How Rivkin Global works

How Rivkin Global works

Rivkin Global provides trade recommendations for its members, covering the top 300 ASX listed stocks, the ASX 200 index, ASX sectors, global equities and indices, commodities and foreign exchange (FX). We also provide additional ‘insights’ articles that lay out our thoughts on financial markets, helping you to formulate your own trading strategies.

Our recommendations are predominantly sourced using technical analysis. The benefit of trading price action is that we can easily implement the same strategies across multiple asset classes. Our main limitation is liquidity, meaning that some financial instruments do not trade enough volume to warrant our participation.

Time required to manage trades

Trading is a rewarding experience, although patience and discipline are required, especially during a period of losses.

You should allocate around 10-15 minutes per day to place and manage your trades.

Frequency of trade recommendations

We recommend trades on average once per day. However, the number of recommendations all depends on what opportunities are available. Market conditions are constantly changing, ebbing and flowing from high activity to static. Because we attempt to capture trending moves, we will be trading more when markets are moving and less when prices enter a range. Furthermore, it is important to remember that we will only issue a trade recommendation if it fits our technical criteria.

Risk management and returns

We place a very strong emphasis on risk management, in particular keeping losses small compared to our returns. As a rough guide, expect to lose on 30%-50% of the trades you place. However, our win percentage means little without knowledge of our win to loss ratio; that is, the average size of our winning trades compared to the average size of our losing trades. Using our win percentage and our average win to loss ratio, we are able to calculate our expectancy. As long as we have a positive expectancy that is greater than 0, we will make money over the long term.

For example, if we profit from 50% of the trades we place, and our average winner is greater than our average loser by a factor of 2 to 1, we expect to make $500 profit for every $1,000 risked, on average. If we can generate 10 trades and achieve an expectancy of $500 per trade, we will make $5,000 over that time period.

How the recommendations work

Every trade recommendation will state the following information; what to buy or sell, the volume to trade, the method of entry, the entry price, a stop loss price and a target price (if there is one). A full trade order would sound like this:

Buy 352 CSL Ltd (CSL) on a stop entry of $39.71. If done, sell 352 CSL Ltd (CSL) at $38.29 on stop, OCO sell 352 CSL Ltd (CSL) at a limit (target) of $42.73.

OCO stands for ‘one cancels other’. It is used to link our stop loss and take profit orders. As soon as one order is triggered, the other order is cancelled. Once a recommendation becomes open, we will actively manage the position on a day to day basis until it is closed out. Any changes to our stop loss or target levels and you will be informed.

We recommend you have your stop loss and target orders placed in the platform at all times.

Our stop loss order is non-negotiable. It is not a level where we just think about getting out. If prices trade at our stop loss level, we exit and move on.  However, we will be more flexible with our target (assuming we have a pre-determined one). Depending on how the trade unfolds, we may exit either under or above our initial target level. This will also save you from having to follow the market intraday. 

About stop orders

Most of our trade recommendations will be entered via a stop order. A stop order only gets triggered if a stock rises or falls to a target level before the buy or sell order is triggered. Stop orders are highly useful in allowing trades to be activated without needing to watch a screen throughout the trading session.

Missing trades

If you don’t place your stop order and a stock moves strongly beyond the recommended entry price, we generally recommend not chasing the stock up. Either the price will come back towards the ideal entry point, or another trade will soon come along.

Position sizing

Position sizing answers the question ‘how many do I trade?’, a question poorly understood in the world of trading. Rivkin Global will provide specific trade sizing for a given level of risk. We typically risk $1,000 per trade, which equates to 2% of a $50,000 trading account.

Volume is calculated by risking 2% of a $50,000 trading account; or put another way, the volume recommended equals $1,000 risk. If you are trading with more or less than a $50,000 trading account, you will need to adjust volume accordingly. Please consider your own risk profile when allocating capital.

You will need to calculate your own volume depending on the size of your trading account and the risk per trade you are willing to assume. You can access your profile online and tailor your volumes by nominating a portfolio size and % risk level, or alternatively you can simply nominate a dollar amount you are willing to risk per trade. 

Position sizing becomes all the more important when trading CFDs because of the access to leverage. Leverage is discussed in detail below.

