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Traders Forum: Durban

Traders Forum: Durban. Shaun van den Berg Head of Client Education 17 th April 2013. Agenda. Technical Market Overview Technical Trading Trading Equity Derivatives (SSF & CFD) The Stockbroker (Trade Ideas) The Investor (Long-term Investment Opportunities) Open the Floor

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Traders Forum: Durban

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  1. Traders Forum: Durban Shaun van den Berg Head of Client Education 17th April 2013

  2. Agenda • Technical Market Overview • Technical Trading • Trading Equity Derivatives (SSF & CFD) • The Stockbroker (Trade Ideas) • The Investor (Long-term Investment Opportunities) • Open the Floor • Upcoming Webinars • Summary • Conclusion

  3. Technical Market Overview

  4. Technical Overview Dow Jones Industrial Average Hang Seng & Nikkei Indices DAX Index & FTSE 100 Index Brent Crude Oil Gold $ & Platinum $ Euro / US $ Rand $ JSE Top 40 Index JSE Resources 20 Index JSE FINDI 30 Index

  5. Dow Jones Industrial Average (Weekly) Resistance Support Dark Cloud Cover Overbought Bullish

  6. Hang Seng Index (Weekly) Resistance Support Down Channel Oversold? Bullish

  7. Nikkei Index (Weekly) Bearish Harami Overbought Resistance Support Bullish

  8. DAX Index (Weekly) Resistance Support Rising Wedge? Overbought Bullish

  9. FT 100 Index (Weekly) Resistance Support Still off record highs Overbought Bullish

  10. Brent Crude Oil Resistance Resistance Support Support Support Broken support 61% Fibonacci retracement Bearish

  11. Gold $ Resistance Resistance Channel Resistance Support Support Support Broken support Free fall? Bearish

  12. Platinum $ Broken support 61% Fibonacci retracement Resistance Support / Resistance Support Support Support Bearish

  13. Euro/ USD Support Resistance Resistance Broken Resistance Tested Support Turning? USD Weakness

  14. Rand $ Resistance Tested Resistance Resuming Trend? Resistance ZAR Weakness

  15. JSE Top 40 Index Resistance Testing 200-day MA Oversold Support Resistance Support Bullish

  16. JSE Resources 20 Index Resistance Support Support Support Bearish

  17. JSE FINDI 30 Index Resistance Support Bullish

  18. Summary: Technical Overview • DJIA • Bullish • Overbought • Hang Seng Index • Bullish/ Down Channel • Nikkei Index • Bullish / Overbought • DAX Index • Bullish / Rising Wedge? • FT 100 Index • Bullish / Overbought • Brent Crude Oil • Bearish / Broken Support • 50% Fibonacci Retracement • Gold $ • Bearish / Broken below Support • Platinum $ • Bearish / Broken Support • EUR/ZAR • Weakness / Broken Support • Rand $ • Weakness / Testing Resistance • JSE Top 40 Index • Bullish / Broken Support • JSE Res 20 Index • Bearish / Broken Support • JSE FINDI 30 Index • Bullish / Testing Support • Oversold

  19. Technical Analysis Support & Resistance / Trend lines / Chart Patterns Candlestick Patterns / Moving Average Crossovers Stochastic/ RSI & OBV indicators

  20. Support & Resistance Resistance Resistance Resistance Support Support Resistance Resistance Support Resistance Support Support Resistance Support Resistance Support Support Support & Resistance levels highlight possible “turning points”

  21. Trend Lines As long as the price stays above/ below the Support or Resistance lines, the trend is either bullish or bearish Resistance Trend Line Support Trend Line Resistance Trend Line Support Trend Line

  22. Continuation Patterns Flat Top or Ascending Triangle Rectangle Formation Symmetrical Triangle 1 3 Flat Bottom or Descending Triangle 5 4 2

  23. Reversal Patterns Rising Wedge Double Bottom Double Top Head & Shoulders (Top) Falling Wedge Inverse Head & Shoulders Broadening Formation

  24. Anatomy of a Candlestick

  25. Bullish Candlestick Patterns These are reversal patterns that show up after a pullback

  26. Bearish Candlestick Patterns • Bearish patterns - Opposite of the bullish patterns. • Bearish patterns come after a rally. • Signify a possible reversal just like the bullish patterns.

