1. Money Management (on Individual Instrument)
By Ken Hodor
11/2/10

2. What I hope you get out of this
Have some fun with our friends
Learn a bit about Forex trading
Explore trading a nice trending market

3. The plan Quick overview of Forex and rules—15 min.
Break into teams and work the game—15 min.
Collect and compile results (offline)—30 min.
Show best trading so far
Future trend trading
Suggest way to profit from what you learned
Q&A
Total time about 1.5 hours including 0.5 hour offline

4. Game Overview
You will be granted Prophet powers and be able to see into the future.
Use these Prophet powers and knowledge of margin to trade as effectively as you can, given the rules.

5. Forex BackGrouder Trading Mini-lots of 10,000 units per lot
A price of implies you will control $13,800
Just slide the decimal point over 4 places
We will be assuming minimum margin requirement of 1%
requires $138 of margin, so slide decimal 2 places.
There is no expiration, or Greeks
IMHO it is simpler than options with better leverage and higher returns on margin

6. The Game Rules Start with $5,000 – a typical starting account
Trade Mini-Lots –10,000 units
Minimum Margin is 1% of value
Dropping below this level you blowup account
Only go short or buy-to-cover
Write down lots to sell short or cover in appropriate column

7. Logistics Divide into 4 to 10 groups Hand out chart and trade list
Would like one member to have Forex experience
Hand out chart and trade list
After 15 minutes collect and tally results
Summary of results—announce winner
Demonstrate best results achieved so far
Speculate on future EURUSD trading

8. Start Suggest 5 minutes to make a quick plan
10 minutes to implement plan

10. EURUSD Trade List
Initial Capital
$ ,000
This is typical of initial margin required to open a FOREX account.
SellShort
BuyToCover #
Date and Time
Price
Lots
Difference
CumLots
NetMargin 1
1/5/ :59 $
1/10/ :00 $
($ ) 2
1/12/2010 5:00 $
1/22/2010 5:00 $ $ 3
2/10/ :00 $
2/16/ :59 $ $ 4
2/17/ :59 $
2/22/2010 5:00 $ $ 5
2/23/ :00 $
2/26/ :00 $
($ ) 6
3/30/ :59 $
4/8/ :59 $ $ 7
4/27/ :00 $
4/30/ :00 $
($ ) 8
5/11/2010 5:00 $
5/17/ :00 $ $ 9
5/21/ :00 $
5/27/ :00 $ $ 10
5/30/ :00 $
6/3/ :00 $
($ ) 11
6/3/ :00 $
6/8/ :59 $ $
Missing from the above is Roll Over (Carry Trade) calculations. Which make the results slightly better than realized.
Margin requirement is 1% to keep the calculations easier and is indicative of when we experienced these prices.

11. Results Gain Team 1 Team 2 Team 3 Team 4 Team 5 Team 6 Team 7 Team 8

13. So what about future? Dollar should continue to weaken
EURUSD may go from to
How do we make as much as possible?

14. Gain when Euro goes from 1.4 to 1.5
by Ken Hodor
11/2/2010
Margin 2%
Initial Equity
5000
Expontential growth
Linear growth
Maximize Margin Utilization (Optimal f)
BuyandHold
EURUSD
Lots
Remainder
Gain
Equity Optimal
Equity B&H
1.4 17
240
$ ,000
1.402 19
12.4
340
$ ,340
1.404 20
104
380
$ ,720
$ ,680
1.406 21
214.8
400
$ ,120
$ ,020
1.408 23
63.2
420
$ ,540
$ ,360
1.41 24
232
460
$ ,000
$ ,700
1.412 26
137.6
480
$ ,480
$ ,040
1.414 28
81.6
520
$ ,000
$ ,380
1.488
312
48.8
5840
$ ,900
$ ,960
1.49
332
204
6240
$ ,140
$ ,300
1.492
354
146.4
6640
$ ,780
$ ,640
1.494
377
212.4
7080
$ ,860
$ ,980
1.496
402
121.6
7540
$ ,400
$ ,320
1.498
428
211.2
8040
$ ,440
$ ,660
1.5
456
200
8560
$ ,000
$ ,000
%Gain
2740%
% Gain
440%

16. Conclusion There are a few general trading tactics
Reversion to the mean
Trade the Trends best return on equity
Scale in with optimal money management
Strive for geometric portfolio gains

17. Additional Reading www.babypips.com for additional Forex info
“Portfolio Management Formulas” By Ralph Vince (explains exponential growth concepts)
“The Handbook of Portfolio Mathematics” by Ralph Vince (I have not read this yet)