Today's CFD Call

Shp  chart...Check the mighty resistance!!!

Edited by HDB, 19 June 2013 - 10:59 AM.

The perfect classical short per T/A

 

Shoprite  R184.50

Stop... a close above R185.00

 

Take Profit

Lower R170's

THANKS HDB!! 

The perfect classical short per T/A

Shoprite  R184.50

Stop... a close above R185.00

Take Profit

Lower R170's

lol!  what if the company issues a statement after you have bought that they are now going bankrupt?

what if a mammoth bear market ensues for 5 years?

what if interest rates sky rocket and you are now paying 15% on your cfd?

what if prices remain stagnant for 5 years?

what if  the ANC announce they are nationalizing everything.

what if juju becomes president after ousting zuma?

what if you get so emotional that after the price of your share comes down to R15 that you panic and sell?

what if it takes 7 years to get back to R60 and not 3?

what if..........what if.... what if....

too many unknowns. 

ask proppies if he has ever closed his positions??

Now you've scared me completely out of the share market!  Think I'm gonna sell my house and car, close all my bank accounts, cash out my retirement annuities and all other investments and keep the money in a box under my bed, or ask my sailor brother to hide it on an island somewhere. Thanks for the eye opening reply anyway, but I was actually merely playing around with numbers and trying to point out that there is a little merit in averaging down, even with instruments. Just holding the shares would obviously have been better and just taking the R1.6M in a Finbond 5 year investment @ 10%, probably the same.

I am one of those guys, I do believe in property and sounds inverse to your style as I use stocks to build up funds to buy property.

If you consider after clearing your own bond and purchasing a 2nd property ONLY when the rent will cover ALL expenses.

This is my style and has worked well for me over the years. If you analyze it, it differs very little to the mantra buy and hold just the asset class that differs.

With the market being a forward discounting beast if Juju was gonna repossess your home the market would already be in the toilet long before then.

Property ownership is the bedrock of my investment strategy.

Each to their own and happy investing/trading.

Well said Soutie 

I guess I do I agree. I don't think either is a better investment device than the other. As I mentioned, I think cash for equity and finance for property seems to be the best option for me. I was focusing more on the idea that any investment has 1000 "what ifs". I also mentioned I am certainly no expert in the matter. I am really attracted to the liquidity of shares as well as the ability to KNOW exactly what the investment is worth. 

This is definitely a never ending discussion...maybe it simply boils down to what you know and what you are comfortable with  I am by no means opposed to property as an investment (my biggest investment is a property due to the fact that I can finance it!). 

I agree with your comment bulls but don't you think you could give 1000 what if's for any investment opportunity? BBW is giving quite a worst case scenario (share price to drop down 66%) in his very rough forecast. I am no expert on CFD trading (or the stock market as a whole for that matter) but I do invest a lot of my time researching various investment avenues. May sound typical but it is all about risk and reward...? Personally, I still don't agree with the guys who prefer to invest in property becasue a lot can happen to a physical property as well. Also, shares are much more liquid. So, if Juju does become our new "leader", I would much rather sell my shares at a loss of about a week rather than sitting with a property that I can't sell (or worse - Juju has decided it now does not belong to me anymore)? Lots of questions. And there will always be lots of questions certainly in a developing economy like ours. My end of the day thought is as follows: use cash to invest in shares and use buying power to invest in property. 

 

I do have 1 question though - don't you HAVE TO sell CFD's every quarter? thus incurring transaction costs every 3 months over the period?  

I am one of those guys, I do believe in property and sounds inverse to your style as I use stocks to build up funds to buy property.

If you consider after clearing your own bond and purchasing a 2nd property ONLY when the rent will cover ALL expenses.

This is my style and has worked well for me over the years. If you analyze it, it differs very little to the mantra buy and hold just the asset class that differs.

With the market being a forward discounting beast if Juju was gonna repossess your home the market would already be in the toilet long before then.

Property ownership is the bedrock of my investment strategy.

Each to their own and happy investing/trading.

Please help me here, as I'm sure I'm either missing something or doing something wrong! Consider the following scenario:

 

I start buying 1000 units (say CFD's) of a stock @ R60, and with every R1 drop I buy 1000 more, down to when the stock trades @ R20, i.e. 40 x 1000 shares/CFD's, costing me an average of R40/share, i.e. R1 600 000.

Now, would you agree that the ALSI40 took less than 3 years after the 2008 crash to pass it's 2008 high, thus giving my share 3 years to recover?

