Sunday, April 7, 2013

Peter Brandt on managing a trade

Khushang Thakkar pointed out a new post by Peter Brandt. Click here to read it.

Mr Brandt explains his trading philosophy, as well as discusses a potential trade. The post is worth reading, again and again.

Peter Brandt risks about one percent of his capital on any single trade. He calculates his return on the capital he allocates for the trade. (My Notes: The capital allocated will be much more than the margin, maybe three to four times more.) He expects a return of 5 to 10 percent on his capital.

The trade setup is identified based on a number of features, including:

  • Pattern - Weekly
  • Pattern - Daily
  • Length of Patterns
  • A "Launching" or "Ignition" pattern within the larger pattern
  • Trend - Daily (using a moving average as proxy)
  • Trend - Weekly 
  • Any other technical factors

Mr Brandt suggests that large profits are attained by holding a position, not by active trading.

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