Read more about position sizing in our blog post here: https://www.rivkin.com.au/blog/2014-09-22-the-risk-reward-ratio-explained-35432.aspx 

Leverage

CFDs provide traders access to leverage. That is, we have the ability to trade a larger value of shares, over and above our actual level of capital. For example, with an account size of $10,000, and assuming a margin factor of 20%, we have the ability to trade up to $50,000 worth of shares (or any instrument). 

However, using leverage recklessly is a sure way to financial ruin. The example below will show that access to leverage does not alter the amount of shares that we trade. However, it does allow us to have more positions open than may otherwise be possible.

Let’s run through an example to demonstrate. In example one, we will trade without the access to leverage, using physical shares. In example two, we will run through the same trade with CFDs.

Example 1:

We wish to buy National Australia Bank (NAB) at a limit of $25. We will place a stop loss at $24 and a target level at $29. We have a $50,000 trading account, and wish to risk 1% of our capital on this trade, i.e. $500.

To calculate how many shares to trade, we divide our capital at risk ($500) by the risk per 1 share ($1). The risk per share is simply the difference between our entry price ($25) and our stop loss price ($24).

How many shares to trade     = $500/$1
                                               = 500 shares.

So we buy 500 NAB shares at $25 for a total cost of $12,500. If we are stopped out on this trade, we will sell our 500 shares at $24 for a total of $12,000. Doing so results in a capital loss of $500.

Notice that this trade ties up 25% of our trading capital. Three more trades of similar size and we are out of capital.

Example 2:

Now let’s run through the same trade using CFDs.

To calculate the number of CFDs to trade, we again divide the $500 by $1 a share, which results in 500 CFDs. Let’s assume that NAB has a margin factor of 5%; that is, we only need to outlay 5% of the total face value of the trade.

So we buy 500 NAB CFDs at $25 for a total cost of $12,500. However, we need only to place 5% of this value as margin, which equals $625. This represents a mere 1.25% of our trading capital.

A few key points should now be obvious:

Whether we are trading physical shares or CFDs, the position size is exactly the same; in this example 500. The position size is based on the trade risk ($1), which is the difference between our entry level and stop loss level.

1.     We will always have a pre-determined stop loss price, because without it we cannot calculate how many shares to trade.

2.     The amount of margin required to be placed with the CFD broker ($625) is not the same as how much capital we have at risk on the trade ($500).

3.     The way to think about leverage is that we will use it only when we need it. So it’s not used to increase the position size, but to increase the number of trades that we can have running at any one time.

CFDs

CFD specifications, such as ticker symbol and contract size, can differ from provider to provider, especially on commodities and currencies. Rivkin Global recommends position sizing assuming members use Rivkin’s CFD dealing service. If you use another CFD provider, you will need to ensure you understand the potential differences in contract sizes.

If you are new to CFDs, please click here to learn how they work, along with the benefits and disadvantages.

Communication

Rivkin Global issues advice and updates every weekday, unless otherwise stated, and will be updated on the website by 9.30am AEST. You will need to read the information on a daily basis so as not to miss new trade recommendations and changes to pending trade recommendations and open positions. We will also issue emails and SMS alerts throughout the day whenever any action is required, be it new recommendations or amendments to any pending orders. Rivkin Global is available online only.

The format of Rivkin Global consists of commentary on our positions and the markets, and tables detailing current recommendations and open positions. In addition, we detail all of our closed positions, showing our complete track record.

Also available to members is Virtually Live Global, a weekly audio show allowing you to share your views with other members and traders, and ask the Rivkin Global team questions.

Please note that investing in financial markets can result in loss, which can be magnified through the use of leverage. While these risks cannot be eliminated completely, we take care in providing trade and position size recommendations to minimise these risks.

Cost

Our most flexible membership option is $37 a fortnight; longer memberships are available at a discount.

Summary

Hopefully this guide offers you a taste of what to expect. More than just trade ideas, we will provide you with the tools to manage your money and build wealth as a trader. We will have good months and bad months. At times it will seem easy, and at times frustrating. We encourage you not to judge your experience from 1 or 2 trades, but think longer-term. It will require a little bit of time each day, and some discipline and patience, however the journey should be rewarding.

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DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice, securities and derivatives dealing services and accounting administration services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.