Borrowing cost (@ 8%) of R1.6M over 3 years is +-R400 000, and after 3 years your share is once again worth R60, i.e. 40 000 x R60 = R2.4M!

Giving you: R2 400 000 - R400 000 - R1 600 000 = R400 000 profit!

 

Where do I miss the plot?!

don't forget that you'll need a massive margin and then still run the risk of getting closed out, risk versus reward not there.

lol!  what if the company issues a statement after you have bought that they are now going bankrupt?

what if a mammoth bear market ensues for 5 years?

what if interest rates sky rocket and you are now paying 15% on your cfd?

what if prices remain stagnant for 5 years?

what if  the ANC announce they are nationalizing everything.

what if juju becomes president after ousting zuma?

what if you get so emotional that after the price of your share comes down to R15 that you panic and sell?

what if it takes 7 years to get back to R60 and not 3?

what if..........what if.... what if....

too many unknowns. 

ask proppies if he has ever closed his positions??

I agree with your comment bulls but don't you think you could give 1000 what if's for any investment opportunity? BBW is giving quite a worst case scenario (share price to drop down 66%) in his very rough forecast. I am no expert on CFD trading (or the stock market as a whole for that matter) but I do invest a lot of my time researching various investment avenues. May sound typical but it is all about risk and reward...? Personally, I still don't agree with the guys who prefer to invest in property becasue a lot can happen to a physical property as well. Also, shares are much more liquid. So, if Juju does become our new "leader", I would much rather sell my shares at a loss of about a week rather than sitting with a property that I can't sell (or worse - Juju has decided it now does not belong to me anymore)? Lots of questions. And there will always be lots of questions certainly in a developing economy like ours. My end of the day thought is as follows: use cash to invest in shares and use buying power to invest in property. 

I do have 1 question though - don't you HAVE TO sell CFD's every quarter? thus incurring transaction costs every 3 months over the period?  

Please help me here, as I'm sure I'm either missing something or doing something wrong! Consider the following scenario:

 

I start buying 1000 units (say CFD's) of a stock @ R60, and with every R1 drop I buy 1000 more, down to when the stock trades @ R20, i.e. 40 x 1000 shares/CFD's, costing me an average of R40/share, i.e. R1 600 000.

Now, would you agree that the ALSI40 took less than 3 years after the 2008 crash to pass it's 2008 high, thus giving my share 3 years to recover?

Borrowing cost (@ 8%) of R1.6M over 3 years is +-R400 000, and after 3 years your share is once again worth R60, i.e. 40 000 x R60 = R2.4M!

Giving you: R2 400 000 - R400 000 - R1 600 000 = R400 000 profit!

 

Where do I miss the plot?!

lol!  what if the company issues a statement after you have bought that they are now going bankrupt?

what if a mammoth bear market ensues for 5 years?

what if interest rates sky rocket and you are now paying 15% on your cfd?

what if prices remain stagnant for 5 years?

what if  the ANC announce they are nationalizing everything.

what if juju becomes president after ousting zuma?

what if you get so emotional that after the price of your share comes down to R15 that you panic and sell?

what if it takes 7 years to get back to R60 and not 3?

what if..........what if.... what if....

too many unknowns. 

ask proppies if he has ever closed his positions??

Please help me here, as I'm sure I'm either missing something or doing something wrong! Consider the following scenario:

I start buying 1000 units (say CFD's) of a stock @ R60, and with every R1 drop I buy 1000 more, down to when the stock trades @ R20, i.e. 40 x 1000 shares/CFD's, costing me an average of R40/share, i.e. R1 600 000.

Now, would you agree that the ALSI40 took less than 3 years after the 2008 crash to pass it's 2008 high, thus giving my share 3 years to recover?

Borrowing cost (@ 8%) of R1.6M over 3 years is +-R400 000, and after 3 years your share is once again worth R60, i.e. 40 000 x R60 = R2.4M!

Giving you: R2 400 000 - R400 000 - R1 600 000 = R400 000 profit!

Where do I miss the plot?!

Edited by BBW, 18 June 2013 - 04:18 PM.

Trader

Not a single mention of a SL on your 2816 enty, only two target prices (3130 and then 3250).

No comment on averaging down.

No comment on compounded losses due to opportunity losses (capital and margin stuck in long-term CFD/SSF trades).

I will not comment on your trading style again. Each to his own.

Good luck to you and your clients - let the good times roll!

