Kelly Trading Workbook
Kelly Trading Workbook
Sandy Jadeja
Copyright © SignalPro PTE LTD 2021 Page | 2
Disclaimer
It should not be assumed that the methods, techniques or indicators presented in these
courses will be profitable or that they will not result in losses. Examples presented are for
educational purposes only and are not solicitations or recommendations of any order to buy
or sell in a currency pair, stock, share, future, CFD, option or any other financial instrument.
Sandy Jadeja and associated affiliates assume no responsibility for your trading results or
decisions. Past results are not indicative of future returns, and financial instruments can go
down as well as up resulting in you receiving less than you invested. Do not assume that any
recommendations, insights, charts, theories, or philosophies will ensure profitable investment.
Trading financial markets can be risky and you may incur losses greater than your original
investment.
What are we trying to do and how will this course help you?
Let’s Get Started and Tap into the World’s Financial Markets.
You think the price of Euro will rise against the dollar, so you buy.
The price of the Euro rises, so you have made a profit.
Before you start trading, there are certain things you need to know.
One of the most important is risk. Risk is different for each of us.
• Stop Loss
Whenever you consider a new trade you should think of three things,
the price you want to enter the market, the price to exit if the trade
goes well and is profitable and the price to exit if things do not go to
plan.
A stop loss is the level you want to exit the trade if the market moves
against you. Unlike a guaranteed stop loss, the price you set is not
always going to be the price you will receive. This is known as
slippage and we will come on to this later.
A normal stop loss can be left very close to the current market price
and so whilst there will always be a risk of slippage, there is more
flexibility than you will find with a guaranteed stop loss.
For a trade to exist there must be a buyer and a seller who are willing
to trade at the same price. If there are only buyers wishing to trade
the market will have to move to the next price where sellers can be
found.
Placing a trade on the Wall Street 30 market, also known as the Dow
Jones 30, is one of the most popular for retail traders all around the
world.
The Wall Street 30 market closed on Friday at a price of around
23,800.
If you wanted to place a trade on this market without leverage, you
might be asked to deposit the full value of the trade.
So, a £5 a point trade would require £5 x 23,800 = £119,000
But a broker offering leverage of 200:1, or 0.5%, would require a
fraction of this amount to be deposited:
£5 x 23,800 x 0.5% = £595
Margin is the difference between the funds held in your account and
the money loaned to you by a broker.
Nobody likes losing money on a trade. After all, it means we’ve got
things wrong. But losing trades are a fact of life. Here are some top
tips:
• If you can’t place a trade that stays within your trading rules,
walk away and wait for a better opportunity
This means that if the Wall Street 30 market goes up to 23802 then
you’ll be making $5 profit
• You decide to buy $50 per point which you can do at 2915.14
You want to trade the Gold Market at $5 per 10 cent movement in the
price.
The initial margin for this market is 0.5%.
At the time you go to place your trade, the price for Gold stands at
$1684.
To work out the margin requirement, you need to do the following
calculation:
Trade Size x Price of the Market in tenths x Margin Rate
So:
$5 x 16840 x 0.5% = $421
This means that you need a minimum of $421 in your account to open
this trade.
This means that if the price of crude oil goes up to 3154, then you’ll
be making $2
• You decide that Apple stocks have been oversold and that it
is a good time to enter the market and to place a buy trade.
• This means that if the price rises to 98p you will be losing £50
conversely a move to 96p means you will be winning £50.
• You would have a running loss (in other words, you haven’t
REALISED the loss by closing the trade) of $100 (3153 – 3103 x
$2).
• The initial margin requirement for this trade was $50 x 2915.14
x 0.5%= $728.78
• You would have a running loss (in other words, you haven’t
REALISED the loss by closing the trade) of $1007 (2915.14 –
2895 x $50).
If you just had $728.78 in your account as Initial Margin, then you
would be asked to top up your account by $278.22. This is Variation
Margin.
Level 2: The market falls or rises by 13% from its previous day’s
closing price
Action: Trading halted for 15 minutes
Level 3: The market falls or rises by 20% from its previous day’s
closing price
Action: Trading halted for the rest of the day
When selecting the market from the list in the trading platform you
may see a choice of a Rolling Cash/Rolling Spot market or a Futures
market.
The Rolling Cash/Spot markets are usually chosen by traders who
have a short-term view about where the market is heading. The
spreads (costs to trade) on the Rolling products are lower than the
Futures products but there are additional charges if you trade these
markets and hold a trade overnight. These are known as overnight
financing charges and we will cover these later.
Futures markets, whilst having wider spreads, are the market of choice
for those traders who are looking to take a longer-term view on the
direction of the market.
If you choose to trade on the Rolling markets with your broker, you
need to be aware that holding your trade over (rolling it) to the next
business day will incur an overnight funding charge.
The roll is done automatically by the broker if your trade remains
open at the close of their day’s trading.
The charge is calculated by using a formula that considers the value
of your trade, the cost to borrow money in the country where the
market is traded and an additional administration charge from your
broker.
If you are rolling your trade over a weekend, you will be charged 3x
the normal daily fee.
Overnight charges, whilst relatively small, can become a significant
cost to trade and so it is important to understand when these charges
will apply to your account and how they can affect your profitability.
You will often hear when a company declares a dividend for its
shareholders and when the dividend is paid, the share is known as
having gone ‘ex-dividend’.
The price of the share is then altered by the amount of the dividend
that has been paid.
