50. How to Set Trade Position Size for Maximum Profits
Produced By:
InformedTrades on 25 Jan 2008
Category: Credit & Debt
Description: http://www.informedtrades.com/
A leIn (more...) yesterday's lesson we talked about the martingale and anti martingale methods of trading which are the two categories which position sizing methodologies fall into. In today's lesson we are going to talk about one of the most basic anti martingale strategies, which is discussed in Dr. Van K. Tharp's book Trade Your Way to Financial Freedom, the Percent Risk Model.
The first step in determining your position size using this method is to decide how much you are going to risk on each trade in terms of a percentage of your trading capital. As we have discussed in our previous lessons on setting stop losses, studies have proven that over the long term traders who risk more than 2% of their capital on any one trade normally are not successful over the long term. Another factor to consider here when setting this percentage are things such as the win rate (how many winning trades) your system is expected to have versus the number of losing trades as well as other components which we will discuss in future lessons.
Once this loss in percentage terms has been determined, setting your stop then becomes a function of knowing how large a position can be traded while still being below your maximum risk level.
As an example lets say you have $100,000 in trading capital and you have determined from analyzing your strategy that 2% or $2000 (2%*$100,000) of your trading capital is an appropriate amount to risk per trade. When analyzing the Crude Oil Futures market you spot an opportunity to sell crude at $90 a barrel at which point you feel there is a good chance it will trade down to at least $88 a barrel. You have also spotted a strong resistance point at just below $91 a barrel and feel that 91 is a good level to place your stop and also gives you a reward to risk ratio of 2 to 1.
From trading crude oil you know that a 1 cent or 1 point move in the market equals $10 per contract. So analyzing further to determine your position size you would multiply $10 times the number of points your stop is away from your entry price (in this case 100) and you would come up with $1000 in risk per contract. Lastly you divide the total dollar amount you are willing to risk by your total risk per contract ($2000 total risk/$1000 risk per contract) to get the number of contracts which you can place on this trade (in this case 2 contracts)
As Dr. Van K. Tharp Points out in his book Trade Your Way to Financial Freedom, the advantages of this style of position sizing are that it allows both large and small accounts to grow steadily and that it equalizes the performance in the portfolio by the actual risk. As he also points out the disadvantages of this system are that it will require you to reject some trades because they are too risky (ie you will not have enough money in your account to trade the minimum contract size while staying under your maximum risk level) and that there is no way to know for sure what the actual amount you are risking will be because of slippage which can result in dramatic differences in performance when trading larger positions or using tight stops.
That completes our lesson for today. In tommorow's lesson we will look at another position sizing model which is known as the Percent Volatility Method.
sson on the % Risk Model of setting position sizes for active traders of the forex, futures, and stock markets. (less)
Views: 111
Comments: 0
Duration: 05:42
Good Will Hunting
Produced By:
moneytalks on 21 Jan 2008
Category: Wills & Trusts
Description: You should have a will, even if you (more...) don't have money or you're really young. Can you get one without shelling out big bucks, or even going to a lawyer? Lets find out. (less)
Views: 110
Comments: 0
Duration: 01:35
Tips for Buying Jewelry
Produced By:
moneytalks on 13 Dec 2007
Category: Personal Finance
Description: Buying jewelry is an especially (more...) difficult purchase because it involves the heart as well as the head. But before you let your emotions lead you astray, here are some tips from money reporter Stacy Johnson... (less)
Views: 110
Comments: 0
Duration: 01:37
CARE About Bankruptcy
Produced By:
moneytalks on 30 Jan 2008
Category: Credit & Debt
Description: There's been a lot of talk...and some (more...) action...lately when it comes to helping people over their heads in debt. But maybe if these lessons were learned earlier, there would be less need for intervention today. (less)
Views: 108
Comments: 0
Duration: 01:37
55. The Business Cycle and Fiscal Policy - What Traders Know
Produced By:
InformedTrades on 12 Feb 2008
Category: Credit & Debt
Description: http://www.informedtrades.com/
A lesson (more...) on the business cycle and how the government uses fiscal policy to try and keep growth going and inflation in check and what this means for traders of the stock, futures, and forex markets.
