2 years ago

Market wrap - Market wrap Nikkei Natural Gas surge and Pitfalls of high margin CFDs

Equities
The Nikkei in Tokyo rose 2% after Prime Minister Yoshihide won’t run for the party leadership post, which means the country will see a new leader elected. He served just 1 year as Prime Minister.
The Chinese market continues to struggle and all other markets dropped off slightly for the week..

Currencies
All currencies consolidated for the week with no significant moves long or short occuring.

Commodities
- Natural Gas & Aluminium continued their steep rise

Focus on Natural Gas
Minimum contracts required to trade is 2.5 contracts which requires a margin of $1243.
With a trade of 5 contracts has an asking margin of $2486.
On the Daily chart we opened our position of 5 contracts on the 27th August and has advanced about 12.5%
bringing us a gain of about $3,660
Note since start of trading back in 2007 (if our baseline account value was $100k) and taking in the effects of the GFC in 2008 & 2009 and subsequent decline in it's share price you would have had a drawdown on your account of $103,115. But after the price rebounded you would have closed your position with a gain of approx $72,605. Or over $145k traded for the whole period from 2007 until today.

Ont the 15 min chart you would have had your position closed Thursday and reopened again early Friday trade. Over the 5 month period for these trades you would have generated about $14,795 with a max drawdown of about $3,805 during the price dip in August.

I showed these examples simply to illustrate the effects of a drawdown in your account and that some instruments such as Natural Gas, Aluminium and other commodities ask a high margin requirement. And if the market goes against you there must be sufficient funds in your account to abosrb a decline.

It may be safer to trade with lower margin instruments such as Gold with a minimum contract requirement of 0.5 which costs about $44 per 0.5 contract. This will give you smaller gains but also less drawdown exposure.
A quick look at trading Gold on the Daily and 15min charts show the following results.
Trading 5 contracts on the Daily chart shows a gain since 2007 with over $14k and drawdown of over $11k
Trading the 15min chart over a 5 month period shows a gain of about $2,100 with a max drawdown of just over $4k.

Supporting videos:
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Money Management:
https://youtu.be/nvvcldeeZS4

Average Down Do's and Don'ts
https://youtu.be/SZbh2Me4kq0

Simple Trading Strategy with CCI and Avg Down technique
https://youtu.be/w35_YtV4YQU

Simple trading strategy https://youtu.be/ibVzRwCX-3Q
Average Down Strategy https://youtu.be/RFCb5S78D8o

#marketwrap #indices #shares #commodities

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