If the company paying the dividend is part of an Index, for example
Boeing is part of the Wall Street 30, a trade that is open on the Wall
Street index will also be affected by the dividend, the value of the
index will be adjusted accordingly.
If you have a trade open when a constituent of the index you are
trading pays a dividend you will see an adjustment on your account, a
debit if you have sold the market and a credit if you have bought the
market.
These dividends can be paid at any time and a weekly list of what is
expected can usually be found on the brokers website.
There will be times when you only want to close part of your open
trade.
For example, you may have a $5 a point trade open in the Germany
30 market (DAX30) and decide that you would like to reduce your
exposure to this market.
You can do this by placing a trade in the opposite direction to the
initial trade in any amount up to $5. So, a part closing trade of $3 a
point would leave you with a $2 a point position.
Part closing a trade can be done by trading at the current market
price or you can leave one or multiple orders away from the market
and wait for the market to come to you.
Every market will have set times where the broker is able to accept
trades from you.
These opening and closing times will vary and, as with other specific
market information, it is important to know when you will be able to
trade.
This information can be found in the market information tab on the
trading platform.
There will be occasions where a market may appear to still be trading
but the broker is not able to accept trades from you. This is because
there are certain times of the day where an auction will take place on
the exchange where the market is priced yet no trading is possible.
For the last year the team behind Core Spreads have been
working for on creating their new brand, Trade Nation, which
was launched late last year.
• The next slides show what you see when you log in and
launch the Trade Nation trading platform and how to place a
trade.
• But you can create your own watchlists with the markets you
want to trade and follow.
• You can search for markets, look at charts, see breaking news
and launch a ‘trade’ ticket.
www.tradenation.com
200:1 Leverage Available
www.corespreads.co.za
200:1 Leverage Available
www.corespreads.com.au
30:1 Leverage Available
www.corespreads.com
30:1 Leverage Available
Counterparty risk
Trade Nation reduces financial exposure by entering into
corresponding trades with counterparties. There is a risk that the
counterparty defaults on its obligations to us which could impact
on our ability to meet our obligations to you. If we default on our
obligations, you may become an unsecured creditor in the event
of an administration or liquidation, and you will not have
recourse to the underlying assets in the event of our insolvency.
Leverage Risk
The high degree of “gearing” or “leverage” is a particular feature
of this type of transaction. This stems from the margining system
applicable to such trades that generally involves a deposit or
initial margin in terms of the overall contract value, so that a
relatively small movement in the underlying market
can have a disproportionately dramatic effect on your trade. If the
underlying market movement is in your favour, you may achieve a
profit position, but an equally small adverse market movement
can not only quickly result in the loss of your entire deposit but
may also expose you to a large additional loss unless you enter
into a limited liability contract with the firm. The nature of
ST Products means that a relatively small move in the price of the
underlying instrument to which your ST Product relates can cause
Order Risk
Orders, other than Guaranteed Stop orders, are not guaranteed so
reliance on an order is a risk. It is your responsibility to manage
orders. Any order which you have placed and have not cancelled
may be filled by us and therefore you may incur losses as a result
of that order.
Gapping Risk
Gapping refers to an occurrence whereby our quote moves from
one price to the next price, through an order level. This may be
because the underlying instrument to which the ST Product
relates has stopped trading and recommences trading at a price
below or above a stop loss order level or may trade in insufficient
size as represented by the size of your order, for Trade Nation to
have been reasonably able to place a trade in the underlying
instrument. When gapping occurs, orders are executed at our
quote based upon the first price that we are reasonably able to
obtain in the underlying instrument. Accordingly, where you have
an order you must understand the potential impact of gapping.
Operational Risk
Our ST Products are typically traded over the internet which
means that you are exposed to the operational risks associated
with online trading such as the reliability of your internet
connection, the stability of the trading platform and the reliability
of network connections and computer hardware. Such systems,
trading platform or hardware failure could prevent you from
implementing your desired trading strategy and could cause you
to suffer loss. In the event of connectivity problems, you can
contact us immediately to manage your account by telephone.
No advice
Trade Nation will not provide you with investment advice relating
to investments or possible transactions in investments or from
making investment recommendations of any kind. We may,
however, give factual market information or information, in
relation to a transaction about which you have enquired, as to
transaction procedures, potential risks involved and how those
risks may be minimised.
Tax implications
The tax treatment of ST Products and of any profits you make
from such trading may be affected by your personal
circumstances and can be subject to change. You should seek
further advice if necessary.
Spread Trading is not suitable for all investors. Spread Trades are
leveraged products and carry a high level of risk. You do not own
or have any interest in the underlying asset. Core Spreads
Financial (Pty) Ltd (Registration Number 2019/229081/07) is a duly
appointed juristic representative of Trade Nation (Pty) Ltd
(Registration Number 2018/418755/07), which is an authorised
Financial Services Provider regulated by the Financial Sector
Conduct Authority (FSP No 49846). As such Core Spreads Financial
(Pty) Ltd renders financial services to clients on behalf of Trade
Nation (Pty) Ltd. Core Spreads Financial (Pty) Ltd is not a financial
adviser and all services are provided on an execution only basis.
The information on our website is for general informational
purposes and does not take into account your objectives, financial
situation or needs.
We recommend that you seek independent professional advice
and consider our Client Agreement and Risk Warning Notice, by
clicking here, before you enter into any transaction with us. The
information on this site is not directed at residents of the United
States or any particular country outside of South Africa and is not
intended for distribution to, or use by, any person in any country
or jurisdiction where such distribution or use would be contrary to
local law or regulation.
3. There will be wins and losses – good days and bad days