Fiscal policy can be defined for our purposes very simply as anything relating to government spending and taxation. Before looking at the fiscal policy role of government in trying to influence the economy, one must first have an understanding of the business cycle. For a number of reasons which are widely debated the economy goes through repeated periods of growth and contraction over time which can be broken down into the following phases.
1. A Contraction where economic activity and growth slows and can turn negative
2. Trough where the economy stops contracting and a new expansion begins
3. An Expansion or the speeding up of economic growth.
4. A Peak where the growth of the economy maxes out and begins to turn downward
We could spend many months going over and debating why this is but for our purposes it is simply important to understand that, while the timing and length of each of these phases has varied widely, the above pattern repeats itself over and over again throughout history. This is important for us as traders to understand as different phases of the business cycle and changes in peoples forecasts of where the economy is in those cycles is arguably the greatest factor which effects the price level of every market.
Prior to the great depression the US Government had a pretty hands off approach in regards to the business cycle. Since the great depression however the government has played a much more active role in the economy with its stated goals being to act to facilitate full employment and price stability. To help understand these goals and the balancing act that goes on between them as they often conflict, lets look at how each relates to the different phases of the business cycle.
1. During an expansion we start to see more people employed as companies begin to sell more goods and services and need to hire more people to keep up with the demand. As economic growth picks up and more people are employed there are more people spending their paychecks which can cause prices to rise, something also known as inflation. Because of this effect on prices the government's primary concern here will normally be trying to keep prices stable and inflation in check without hurting economic growth. The two things they can do in regards to Fiscal Policy to try and keep prices in check and inflation at bay are:
a. Raise Taxes: By raising taxes money is taken away from the consumer who now has less money to spend helping to counteract the demand that is pushing prices up and causing inflation.
and/or (less)
Views: 106
Comments: 0
Duration: 08:37
HOW TO MAKE MONEY ONLINE FOR FREE
Produced By:
philipk31 on 26 Nov 2008
Category: Creating Wealth
Description: realeasycash.ws
email me at (more...) philipk31@gmail.com if you have any questions
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Views: 103
Comments: 2
Duration: 09:48
Get A Free Domain Name for One Year No Obligations
Produced By:
ocollier on 29 Feb 2008
Category: Creating Wealth
Description: http://www.otiscollier.com/freedomain
In (more...) an earlier video, I shared with you how to get free hosting ( http://www.otiscollier.com/freehosting ). Now in this video, I am going to show you how to get a free domain for one year without any obligation. (less)
Views: 102
Comments: 0
Duration: 05:59
Business Tips - how to Roll Back
Added on: 02 Oct 2007
Category: Taxes
Description: Learn about the Roll Back of the State (more...) Income Tax in Massachusetts. For more info, visit www.superlativesolution.com/Podcasts.htm (less)
Views: 102
Comments: 0
Duration: 02:50
46. How To Protect Your Trading Profits with Trailing Stops
Produced By:
InformedTrades on 18 Jan 2008
Category: Creating Wealth
Description: http://www.informedtrades.com/
A lesson (more...) on how to traders use trailing stops when trading the stock, futures, and forex markets.
In yesterday's lesson we talked about some of the psychological difficulties people have with letting their profits run and introduced the concept of the trailing stop as one way traders can overcome these difficulties that are the downfall of so many traders.
As we spoke about briefly in yesterday's lesson, once a position has begun to move in a traders favor many successful trader's will manage that position through the use of what is known as a trailing stop. The simplest type of trailing stop is what is known as a fixed trailing stop which simply moves along behind a position as that position begins to move in the traders favor. The beauty of the fixed trailing stop, is that while it will move up behind a long position or down behind a short position as the position moves in the traders favor, if at any time the position begins to move against the trader, the stop does not move, essentially locking in a large portion of the gains the trader has made up to that point.
