Wednesday, 22 January 2014

How Much Do I Need To Trade CPO Futures

Palm Oil Futures trading is considered a volatile futures product in local futures market, and Bursa Malaysia Derivatives has normally set its official initial margin maintenance in a range between 4000 and 5000 ringgit in view of the volatility range of about 5%. So, how much does a technical trend trader need to trade CPO Futures in order to ignore unnecessary disturbance of margin calls and focus solely on trading success?

Assume the palm oil futures price is traded at 2500, the 5% swing on prices to the top and bottom in a day already incur losses of more than the initial margin and trader will face "over loss" in his/her trading account. Even in my previous posts that had mentioned on multiple losing trades in a row can also easily wipe out trader's trading account if the trading account is highly leveraged on per contract basis methodology.

Technical trend trader must learn to be conservative, remember that you may encounter multiple losing trades when you follow strictly on STOP AND REVERSE technical trend trading strategy. 

Make it 4x on initial margin (Four times! OK!), say, 20000 trading account on 5000 initial margin. NO doubt your yearly rate of return may not be able to hit more than 100%, you will still be able to beat majority of fund managers yearly performance. Think about it, 25% ANNUAL rate of return in your whole life as technical trend trader, any extra will be your yearly bonus. If you cannot follow strictly on such a rule, you will probably encounter the above bad trades affecting your trading survival as a technical trend trader.