Clarification on Procedure for chnage to Low market Risk

[Graeme Reardon]

Afternoon All,

Happy to see that we finally have a change to Low Market Risk yesterday, and have been madly looking for the right procedure to do it correctly. Looking at the manual and a bunch of posts over the years, I wanted to clarify it for myself (and this obviously assumes that my trading plan says to pyramid immediately the market moves from High -> Low Risk).

I see that I should firstly be manually adjusting the MVR's of all open stocks to 40%.

Is this done simply by going to 'Transactions-> View & Edit' and changing the MVR to 40% for all open stocks I have?

If so, I see the next step then being to pyramid all open stock trades by 50% and with leverage factor of 1, in descending order of profit until no margin is left available..

Is this done by simply going to 'Transactions-> New Pyramid' and sorting by profit (I assume $ profit, but it could also be % profit too which may affect the order they are done in), selecting the 'Low Market Risk' signal, typing in 50% for the pyramid value, and the price you aim to purchase at on Monday morning to give you the required quantity that you will need to buy?

I tested the above on an open stock I have (Ramsey Health Care - RHC), and the quantity it suggests I need to buy on Monday (assuming the same price as the close) is actually more than I purchased initially (but in a high market and sector risk, which was therefore lightened upfront by 50% and with a 100% MVR). This seems right as effectively I want to get back to a 'standard position size'..

Last question is what do I physically do (I'm with CBS) come Monday - am I selling all stocks and re-opening them as CFD's, or 'adding' to the current stock position size with the amount of CFD's suggested after following the above process.

If someone could clarify that I've got this procedure this right, it would be greatly appreciated.

Thanks for your advice.

Regards,
Graeme

[Ralph]

Hmmmmmm No need to change settings in Trade master every one has their own method outlined in their trading plan.
Basically if you have any vacant positions fill them first.

Next check your current positions and starting with the one with the greatest open profit select pyramid and trademaster will tell you how many to buy keep doing this till you run out of free equity.

DO NOT CHANGE YOUR OPEN POSITIONS FROM SHARES TO CFDS only open a cfd if it is a new position.
I trust this makes sense
Regards Ralph

[Reginald Lin]

Is this done by simply going to 'Transactions-> New Pyramid' and sorting by profit (I assume $ profit, but it could also be % profit too which may affect the order they are done in), selecting the 'Low Market Risk' signal, typing in 50% for the pyramid value, and the price you aim to purchase at on Monday morning to give you the required quantity that you will need to buy?

Yes, that is the procedure you should do. But the low market risk pyramid will only increase the amount at risk by a portion of the un-leverageed position size. Also, maximum brokerage percentage rule will apply may prevent you from pyramid. My med trades are not able to be pyramid due to this reason.

Irony, the position size of my new high risk trader turn out larger than med cap due to leverage factor. This is the part i am not sure. (2 of med trades are entered during high risk market and therefore position is lightened by 50% automatically.) Does anybody have similar situation or i misunderstand something?

[Chris Bayley]

DO NOT CHANGE YOUR OPEN POSITIONS FROM SHARES TO CFDS only open a cfd if it is a new position.
I trust this makes sense
Regards Ralph

Hmm, I've seen this mentioned a few times now (here, point 6.4 in the SPA3CFD manual,
point 1.4.3 in the public SPA3CFD trading plan) and I perhaps do not fully appreciate
the significance of it.

IF I have a trading plan that stipulates that my portfolio is traded with 3x leverage during
low market risk periods, then when the market transitions from high to low risk then
what is the problem with pyramiding(using CFDs) to the desired portfolio leverage ?
It appears that the weight of advice would indicate that only new positions should be
opened at the desired portfolio leverage ? Waiting for exits on enough 100%MVR positions
to enable the portfolio leverage to reach it's desired level may take considerable time,
or is that the very deliberate intent ?

Also if we are transitioning from a high to low risk in both sector and market
simultaneously then presumably the pyramid is from a %50 position to %100 i.e. +100% CAR ?
Most of the texts mention only the high -> low market situation 67% -> 100% i.e. +50% CAR.

Cheers
Chris

[Graeme Reardon]

Thanks for the comments so far.

I called SWS team this morning, and am now waiting for a call back from David to clear up some further confusion I have. My manual (which I received early January 2010) shows leverage of 3.5 is used in the Public CFD Trading Plan, as well as point 10.4.3 on p.101 talking about manually changing MVR's to 40% (per my above question)..

Seems as though the trading plan being used is actually the one on the Member's web site with 3.2 leverage, and point 10.4.3 does not appear in it. This plan on the web site is dated 10th Dec 2009. I've asked the obvious question..

I'll update everyone once I've heard back..

[Ralph]

They did change the leverage you can get the new trading plan from the members zone