Advanced Trading Strategies

Episode 2: How to calculate your Stoploss

This should’ve probably been the first episode but i needed something spicier, lets get into it NO BS.

I call it the GodsonModifiedKellyFormula; Calculating your SL using this strategy requires you know the probability of success for your entries.

Calculating StopLoss:

Very quick, Very simple using a modified Kelly Criterion: 2P-1; where P is the probability of success in decimal form.

for example here i backtest my Script on the Daily Timeframe with a long only bias and a 10% takeprofit.

the success probability is >70% so therefore the Kelly is (2*0.7)-1 which is 0.4

This means you can only bet 40% of your portfolio on each trade, AKA you can bet 100% of your portfolio but with a 40% stoploss or margin your portfolio 10x with a 4% stoploss.

Now i know what you’re saying but Godson, how do i trade with leverage without risking liquidation. what if the long dumps 10% before hitting my take profit.

Answer: Options Contracts!

with options you can leverage a trade upto 100x without risking liquidation.

--

--

His Imperial Majesty, Lord of Altcoins and Prophet of the Altgods. @Mansa_Godson

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
AltcoinGodson

His Imperial Majesty, Lord of Altcoins and Prophet of the Altgods. @Mansa_Godson