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The secret to a successful stock market Investment Trading is to compound your earnings much like investing in mutual funds 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 compounding your earnings much like what would happens when you leave your money into successful mutual funds for decades. William Money Management formula is used by Larry William who won the International Robin Trading seminar twice, we 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 a money management formula and his trading techniques. 10 years later his 16 years old daughter entered the same competition and traded USD10,000.00 to USD 110,000.00 using the same money management technique. Larry William has mentioned in all his books that money management is what made his trading successful by compounding his winnings. A good trading system alone will not do, you need to combine them both. According to him, you must first need a viable trading system before you can use his money management formula. In Stockswise, we believe our method of selecting depressed stocks or stocks that have made significant retracement after strong bullish moves is rather good as can be seen from the many successful buy signals around the bottom of the money belt line. You will appreciate the fact that in many cases the Investment Trading result will be profitable six (6) months after the buy signals. Don't take our words for it, go look at the charts of all the stocks listed in this site. All you need now, is money management to compound your winnings. The William Money Management formula is as follows N = ( A x MAL) / ML where N = maximum no of possible contracts 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 trade. We prefer to use 5% for MAL, i.e we cannot allow the account to loose more than 5%. In other words, you cannot have more than 5% of your account in a single stocks, this is another way of telling you to diversify your holdings. ML=maximum loss per contract trade, normally in trading stocks, because stocks are less volatile than derivatives we can limit the maximum loss per contract to 20% (this is our preferred number, you will have your own). example Stock Price is $40.00 A = account size, in this case we have about $50,000.00 MAL = 0.05 ML = 20% of $40.00*100 (stocks/contract) = $800 N = ( A x MAL) / ML , so in this case, I am afraid, we can only trade three (3) stock contract of 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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