Let's say for example that you had been following the trend in the EUR/USD chart below which started back in August and were looking for an opportunity to get into a trade. Based on your analysis you decided that if the market broke out above the little resistance point that I have highlighted on the chart below and the ADX was in a good position that you were going to enter long at 1.4360 to try and ride the trend. To manage the trade if it moved in your favor you placed a 100 Point trailing stop on the position at 1.4260. Now in this example if the market moved against you from the start 100 points your stop at 1.4260 would not have moved and you would have been executed on that order when the market touched 1.4260. As you can see from the chart below however, in this example the market did not pull back but went higher. As our stop is a 100 point trailing stop once the market moved up from 1.4360 the stop is going to continue to move up remaining 100 points behind the current price. If the market moves down however the stop does not move. So in this example once the market stoped moving higher at 1.4752 so did our stop and since the market pulled back 100 points from that level we were stopped out in this example at 1.4652.
Chart Example
Most trading platforms will allow you to set a fixed trailing stop on the platform so you do not have to manually manage the order.
As we have touched on briefly in previous lessons, indicators can also be used as trailing stops. One of the more popular indicators which was designed specifically for this purpose is the Parabolic SAR which we covered several lessons ago and you should review if you have not done so already.
As we discussed in our lesson on the Average True Range (ATR), this and other methods for measuring volatility in the market are often used to set hard stops by traders when entering the market so they do not get stopped out by market noise. In addition to using the ATR as a hard stop, this and other volatility based indicators can also be used as a trailing stop, moving your hard stop along behind the position a set number of ATR's for instance as it moves in your favor. As with a hard stop this protects your position from market noise, while allowing you to look in profits should the market begin to move against you.
Many if not all of the other indicators could also be used as trailing stops with the Moving Average probably one of the more popular here as well.
Aside from fixed and indicator based trailing stops another strategy that many traders implement is a fixed percentage of profits trailing stop. Using this method a trader will set his hard stop his profit target, and then once the market hits his profit target will then begin trailing a stop which could be any combination of the methods above. This method gives the trader a greater chance that the trade will hit his profit target but provides less protection should the market reverse and begin to move against him. (less)
Stock Market For Beginners Calculator
Produced By:
antonb on 12 Nov 2008
Category: Investing
Description: http://basicsofinvesting.info/stock-market-investing/stock-market-for-beginners.html (more...) - Instruction of how to use the stock market for beginners calculator to help with stock investing or investing in general. (less)
Views: 96
Comments: 0
Duration: 01:06
How to Wholesale and Flip Houses without Cash or Credit?
Produced By:
TheFlipMan on 27 Sep 2009
Category: Real Estate
Description: The Flip Man tells all from A to Z How (more...) to Wholesale and Flip Houses without Cash or Credit? Wholesaling Houses maybe the easiest way to start making money via real estate investing with NO MONEY DOWN. When you start to wholesale houses you will find that you can make money and learn the business at the same time.
http://The-Flip-Man.com (less)
Views: 95
Comments: 0
Duration: 10:01
35. Master the Psychology of Trading: The Effect of Losses
Produced By:
InformedTrades on 04 Jan 2008
Category: Creating Wealth
Description: http://www.informedtrades.com/
A (more...) lesson on how the ability and willingness to take losses when trading the forex, futures, or stock markets is one of the key factors that differentiates successful traders from unsuccessful ones.
Trading Success Means Comfort with Being Wrong
In our last lesson we introduced the concept that money management and the psychology of money management as the most overlooked but most important component of trading success. In today's lesson we will begin to look at one of the most important components of the psychology of money management: a willingness to be wrong.
Humans in general grow up being taught by their environment of the importance of always being right. Those who are right are envied as the winners in society and those who are wrong are cast aside as losers. A fear of being wrong and the need to always be right will hold you back in general, but will be deadly in your trading.
