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Empowering the Individual Investors | ||
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The secret to a successful stock market investment/trading game is to compound your earnings much like investing in a mutual fund and leave the money there for decades. However, in investment trading, you cannot wait for decades as the signals are just months apart not decades. I like to introduce you to the money management method that have the same effect of compoundig your earnings much like what would happens when you leave your money into a successful mutual fuds for decades. William momey management formula is used by Larry William who won the International Robin Trading seminar twice, I don't know the details on the second competitioin but in the first competition Larry traded USD 10,000.00 to USD 1,100,000.00 in 12 months using money management formulas and his trading techniques. 10 years later his 16 years old daughter also entered the competitioin and traded USD10,000.00 to USD 110,000.00. According to him, you must first need a viable trading system before you can use his money management formula. So when you use stockbreakout.com make sure you choose a stock with a good PriceStructure Ranking i.e PR>60% The William money management formula is as follows N = ( A x MAL) / ML where N = maximum no of possible contracts or stocks allowed at any time.One contract is 100 stocks. A = account size. How much you have in your brokers account for investment trading. MAL = maximum loss allowed for whole account at any one time. This must include all your other stock purchases. ML=maximum loss per contract or stocks allowed at any time. Lets use an option example A = account size, in this case we have about say $2,900 MAL = maximum loss allowed for whole account at any one time, say for we cannot allow the account to loose more than 5% at any one time, so MAL = 0.05 ML = maximum loss per stock trade, in our case we limit the maximum loss in any option trade to $75.00, so ML=$75. N = maximum no of possible option contracts allowed at any time, if this is exceeded we must not add any more contracts. N = ( A x MAL) / ML , so in this case, I am afraid, we can only trade one option contract representing 100 stocks for now until the account size increases from future earnings or further deposits. Do not underestimate this formula. It is from a famous trader that has done it and is doing it, Larry William.
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