  27. 50 & 200-day Moving Averages

  28. The Stochastic Indicator Bearish Divergence Sell Zone Buy Zone Stochastic = Close - Low x 100% High - Low 14 = Lo = 014 14 = Hi = 10014

  29. The RSI Indicator Bearish Divergence Overbought Oversold RSI =100- {100/ 1 + (U/D)} 14 = Down = 014 14 = UP = 10014

  30. The On Balance Volume (OBV) Indicator

  31. Trading Tools • Watch List (Top 100 shares) / Fundamentals • Top 40 shares / Mid cap shares • Mining & Resources / Financials / Industrials • Technical Analysis • Price charts (Candlesticks) / 50 & 200-day Moving Average • Trend lines / Support & Resistance / Fibonacci retracement levels • Chart Patterns • Stochastic & RSI indicators / Volume Indicators • Trading platform • Mobility (Trade anywhere) / Place orders after hours • Direct Market Access (DMA) / Price Alerts & Stop Orders • Risk & Money Management • Stoploss • Position Size

  32. Trading Equity Derivatives Single Stock Futures (SSF)

  33. Investor / Trader Matrix Prudent High Reward / Low Risk Aggressive High Reward / High Risk High R EWARD Conservative Low Reward / Low Risk Speculative Low Reward / High Risk Low Low High RISK

  34. Equity SSF • Regulated by the JSE • A standardised contract • Standard quantity (100 shares) • Expiry Date • Expires on the third Thursday of every quarter • March, June, September & December. • Initial Margin – ± 15% deposit • Gearing ± 6 times • Variation Margin – Adverse price movement

  35. SSF Contracts Available

  36. Trading Costs • Brokerage - Charged at 0.4% (ex VAT) - Value of the transaction. • Market Makers Fee – Charged at 0.1% (excluding VAT). • The total brokerage charge is 0.57% (including VAT). • Booking Fee - R60 is charged per SSF contract • You pay only for the opening leg of all transactions • Only once per day per SSF contract. • If you buy a Sasol SSF10 times on one day; you only pay R60 once. • Rollover Cost – 0.25% of Exposure • Interest Payable • Interest paid on the SSF cost value • Determined daily by the market maker • Ruling SAFEX rates. • Interest Received • Initial Margin – SAFEX less 2% • Cash balances - Rate linked to the JSE Trustees rate

  37. Comparable to Equities INVESTOR A (Share Trader) INVESTOR B (SSFs Trader) Confident that Sasol shares will increase. Confident that Sasol shares will increase. Sasol’s share price is R350,therefore she buys 1 contract. She has R35 000 which she can invest. Sasol’s share price is R350,therefore she buys 100 shares. The initial margin set by the broker is R6 000 which is paid by the buyer. 3 months later the price has increased by 10% so she sells her shares to make a R3 500 profit. After 3 months the price has increased by 10% & the investor closes out his position & sells out of theSasol SSF contract. Her return on her investment is 10%. His profit is R3 500but his return on his investment is 58%.

  38. Dividend Neutral Contracts • DividendsExpected in any quarter • Priced into SSFs • Includes expected interest to be received on dividend payment. • Traders do not receive dividends as a cash payment even though they do benefit from them. • Long Trades • N-contract = R100 • Q-contract = R95 plus interest • Plus F-Contract = R5 • Short Trades • N-contract = R100 • Q-contract = R95 plus interest • Less F-Contract = R5 Dividend R5 SSF Price R95

  39. Hedging using SSF Equity Position + 500 NPN SSF Position -5 NPN contracts Share Price: -R50 Share Price: -R50 Loss: 500 x R50 = -R25 000 Profit: 500 x R50 = +R25 000

