Define Your Process
They may include technical analysis,
broker research, algorithmic trading, swing trading, and news events. Trading tools
can be sourced from your broker, trading texts and seminars. You will also find
a wonderful amount of ideas online. We suggest selecting tools that make sense
to you and are easy to follow. We recommend you only use trading
tools that generate entry, exit and target prices before you place the trade.
This information is required to calculate the reward-risk ratio. Online Currency Trading India
Capital Required and Risk Per Trade
The Capital required depends on
expected earnings. If budgeting for an annual profit of $25,000 we recommend a
capital base of $100,000 and a max leverage of three times. Risk no more than 1
per cent of your capital base on each trade, so in this case $1,000 per trade.
Stick to Your Plan and Cut Losing Trades
Before placing an order, determine
which specialized event or set-up you are trading. Then apply the trading rules
you have designed for such an event. These will generate your entry, stop loss
and exit levels.
Once
the position is open, make sure you follow to your planned exit levels. Do not
let factors such as news headlines (positive and negative) divert you from your
trading rules. Cutting losses will determine whether you stay in business or
not. If you cannot cut losses, we suggest you find another business to build. PAMM Fund Management Solutions
Keep
a record of all your trades and analyse each one faithfully. The primary focus
of the analysis should be to determine the amount of times and the reasons why
you failed to follow your rules. A loss-making trade is not an error if you
have followed your rules.
Position Sizing and the Reward-Risk Ratio
Calculate your position size using the 1% bet
size rule and the entry and stop-loss levels generated by your system. For
example, if we buy BHP at $36.00 and the stop-loss level is $35.50; our
position size is $3,600 or 100 shares.
Our
suggested reward-risk ratio is greater than or equal to 2.5 times, so do not
place an order unless your system is generating trades that are risking 1 per
cent of your capital to make 2.5 per cent or more. Open PAMM Manager Account
Success Rate and Return Expectancy
We bring it all together. Let's say you invest
$10,000 into your business and place 100 trades over the year. You risk $100
per trade and only place orders when your system trading signals with a
reward-risk ratio of 2.5 times or more.At
the end of the year your records show that your system produced 60 losing
trades that cost $100 each (brokerage costs
are excluded from this hypothetical example) and delivered 40 winning
trades that made $250 each. At times your system generated 10 losers in a row
so your account experienced the occasional 10 per cent drawdown. However, after
a tough year of trading you will have made $4,000. That is a 40 per cent return
for the year. If your system had produced 71 losing trades and 29 winners, your
earnings would be nil.
Regards,
Mobile : +91 8870455111
E-mail : info@bluemaxcapital.com
Web : www.bluemaxcapital.com
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