From Swing Trading & Momentum Trading

AlpeshPatel.com

Making Money By Not Losing Money

AlpeshPatel.com

The Trouble With A Loss Is

Not Only The Loss Of Money,
But Also The Loss of Ego.
Pat Arbor, Chairman Chicago Board of
Trade worlds largest derivatives exchange

 How find the initial fixed maximum stop loss?

Method Average Range

 How find the initial fixed maximum stop loss?

Method: Average True Range (ATR)

 SL= 2 x ATR. Fixed At Entry

Because it is not noise if 2 x ATR
How find ATR?
Use ATR indicator

2 x ATR = 2% of Total Risk Capital

3 x ATR = 2% of Total Risk Capital

ATR = 25 pips
2 x ATR = 50 pips
3 x ATR = 75 pips

ATR = 25 pips
2 x ATR = 50 pips
3 x ATR = 75 pips
Assume Total Risk Capital = 100k
2% of 100k = 2k = 2xATR (50 pips) = 40gbp per pip

ATR = 25 pips
2 x ATR = 50 pips
3 x ATR = 75 pips
Assume Total Risk Capital = 100k
2% of 100k = 2k = 2xATR (50 pips) = 40gbp per pip
2% of 100k = 2k = 3xATR (75 pips) = 27gbp per pip

ATR = 25 pips
2 x ATR = 50 pips
3 x ATR = 75 pips
Assume Total Risk Capital = 100k
2% of 100k = 2k = 2xATR (50 pips) = 40gbp per pip
2% of 100k = 2k = 3xATR (75 pips) = 27gbp per pip

Note: Loss is 2% of Trading Capital Whether Falls to 2 ATR or 3 ATR

So Why Not 3 x ATR? Because only 27gbp per pip NOT 40gbp per pip so make less
profit eventually on winning trades

ATR

Benefit

Costs

Overall

Total Loss Is Fixed - 2%

Stopped Out More

Often Of Potentially
Profitable Trades
Than If 3 ATR

Win/Loss Ratio
Lower, But
Profitability Higher
on Wins

Total Loss Is Fixed 2%

Position Size Smaller Win/Loss Ratio

Than if 2 x ATR So
Higher, But Profits
Make Less Profits On Lower on Wins
Profitable Trades

 Trading Has No Staff Costs

You Can Eventually Hire An Assistant
Outsource Accountancy
No Staff Training
No Employers Liability Insurance
No Statutory Paid Leave

No Employer NI
No Staff Pension Fund

 No office
No shop
No commuting
Just need a computer and internet

 No Marketing Costs
No Blogs/Social Media
No Adverts
No Business Cards
No Google Adwords
No Shop

 No Foreign Low-Cost Provider Of Your Product

No Price Competitor Next Door
No Supplier Price Hikes
Trading Platforms are Free
Trading Brokerages are Commission Free

 FX and Indices and Commodities Never

Change
Nothing To Make You Obsolete

 If Your Broker Goes Bust Your Account Is

Underwritten By The Government
YOU Benefit From Government Bailout!

 Always A Buyer On The Global Market

No Price Haggling, Discounts, Sales Offers

 No Warehouse, Storage, Delivery

Instant Execution Move On To Next
Deal
No Commissions

No Middlemen Sales Fees

Dell Computer fast, allows multiple monitors: www.dell.co.uk

(as for multiple monitors) aprox gbp450
Or add extra monitor (eg Samsung) to your existing PC
(gbp100)
Fast Broadband

www.investingbetter.com

Analyse

Analyse Each
Chart
Constantly

More
Analysis

Interpret

Have To
Analyse Each
Time Frame
Constantly

Interpret Each
Chart In
Keeping With
The Rules

Wait For
Exit and
Entry

Computer
Tells You
Buy and Sell

Calculate
Position
Size

Place
Trade

Based on
Your Trading
Risk Capital

Click Of A
Button

 Once a security risen 10% into profit, if it falls

back into loss, you are less likely to make money
Some make money who are right only 4 times out
of 10 they close a lot of losing trades quickly

 Forex traders were particularly successful trend following and reverting

trade
Those who bet small amounts, but did more trades, were more profitable
than those trading big size but infrequently
Long trades took longer to make money than short trades

Those who took a systematic approach, did better than an

opportunistic approach
When they won, they won more than what they lost when they
lost. Ie Average win bigger than average loss.

Wins to losing trades were 55-45 to 60-40 ie almost equal

 There were no big losing trades

among winners, unlike losers, who
had some big losses
Losers and winners looked the same,
except, losers had some big losing
trades which wiped out their
otherwise good record, it was not
that losers just kept losing all the
time.

 Losers did this: Trades which turned

out to be losses, were held on longer
than the average holding period for
all trades they held.

Winners held on to losing trades for

shorter time frames than their
winning trades and the average
holding period for all their trades.

 90% of trades for winners made as much as

they lost. Of the remaining 10% of trades, is
where they made the money. Ie a few big
winning trades. But only very few.
Based not on the amount of money they bet,
but letting those wins continue ie those few
winning trades were held for longer than
average once they knew they had a winner. But
winners did not let wins turn into losers by
holding on.
Losers held on longer than average once they
knew they had a loser.

Run Profits
When you are right, you have to add to your position and let those profits run

How do you decide

when to buy more in
the middle of a winning
trade?
That is the ART of the
Trader

Run Your Profits: Add To Your Position Method 1

Run Your Profits: Add To Your Position Method ATR

Add same position again at every 0.5 ATR price interval move after initial entry.
Example:
ATR = 1.20
First Position Entered at

28.30

Second Position Entered at

28.30 + (0.5x1.20) or 28.90

Third Position Entered at

28.90 + (0.5x1.20) or 29.50

Fourth Position Entered at

29.50 + (0.5x1.20) or 30.10

If you do add additional positions then raise the initial 2 x ATR stop-loss to be 2 x ATR
from latest entered position

ATR = 1.20
Entry Price

Stop

First

28.30

25.90 ie 28.30- (2 x 1.20)

Second

28.90

26.50 ie 25.90 + 0.5x1.20

Third

29.50

27.10

Fourth

30.10

27.70