14 Jul 2014 A week as a day-trader: Our Wannabe iTrader reveals all
We gave Pieter Kriel, our first Wannabe iTrader, R10,000 of our money to try his hand at being a day-trader for a week. He was nervous and excited and VERY quiet during the trading week. We catch up with him to find out how it went, how much money he made or lost, and what he learnt from it all.
Here’s his story.
My week of being a ‘Wannabe iTrader’ came to an end on Friday and has truly been an exciting one. I’ve had a slight taste of what trading is all about; the adrenaline rush, the testing of one’s patience and discipline, flashing trade screens, different viewpoints and strategies, the general market noise and critical decisions at crucial points.
Around 16:00 on Friday my final order got executed and I ended the week with a small gross profit of R288, around 2.9% in one week. Taking trading fees into account, this profit swings to a net loss of around R330 – down 3.3% for the week. One would obviously like to avoid these losses (or any loss for that matter) and in hindsight it’s easy to spot the perfect trades (they always exist!). However, taking all things into consideration, I am quite satisfied with the end result.
I started with R10,000, 5 trades to complete and one specific week to work with. From the onset I realised that the challenge would be to rather make small profits than waiting for 1-2%+ net profits. In order to break even more quickly, I decided to rather trade CFD’s and use its leverage to increase my notional amounts and reduce trading fees. (As comparison: completing a R10,000 share trade results in around 3.3% trading fees. A R10,000 CFD trade will only cost you around 1.2%. Both these percentages decrease with increased trade sizes. On a R15,000 CFD trade you only need to gain 0.8% to break even). CFD’s also gave me the option to sell short and profit from share price decreases.
Sanlam iTrade requires a 15% margin for CFD’s, resulting in a maximum theoretical portfolio size of R66,667 – if you start with R10,000 and ignore trading fees. (E.g. if you trade the full R66,667 you would need to put down 15%/R10,000 as margin.)
I used a bit more conservative R50,000 as my portfolio size and decided that I would risk a maximum of 1.5% per trade. I calculated my stop losses on price movements of 5%. These factors resulted in effective trade sizes of R15,000, with maximum losses of R750 per trade. So I knew from the start that if everything went pear-shaped, my maximum loss for the week would be 5 X R750 = R3,750 + fees.
During my trading week I’ve mostly used technical analysis, but also threw in a bit of fundamentals. I went long on four stocks: Steinhoff (JSE:SHF), Impala Platinum (JSE:IMP), Naspers (JSE:NPN) and Sasol (JSE:SOL). I shorted Woolworths (JSE:WHL), which also turned out to be my most profitable trade. My fastest trade was Sasol, which I bought and sold on Friday, realising a small net profit in the process. The only gross declines (IMP&NPN) were in line with the JSE breather on Thursday. Fortunately both prices recovered a bit on Friday, slightly reducing the loss.
Below is a summary of each trade:
Whilst I’m satisfied with my performance in a week the JSE dropped 1.73%, I’m happy to take a slight breather for now, review my strategy and wait for the market to decide on its direction. And who know, I might dip my feet in trading waters again soon!