With this in mind lets say that you have been watching my videos and feel that I am an intelligent trader, so you want me to give you a method to trade. I say fine and give you a method and tell you that the method will trade 100 times a year with an average profit of 100 points for winning trades and an average loss of 20 points for loosing trades. You say great and take the system home to give it a try.
A few days later the first trade comes and quickly hits its profit target of 80 points. Great you say and call a bunch of your friends to tell them about the great system you've found. Then a few days later the next trade comes but quickly takes a loss. You hold tight however and then the next trade comes, and the next trade etc until the trade has hit 5 losers in a row and amounting to 100 points in loses on the losers so you are now down 20 points overall, and all your trader buddy's who started following the system after the first trade are now down 100 points.
Now you feel really dumb and are the joke among the group of guys that you trade with, so the next day you come back to me yelling about how bad the system I gave you is. I say ok and tell you I have another system for you. This one also trades 100 times a year but has a higher success rate that I think he will be happy with. You take this system home and the next day it quickly hits a winner followed by another then another and then another until over the next few days you have 5 winners in a row totaling 50 points in gains for your account. Getting very excited you call all of your trader friends and tell them that this time you have found it, you tell your wife how you haven't lost on a trade in two weeks and you rub your perfect trading statement in the face of all your trader buds as revenge.
So now ask yourself this question. If you were really the trader in this example which system would you rather have? I can tell you from experience that the large majority of traders will take the second system without a second thought, and on top of that will stick with it even if it hits a few losses that wipe out most or all of its gains.
Although the successful trader will want to know a lot more about both these systems which we are going to learn about in the lessons that come before deciding which one to trade I can tell you that what they will glean from the above information is the following: (less)
Views: 95
Comments: 0
Duration: 07:32
How to Embed a List of YouTube Videos on MySpace
Produced By:
ocollier on 19 Jan 2008
Category: Creating Wealth
Description: http://www.otiscollier.com
In this (more...) video, I learned a neat little trick to embed multiple YouTube videos on your MySpace friends comments section.
http://www.youtube.com/sharing
ow do I link to a list of YouTube videos?
Want to show off more than one of your own YouTube videos, or specifically tagged videos, on your website? Below are a few options!
Option 1: Displaying a window of your own YouTube videos
By placing a small snippet of HTML code in your webpage, you can pull up a list of all your YouTube videos in a neat, little window. As a result, a small box with your videos will be rendered. (less)
Views: 94
Comments: 0
Duration: 04:44
WordPress Permalinks | Tutorial #11
Produced By:
ocollier on 19 Mar 2008
Category: Creating Wealth
Description: http://www.otisteaches.com/tutorials/wordpress-permalinks-tutorial-11/
Before (more...) you conduct your first post, I recommend customizing your WordPress permalink structure. Permalinks are basically the layout of how a URL of a WordPress post appears. WordPress' default permalink structure includes a bunch of random numbers in your url. This won't do jack squat for your search engine optimization.
Instead, you should look into customizing your permalink structure with the category field and post name.More...
Are you confused by what I just said? Watch the video and you will get it. (less)
Views: 92
Comments: 0
Duration: 08:55
(Team Beachbody)**Secrets to Success EXPOSED**
Produced By:
charliedg on 03 Nov 2008
Category: Small Business
Description: http:/www.CreatorstoWealth.com
Charlie (more...) Deleon Guerrero
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These views and opinions shall not be attributed to or otherwise endorsed by Team Beachbody or Beachbody, and may not be used for advertising or product ...
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Views: 91
Comments: 0
Duration: 07:07
Changing Your Credit Score
Produced By:
moneytalks on 19 Mar 2008
Category: Credit & Debt
Description: If you borrow money, you probably know (more...) that your credit score is important. The company behind credit scoring, Fair Issac, recently announced changes in the way they'll soon be doing it. (less)
Views: 90
Comments: 0
Duration: 01:26
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Produced By:
videormt on 12 Nov 2008
Category: Small Business
Description: http://www.RealMLMTraining.com Call Joe (more...) LoBalsamo 1-716-871-1211
Want Youngliving com Success? How to generate hundreds of fresh hot mlm leads a month!
