09 Oct 2018 Big risks, big rewards
The front runners of the iTrade with a Million challenge take considerable risks, especially with contracts for difference (CFDs). As a consequence they make a lot of money on some days – and lose a lot on others, says Gerhard Lampen, CEO of Sanlam iTrade, Netwerk24’s partner in the virtual trading competition. Lampen says the leader board is still changing almost daily because of the high risks people are taking.
Some of the front runners had a profit of R500 000 within only three days, quite an achievement in a difficult market. By Tuesday, a little more than three weeks into the competition, the top iTrader had a profit of R669 435. All iTraders start with a virtual R1 million.
Lampen says it is noticeable that most people still shy away from short selling. Short selling is when you expect a share to fall. Some of the front runners will go long on a share and after closing the position go short of that share. Generally speaking iTraders buy companies that make the news, like MTN, Naspers and Aspen Pharmacare. Other popular shares are Standard Bank, Anglo American, Momentum, Sasol and BHP.
It seems that people are not quite as brave with shares on the Dow Jones 30, which they are also allowed to trade. There is good news for people who are worried that they don’t have time for the competition. Lampen says the leaders include someone who has spent 380 hours on the iTrade platform and has completed 37 transactions but also someone who has spent only 400 minutes on the platform doing 4 transactions.
As for advice, Lampen says iTraders must keep up to date with news and try to gauge what the effect of news events on shares would be. For example, what would President Cyril Ramaphosa’s stimulus plan mean – would MTN and Vodacom climb because of his announcement that broadband spectrum is going to be released to private companies soon?
Now is also the time to read more about technical analysis. The platforms makes it possible to see graphs.
“If you want to win, you’ll just have to take big chances, maybe by buying a share that has dropped sharply.”