Am I right when I say that interest on CFD's is not compounded, and the total interest payment actually becomes less as a share looses it's value?

jeez, fully agree.

im sorry but i cannot agree with the trading plan either. buying on the down and averaging down has never worked.the odds of successful trading is quite limited.

teaching newbies to trade like this is a disaster. the best case scenario will be to break even(this is based on averaged trades)

 

why buy 1/3 at R30 when you could have bought 1/2 at R26.50 and the other 1/2 at R27.40 or the whole position at R26.55

 

i rather wait for the clear reversal up then start buying. burnt many fingers doing it the other way.

Not as easy as it sounds... is there a clear reversal on PWK and BAW yet? Or Woolies, etc? How do you define a clear reversal? A "White/Green Marubozu"? On what time frame? See what I mean? Averaging up does seem a better concept though, but what if you get it wrong? I'm doing it both ways now, with my GOOD, trustworthy investment stock.

that point is so simple and so vital. never average down on geared products. 

jeez, fully agree.

im sorry but i cannot agree with the trading plan either. buying on the down and averaging down has never worked.the odds of successful trading is quite limited.

teaching newbies to trade like this is a disaster. the best case scenario will be to break even(this is based on averaged trades)

why buy 1/3 at R30 when you could have bought 1/2 at R26.50 and the other 1/2 at R27.40 or the whole position at R26.55

i rather wait for the clear reversal up then start buying. burnt many fingers doing it the other way.

What about the stepped buying at R30/R28/R26 for FSR, as suggested by you a while ago? You not gonna get FSR @ R27.00 today.

Trader, this is not a good CFD strategy. Averaging down on a geared product is Roffey-like stuff. Rather make these suggestions in the long-term portfolio section.

 

To break even on your stepped approach, you will have to overcome some serious overhead resistance.

 

Pyramid-up, don't average down - CFD101.

that point is so simple and so vital. never average down on geared products. 

We trade SSF, with finance charges of 6.4% pa

Client buys 10000 FSR at an average Price of R28.16 – sits on it for 60 days (2 months)

Finance costs:

10000 x 28.16 x .064 x 60/365

=R2962

Sells 10000 FSR at R32.50 - bought at 28.16

Gross profit 10000 x R4.34 = R43400

Minus interest charge R2962

Brokerage x 2 : R704 plus 812 = R1516

Thus-nett profit R43400 – (finance cost R2962 plus brokerage 1516)

= net profit of R38922, on a margin of R24000 = 162% return

What is your point??

Ok Trader, here goes:

 

1. Please inform/remind your clients that CFD exposure carries a daily margin charge. Your position below is still some 8% under water, and 20 days old.

2. Averaging down is one of the biggest no-no's for any serious trader. Please tell me if you differ.

3. Please consider posting your ideas in the long-term portfolio section. CFD/SSF trading is for short term trading puposes only. If you advise your clients to average down and hold for time periods of weeks to months, please advise on the required margin, trading costs and time-decay costs.

 

Common-sense 301.

Ok Trader, here goes:

1. Please inform/remind your clients that CFD exposure carries a daily margin charge. Your position below is still some 8% under water, and 20 days old.

2. Averaging down is one of the biggest no-no's for any serious trader. Please tell me if you differ.

3. Please consider posting your ideas in the long-term portfolio section. CFD/SSF trading is for short term trading puposes only. If you advise your clients to average down and hold for time periods of weeks to months, please advise on the required margin, trading costs and time-decay costs.

Common-sense 301.

Trade Ideas

 

1. Long: FSR off R30, stock has trendline support at R30 and with  good results due soon we are buyers. Strong banking sector performance overnight in  U.S. markets should support our banking sector.

We bought 1/3 at R30 another 1/3 at 28.00 and another 1/3 at R26.50-ave price R28.16.

We will put a rising stoploss in at R3130

SSF 201

What about the stepped buying at R30/R28/R26 for FSR, as suggested by you a while ago? You not gonna get FSR @ R27.00 today.

Trader, this is not a good CFD strategy. Averaging down on a geared product is Roffey-like stuff. Rather make these suggestions in the long-term portfolio section.

To break even on your stepped approach, you will have to overcome some serious overhead resistance.

Pyramid-up, don't average down - CFD101.

Trade Ideas

 

1. Long: FSR at R27,  this stock has fallen R5.64 in 30 days, and has strong trendline support at R26.50. We are buyers at these levels.

 

1. Long: SAB at R500, the stock closed R4.95 higher on the LSE. We are buyers at these levels.