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'YouTube Video Marketing' Tips #1 - Customizing Your Channel
Produced By:
ocollier on 30 Apr 2008
Category: Creating Wealth
Description: http://www.otiscollier.com/theplan
Hello (more...) downline members. This is Otis Collier and today I want to show you some tips about setting up your YouTube channel.
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19. How toTrade Moving Averages Like a Pro Part 2
Produced By:
InformedTrades on 14 Dec 2007
Category: Creating Wealth
Description: http://www.informedtrades.com/tags/index.php/moving-average/
In (more...) our last lesson we looked at the two main types of moving averages, the simple moving average and the exponential moving average. In this lesson we are going to look at some of the ways that traders use moving averages to pick their entry and exit points in the currency, commodities, and equities market.
As moving averages are lagging indicators they tend to work well in identifying and following a trend and not to work well in ranging or trend less markets. Because of this traders will often use them to trade with the trend as well as to identify potential areas of support or resistance which may result in a continuation or reversal of a trend.
Lets look at some examples:
The most basic way that traders will use moving averages is to identify and then trade with the trend of a particular instrument. Although most traders will probably want to use the moving average in conjunction with some of the things that we have learned so far and some of the things we will learn in future lessons, the most basic way to trade using just the moving average is to buy when the price of a financial instrument breaks above the moving average line and sell when the financial instrument breaks below the moving average line. For confirmation traders will often wait for a full bar to close above the moving average line before entering long and a full bar to close below the moving average line before entering a short position.
Example of Trend Following Using Moving Averages:
A second way that traders use moving averages is to identify areas of support or resistance and then trade the break of these levels, looking for a potential reversal of the trend. When a financial instrument has shown a particular moving average level to be significant from a support or resistance standpoint in the past by testing the moving average line several times, and then breaks that level, traders will often see this as a warning sign that the trend is reversing and position themselves accordingly.
Example of Trading Support and Resistance Breaks Using Moving Averages:
The last way that traders will using moving averages is by plotting a longer term moving average and a shorter term moving average on a chart and trading the cross over. The idea here is that the shorter term moving average will be faster in identifying changes in the trend and therefore traders will look to get long when the shorter term moving average crosses above the longer term moving average and short when the shorter term moving average crosses below the longer term moving average.
Example of Moving Average Crossovers:
That completes this lesson. You should now have a good understanding of how many traders trade moving averages. As always if you have any questions or concerns please feel free to post them in the comments section below, and have a great day! (less)
Views: 82
Comments: 0
Duration: 05:25
4. Day Trading Lesson 4: The Basics of Charts
Produced By:
InformedTrades on 27 Nov 2007
Category: Creating Wealth
Description: http://www.informedtrades.com/
The (more...) fourth lesson in a series on technical analysis for day traders of the forex, futures, and stock markets.
The tool of the day trader when analyzing the forex, futures, or stock markets is the price chart. Very simply a price chart is a chart showing the movement of the price of a financial instrument over a chosen time.
Most charts will allow a wide variety of time frames to be displayed and the time frame that day traders choose to use varies widely and depends on each traders trading style. In general, longer term traders will focus on daily time frames and above, and shorter term traders will focus on intraday charts such as hourly or 15 minute charts. Many traders will also use a combination of time frames in order to get a full picture of what price has been doing by, for instance, looking first at a longer term daily chart, then moving to an hourly chart, and then finally to a 15 minute chart. (less)
Views: 81
Comments: 0
Duration: 05:47
SHOCKING TRUTH!!! Anyone can make money online.
Produced By:
ocollier on 07 Apr 2008
Category: Creating Wealth
Description: http://www.otiscollier.com/silentmoney
You (more...) want to know the truth? Anyone can make money online if they simply apply a little bit of effort. How much effort? How about taking three minutes to complete a form and earn $25.
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