From Swing Trading & Momentum Trading. AlpeshPatel.com

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1 From Swing Trading & Momentum Trading AlpeshPatel.com

2 Making Money By Not Losing Money AlpeshPatel.com

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4 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 world s largest derivatives exchange

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6 How find the initial fixed maximum stop loss? Method Average Range

7 How find the initial fixed maximum stop loss? Method: Average True Range (ATR)

8 SL= 2 x ATR. Fixed At Entry Because it is not noise if 2 x ATR How find ATR? Use ATR indicator

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10 2 x ATR = 2% of Total Risk Capital 3 x ATR = 2% of Total Risk Capital

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

13 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

14 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

15 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

16 ATR Benefit Costs Overall 2 Total Loss Is Fixed - 2% Stopped Out More Often Of Potentially Profitable Trades Than If 3 ATR 3 Total Loss Is Fixed 2% Position Size Smaller Than if 2 x ATR So Make Less Profits On Profitable Trades Win/Loss Ratio Lower, But Profitability Higher on Wins Win/Loss Ratio Higher, But Profits Lower on Wins

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49 Trading Has No Staff Costs You Can Eventually Hire An Assistant Outsource Accountancy No Staff Training No Employer s Liability Insurance No Statutory Paid Leave No Employer NI No Staff Pension Fund

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

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

52 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

53 FX and Indices and Commodities Never Change Nothing To Make You Obsolete

54 If Your Broker Goes Bust Your Account Is Underwritten By The Government YOU Benefit From Government Bailout!

55 Always A Buyer On The Global Market No Price Haggling, Discounts, Sales Offers

56 No Warehouse, Storage, Delivery Instant Execution Move On To Next Deal No Commissions No Middlemen Sales Fees

57 Dell Computer fast, allows multiple monitors: (as for multiple monitors) approx gbp450 Or add extra monitor (e.g. Samsung) to your existing PC (gbp100) Fast Broadband

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60 Analyse Analyse Each Chart Constantly More Analysis Have To Analyse Each Time Frame Constantly Interpret Interpret Each Chart In Keeping With The Rules

61 Wait For Exit and Entry Computer Tells You Buy and Sell Calculate Position Size Based on Your Trading Risk Capital Place Trade Click Of A Button

62 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

63 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

64 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. I.e. Average win bigger than average loss. Wins to losing trades were to i.e. almost equal.

65 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.

66 Losers did this: Trades which turned out to be losses, were held 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.

67 90% of trades for winners made as much as they lost. The remaining 10% of trades is where they made the money. I.e. a few big winning trades. But only very few. Based not on the amount of money they bet, but letting those wins continue i.e. 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.

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71 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

72 Run Your Profits: Add To Your Position Method 1

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74 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 Second Position Entered at (0.5x1.20) or Third Position Entered at (0.5x1.20) or Fourth Position Entered at (0.5x1.20) or If you do add additional positions then raise the initial 2 x ATR stop-loss to be 2 x ATR from latest entered position

75 ATR = 1.20 Entry Price Stop First i.e (2 x 1.20) Second i.e (0.5x1.20) Third Fourth

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77 1. An Alpesh Patel trading book 2. Exclusive ebooks/eguides on trading and investing 3. Exclusive subscriber-only webinars 4. Exclusive subscriber-only videos on trading and investing 5. Access to my personal Facebook page to keep in touch 6. Access to my Twitter account for social investing 7. My monthly newsletter and free access to my daily newsletters on stocks and FX 8. My top picks reports during the year