Capital Protection Group

Subject preservation of capital can be divided into two hotel’s category. The first category protects the initial capital, whereas the second is responsible for the protection of the revenue already in the process of its enlargement. If you have not done a job of protecting the initial capital, you can not introduce the possibility of protecting profits. Speaking of income, the first thought that comes to mind 90% of traders – protection of income in a single winning trade. They want to know at what point the record profits from the transaction, and when to hold a profitable position. This topic is certainly worthy of discussion and consideration, but it is not the subject of this article. When I speak about the protection of income in this article, I mean the profits from all transactions. For example, starting with the account, and reaching 000, 000, what steps should be taken to make sure that the account does not “fall through” back to, 000. This is exactly what I will discuss in this article.
Protection of seed capital.
This is something with which to begin …
What was thought to Markets? I spent quite a lot of research and discovered one of the most brilliant professional secrets. I do not have to worry about protecting the initial capital, because I’m going to make a fortune. The saddest thing is that only the beginning, they “merge” its own expense during the first 36 hours, each time repeating the same mistake. Neglecting the protection of seed capital.
Once, I was approached by a trader, who had (I emphasize the word “had”) 0,000 of capital to start trading. He was going to sell Daily S & P. He asked me, with a number of contracts to start trading. I asked him, “Were you ever Daily trading on the S & P?”, “No”. “Has you the necessary research?”, “I think so. My answer was the same as it was and will always, regardless of the answers to these two questions, one. Start with the one contract. The only reason that I asked him about was that I knew that he would oppose that, to trading only one contract with an initial score of 0,000. So, I just tried to convince him to start with one contract. He began to trade with the eight. A month later, he called me. His bill slipped to 0,000 from 0,000. He decided that if he loses money, it is necessary to increase the number of traded contracts! This may be a topic for another article. Nevertheless, he called me and told me what had happened and asked what to do now? I said – trading one contract. It was an expensive lesson.
The first rule of protection of seed capital – always start trading with one contract, minimum lot of shares, or one option. No matter what the initial capital you have, how much research you conducted, what results were obtained on historical data. Start with the minimum. Starting with the minimum you can give a method to prove its efficiency, before the risks increase. (See “Power of proper money management”).
The second rule of protection of seed capital – not “peretorgovyvat” one contract too many markets. If at some point you are close to the probability of margin-Cola, then you are “overloading” your account. Sometimes it can be waived, depending on the account that you have, or the goals it has set for itself. For example, I have a funny dream – beat the record trade Larry Williams. Will I be it ever do, God only knows. But every time I try and put the entire competition account of, 000 at the starting line. The reason is a consequence of the greatness of purpose, which stands in front of me. Others can only work with a score of, 000. Virtually impossible to completely avoid stress and still be able to adequately increase the account. However, if you have the opportunity to have some margin between the initial score and the minimum margin requirement after deducting the three maximum drodaunov received on historical data – is a good start.
On the other hand, little account is the fine line between “peretorgovley” accounts and building a reasonable position. If in doubt, take the conservative side. Better be careful what crazy to have a chance to stay here until next year.

PROTECTION OF PROFITS

Since then the fun begins. If you are properly protected starting capital, you have a very good chance to stay in the game long enough to finally derive some income from your trade. One of the most important trading decisions in your life – how big income satisfied, if it grows. In this section, I assume that you have read and understood how to increase your risk, in the article “The power of proper money management.” If the increase in risk is correct, there is a chance that the amount of income that is received in a favorable trading period, will surprise you. However, you must protect this income, because there is always a chance drodauna, which may push you into a corner. Most traders do not realize that regardless of the methods that they sell, the system will be in drodaune, on average, from 65% to 80% of the time. And if you do not have a proper plan, you can easily see how with profits grow sweeping eagle’s wings, and it evaporates away. And you do not even know what has caused you such a defeat. (See “Drodauny can always be more …”).

If the protection of profits is more important to you than continuing increase in accounts as rapidly as possible, then the most important step in the onset of drodauna will decrease your risk per trade at a faster rate than the rate with which went the growth of risk in a favorable period. There are two main aspects of money management. How to increase the risk in the next transaction, and how to reduce the risk in the next transaction. For example, if increasing the number of contracts traded in the method FixedRatio, you are using a delta equal to, 000, to protect income, you can reduce your risk is twice as fast. For example, using the delta in, 000, beginning with the account, 000, you trade six contracts, if the account has grown to, 000. If there is a relatively large drodaun – in, 000 per contract, then your score will drop to about, 000, trade two contracts. This means that you have been sufficiently great risk in continuing drodauna.

However, if you reduce the number of contracts is twice as fast, your account drops to, 000 when trading is only one contract. Thus, even after a relatively large drodauna, you protect on, 000 more profits than if the rate of risk reduction was the same as the rate of increase in risk. Continuing to trade this system or method, you can still undergo drodaunu, 000, before reaching the value of the initial capital, 000.

Using a more rapid decrease in the number of contracts than a raise, you can actually deploy a losing scenario in the lucrative, if the first was obtained income. To increase the account by the method FixedRatio from, 000 to, 000, as in the example above, the system or method should bring the total revenue on a contract in, 000. If this system will suffer drodaun in, 000 per contract, the result will be (-, 000). However, when applying to reduce the number of contracts traded in the two times faster than growth, the end result will remain positive, 000! Method to work, 000, and then lost, 000, but a good trader, however, remained in profits, 000, despite a losing scenario.

Obviously, an article can not fully consider all the possibilities of using the appropriate capital management to protect profits. Nevertheless, I will focus on some key points. First, if in the trading process, you lessen the number of contracts (or lots of shares or options), the question arises as to when to return to increase. Simple answer, to increase the number of contracts at the same levels at which there was a decrease. Then, when you reach the goals that led to a decrease, you continue to increase the original script by using delta in, 000.

Critical points.

Almost every time I start selling a new method, or a new account, my first goal – to achieve what I call a “critical point”. The critical point is a very important point, which should seek any trader. If you apply the principles outlined and will reach this point, you will feel the joy and freedom in their trade.

The critical point is simply the level of your account, at which, in the application of appropriate management of the capital, you will never get a negative result on the account, regardless of whatever happens. It is not as difficult as it may seem.

For example, I cite his plan used for the participation of traders in the championship this year. I used the Daily trading on its system PowerTrade S & P. My account has reached a size of 7,000, starting with the whole, 000 in the beginning of the year. I did not use exactly the method of reduction described above, although very close to it. Nevertheless, in accordance with my plan, I had to go to the trade only one contract, if my account has fallen below 000. Then, if drodaun continue, with a decrease in accounts below 000, I should go to trade contract E-Mini S & P. If this happens, PowerTrade S & P will continue to trade with another additional drodaunom 5,000. That’s true, I’m not mistaken – additional drodaun to 5,000, based on trading one (complete) contract before my account reaches a negative zone.

Thus, after the receipt of income in total, 000 based on trading one contract, the method could enter into a common drodaun 0,000, before I lose this, thirty profit. Thus, based on trading one contract, this method may lose up to 0,000, while I still did not lose a penny.

Relax and perceive the power of the information contained in this article. This should forever change your view on trading methods. And if you gain invaluable experience to reach a critical point in their trade, I hope I can count on you for at least a steak dinner:)