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    FREE MAXIMUM LOT TRADING COURSE

    Hi

    Thank you for answering the questions in module 1

    We are now ready to move onto module 2:

    1        Basic risk reduction concepts
    2        The calculation of maximum lots and splitting of trading capital
    3        3 strategies for using maximum lots with examples

    At the end of this module we will be asking you questions about the content covered
    to ensure that you are ready for the last module where all the concepts are combined
    into a money management strategy. Please complete these questions and should
    your answers indicate that you are ready for the next module, the webpages for that
    module will be forwarded to you.

    We hope you are enjoying the course and look forward to your feedback.

    Kind Regards


    Expert4x

    MODULE 2 OF THE MAXIMUM LOT TRADING COURSE

    SPLITTING YOUR TRADING CAPITAL INTO A CAPITAL PORTION AND A TRADING
    ACCOUNT PORTION

    Our approach to trading is based on the management of risk. If you have an amount
    of money you want to use for Forex trading, say $ 10 000, it would be prudent not to
    have this entire amount in 1 account. You should only be exposing your trades to
    between 5% and 10% of total money.

    If we were to expose our trading to 10% of our total money we would create 2
    accounts:

    1. a Capital account with $ 9000 and
    2. a Trading account with $ 1000.

    The capital account is the part of your capital you do not want to expose to risk while
    trading. You would therefore have a separate account where you keep the 90% of your
    capital in an account that is not exposed to trading risk. This account could be another
    account with the same broker or an interest bearing account with a financial
    institution. The main objective of this separate account is to firstly safe guard you
    money and secondly have some where to transfer your gains to or to top up your loss
    from.

    The whole idea is to use the following process (which will become clearer as we go
    on):
    1.        When you double the amount in your trading account (the one with say 10% of
    your money) you would transfer the gains to your capital account.
    2.        When your trading account losses cause that account’s balance to drop to
    below 25% of the original balance you would top your trading account up from your
    capital account.

    This approach of not having all your eggs in one basket is a risk management
    technique which has been very important to Expert4x over the years. Some traders
    just mentally split their money into a capital and trading portion of their trading
    account, but the physical splitting of these amounts is part of the trading psychology
    and discipline adopted by Expert4x. This becomes even more important when the
    money that you use to trade is over $100 000.



    THE MAXIMUM LOT TRADING METHOD

    In the previous module we used the method of increasing the number of lots in
    winning streaks and decreasing the numbers of lots in losing streaks. This was quite
    effective.

    This method however ignored factors such as how much was at risk during every
    trade and how trades are financed. For instance if a trader risked 30 pips on one
    trade and then 100 pips on the next the method of just increasing or decreasing lots
    could result in lopsided weighting of transactions.

    The Maximum Lot trading method is a very aggressive trading method that takes the
    following factors into account.
    1        How much the trader is prepared to risk per trade (Stop loss)
    2        What margin the trader is using to trade (Margin requirements)
    3        The amount of capital the trader is using in the Trading account (Balance on
    trading account)

    Using these factors we calculate the maximum number of lots which can be risked on
    the traders next trade and this calculation is repeated for every trade which follows
    that one.

    The objective is to double our trading account as quickly as possible by risking the
    maximum amount per trade. This sounds highly aggressive but the biggest
    advantage actually lies when losing streaks are encountered as fewer and fewer
    numbers of lots are being risked.

    So lets have a look at a few examples:

    Lets take the example of a trader with $30 000 available to trade the Forex market.
    The trader decides to risk 10% of the trading money by putting it in the a mini Trading
    account. The rest $27 000 stays in the Capital account as discussed above.

    So his available trading account balance is $ 3 000.  The margin requirements per lot
    are $50 per $10000. (200:1). This means that for every lot traded he will require $50. It
    is important to realize that margin is not risked or can not be lost during a trade. It is a
    deposit held by the broker who returns it after the trade.

    The trader now has identified a trading opportunity to trade the EUR with spread of 2
    pips. The stop loss will be 40  pips and the Target will be 60 pips.

    In order to get the maximum benefit from this trade the trader will have to take a many
    lots (the maximum) as the trading account balance will allow. So how do we calculate
    that:

    For each lot the trader will need $50 for margin, $40 for the stop loss, $2 for the
    spread and a safety margin should the trade go overnight and incur interest of say of
    $5. This means that the trader will need $97 for every lot traded.

    To get the maximum lots that can be traded the trader merely has to divide the trading
    capital of $3000 by $ 97 to get the maximum lots that can be traded. This gives 30 lots
    (always round downwards).

    This means that if successful $ 1 800 will be earned (30 lots x 60 pip target) A return
    of 60% on the trading balance! If unsuccessful the trader will incur a loss of $ 1 200
    (30 lots x 40 pip stop loss) A loss of 40% of the trading balance.

    Now in the case on the successful trade the trading account balance will be $ 4 800
    and if a similar trade is identified the lots for the next trade will be ($4800 / $97) 49
    lots. If successful the gain will be (49lots x 60 pips) = $2 940. The trading account will
    now have a $ 7 740 balance. (A 158% return on the starting balance of $ 3000). So it
    takes 2 trades to double the trading account.

    In the case of the unsuccessful trade the trading account balance will be $ 1800 and if
    a similar trade is identified the lots for the next trade will be ($1800 / $97) 18 lots. If
    unsuccessful the loss will be (18 lots x 40 pips) = $ 720. The trading account will now
    have a $ 1 080 balance. (A 64% loss on the starting balance of $ 3000).

    So it takes 2 trades to double the trading account (+156%) but the loss on 2
    unsuccessful trades only results in a 64% loss and  does not wipe the account out as
    maybe thought.

    In brief: This method allows many, many trades before the trading account is depleted
    (10% of total money) whereas a very small number of trades allow for the doubling of
    a Trading account.

    The above examples can further be enhanced by applying the pip by pip following
    stop.


    Assignment:

    Please continue the process as shown above and calculate

    1)  What the balance of the trading account will be if 4 successful trades are
    experienced and
    2)  What the balance of the trading account will be if 4 unsuccessful trades are
    experienced.

    On receipt of the correct answers you will be supplied with details of the next module:
    Maximum lots trading strategies to leverage gains even more.
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