB! Trading KO's is trading KO's. Cowboys don't cry!

[barry_1]

good advice!