  40. Pro’s & Con’s of Trading SSFs Advantages Disadvantages • Capital Efficient • Low trading costs • Hedge your current portfolio • Trading Platform • DMA • After hours • Stops • Interest Payable • Quarterly Rolling Fee • Dividend Neutral • No voting rights • Gearing & Risk

  41. Trading Equity Derivatives Contracts for Difference (CFD)

  42. What are CFDs? • Contracts for difference (CFDs) are contracts … • Two parties (i.e. client & PSG Online) • Settled at the close of the contract • Difference between opening & closing price. • Derivative - It derives its value on an underlying share e.g. ANG, BIL, SOL • “Go Long & Short” – Up or down • “Long Only” – No Scrip available for shorting • Top 100 JSE listed shares • Initial Margin • 15% on Top 40 • 17.5% on next 60 • Variation Margin – “Top-up” - Adverse price movement

  43. Geared Product • You do not have to pay the full price of the underlying shares. • You only pay enough money to cover the initial margin or deposit into your account. • You may only need R15 000 to purchase CFDs up to a value of R100 000. • If your position rises to R115 000 (15% rise), you will in fact make a 100% return on your trade, as you only deposited R15 000 initially.

  44. Trading Costs • Minimum Cost Value - Each new CFD position opened needs to have a minimum cost value of R25 000 • R3 750 (15%) initial margin on a Top 40 shares • R4375 (17.5%) initial margin for Top 41-100 shares. • Brokerage – Commission is 0.4% (excluding VAT). • Open to negotiate brokerage rates for active traders. • Interest – Interest is charged on the total value of the open position at SAFEX +2%. • This is usually equal to around Prime -2%. • Scrip Lending Fee • A fee of 1.5% per annum is charged for short positions • Charged per day on open positions • Minimum of R250 per position. • Financing at competitive rates (CFD) • Current borrowing rate 7.00% (± Prime –2%)

  45. CFD versus Equities Equity Trade Details CFD Trade 500 ABC shares 500 ABC shares Instrument 6000c 6000c Price (Cents) R30 000 R30 000 Exposure Initial Margin 15% R30 000 R4500 Initial Margin 17.5% R5 250 R30 000 R120.00 R267.50 Brokerage Cost 14% VAT R37.45 R16.80 STT & STRATE None R85.92 Total Costs R136.80 R390.87 % of Exposure 0.46% 1.30%

  46. CFD Available

  47. Trading CFD • Buy 300 AVI shares @ 5529c • Exposure = R16 587.00 • Initial Margin Required = 17.5% x R 16 587 = R2 902.72 • Gearing = 5.71 times = R16 587 / R2 902.72 • Brokerage = R16 587 x 0.4% = R66.34 • Equity trade = 0.9% = R149.28 (Minimum R98) • 14% VAT = R9.28 = Total R75.62 • Interest on Cost: SAFEX rate 4.73% +2% = 6.73% • R16 587 x 6.73% = R1116.30 /365= R3.05 per day • Interest on Initial Margin: SAFEX 4.73%-2% = 2.73% • R2902.72 x 2.73% p.a. = R79.24 / 365 = 0.21 cents per day.

  48. New Order (Margin) Step 1: Click New Order Step 2: Enter Code & Go

  49. Price Watch & Stop Order Step 1: Click New Order Step 2: Select Price Watch Step 4: Enter Price Step 3: Above or Below Step 8: Click Submit Step 7: Enter Price Step 5: Select Close Step 6: Enter Contract

  50. Pro’s & Con’s of Trading CFDs Advantages Disadvantages • Capital Efficient • No fixed quantities (R25 000) • Low trading costs • No expiry date • No rollover costs • Save the annual 1% expense • Ideal for the Position Trader • Hedge your current portfolio? • All the benefits • Capital growth & Dividend income • Trading Platform • After hours • Stops • High minimum trade values • Scrip lending fees • No voting rights • Gearing & Risk

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