MATHEMATICS

BEHIND THE TRADING

PLEASE DON'T BE SCARED OF "MATHEMATICS"

FEAR IS AN ENEMY OF CREATIVITY

IF YOU WANT TO MAKE MONEY
-YOU NEED TO COUNT MONEY, RIGHT?

QUANTITATIVE TRADERS DON'T RUN AROUND WITH CALCULATORS

THEY PREPARE THEIR WORKING SPACE

-BY SETTING UP THE TOOL SETS

AND THIS IS WHERE WE COME INTO PICTURE

  1.                                                                                                                                                                                                                                               

  

Mobirise

Microsoft Excel

 The Only True Quantitative Tool

We will tell you the secret now: the best, the only, the unconquered tool for Quants is Excel fed with life signal from the Markets. It’s only the proficiency in using Excel that makes the difference between amateurs and professionals. This tool has so many options and possibilities, that no one actually uses all of them. It’s a true monster among the tools you may use. Amateurs are looking for shortcuts - professionals know that there is no such thing. This is exactly what we teach - how to use Excel in a professional manner.  

WHAT CAN YOU SEE ON THE ABOVE VIDEOS?

-THE MOMENTARY OPPORTUNITIES ON THE MARKET



THAT'S WHY 

 THE MATH IS TO BE OR NOT TO BE FOR THE TRADER

The biggest mistake of each beginner is falling for psychological traps and ignoring the numbers. Like in a lottery, when accumulation of prizes occurs, let’s say there is $100M in the pot, many more people buy the coupons, right? Even if the mathematical chances are exactly the same, people fall for the trick of “fireworks”, being the prize to be won. As a Trader, you must get rid of this kind of thinking, you must teach your brain to think mathematically, not wishfully. You must understand that emotions don’t go along with trading at all, they are only an obstacle. By seeing the potential trade that can give you 1000% return, you should not jump on it like a skydiver, but send that trade to your analysing tool for confirmation of a mathematical sense in it. Speed is not what you are after. Starting to learn on, let’s say, 20 assets on the 5-minute timeframe, you will have more than enough time to make your calculations. Once you get use to the drill, you can move to 1 minute. And that’s what our Programme will teach you, showing what and how to do.

Life Excel spreadsheet is your main tool as a Quant. Not the trading platform. Please, remember that. You can place your orders via telephone if you wish, it doesn’t matter. What matters is the decision whether or not to make that call. We will teach you how to construct the spreadsheet for any Broker, any asset, and for your specific trading style. Once you see the power of it, you will understand how far ahead the Quants are...

Usually, the biggest problem is how to feed your spreadsheet with life data. Let us say upfront that no programming skills are needed. We have professional solutions for programmers, but we understand that you want to be a Trader, not a Programmer. So, we will not require any programming from you. Actually, you only have to understand the most basic Excel functionalities and MT4 / MT5 platform. We will teach you all the rest. 

WHAT DOES THE TRADING MATH CONSIST OF ?

IT'S NOT THAT COMPLICATED AT ALL. BUT YOU MUST KNOW THAT THIS IS WHAT YOU NEED TO BE CONCENTRADED ON. EVERYTHING ELSE IS JUST THE ADD-ON FOR THIS TASK

Every transaction has its price. The main costs are the spread and the commission that the Broker imposes on you. There are brokerage accounts that have commissions calculated into spread, so it differs a bit from one Broker to another..

Side costs are usually used by those Brokers who want to hide the true cost, trying to make an impression that trading with them is cheaper. You should consider it as a bad sign. If the Broker knows his job, he or she doesn’t have to pull those tricks. Decent Brokers don’t have these costs at all. If you find, let’s say, the commission calculation over-complicated – it’s a clear sign of such practices

It’s a mathematical indicator that shows how much of your capital is at risk. It is called “RR” for short. That’s the third thing you should think of - not the first one. Without taking care of the two above, one’s RR is useless.

It divides your money into functions, particular jobs. Some for a margin, some for expected loses, some for remaining positions that wait to be opened. Amateurs think that all of the money should be shovelled into one position. That is not true.

Mathematical Methods

This is the proper way of thinking for every Trader: You are the Chairman of your company, and the money are your staff. You are responsible for sending a particular employee to a particular job position, directing and guiding them all into one task – making a profit.
Before you open, let’s say, a shop, you make a business plan taking into consideration all profits and loses, all expenses, and the estimates of the expected results. The same applies to trading. Before you open any transaction, you must know the expected results. It’s not that difficult but it is usually skipped by amateur Traders. Every penny of your capital must have a function and must fit into your action plan, so your whole investment works smoothly as one machine. Depending upon the Markets you trade, there are different costs and expenses you need to consider, please look to the right for details.  

             LET'S GET FAMILIAR

WITH THE MATHEMATICS

Every Trader must know his place. And mathematics is the easiest way to establish that. Let’s look at an example: for Institutional Traders intraday (that is less than one day) scales are useless, and if you learnt from the Institutionals, they would tell you, that intraday trading is no longer profitable. From their perspective, this is true. The Institutionals have usually $millions under their mousses, and with that money they simply have no place to trade short-term positions. If they calculate what is most profitable for them – the intraday scale takes last place. For the Retail Trader, on the other hand, short-term positions are the most interesting, because we are trading via brokers, and they provide us with liquidity and leverage. By the way, this is the best example of why not to follow the opinions of others. If you, let’s say, watch 100 videos (on the well-known streaming platform) made by the Institutional Traders, and accept all of their arguments, you will start behaving like one of them. That is to say, you will mismatch your possibilities with your circumstances. You will start to use the “big sharks” techniques, that are not profitable for Retail Traders at all, and you will fall into fantasy world. You will trade red army style while being a little partisan. You have to stick to the reality. And here the maths comes into action.

The most basic example: the Trader must know that despite the leverage his/her losses will be covered from their account balance BEFORE the leverage. That’s obvious, but many Traders fall into that trap. Let us use the example. Let’s assume we have $1000 in our account. We also have 1:100 leverage. So, we can spend $100.000 on our margins (margin is money that you must pledge for any transaction - it will be returned to you once you close it). Leverage helps to increase your position numbers and size, and give more as a collateral. But only that. What you lose is covered from your plain account balance. So, if you open one position for $100.000 and the price makes a small dive for something like 40 pips, you will lose all of your money. You can hit the loss of $1000 in a few seconds. Leverage must be mathematically understood before you engage in trading.

Next example is the money you can actually spend on margins, as you need to leave something on your account to cover potential losses. If you have $1000, you want to open 5 positions, and the risk you are willing to take is 5% per position, you need to leave 5*5%*$1000 = $250 on your account before the margins, so your available balance BEFORE margin is actually $1000 - $250 = $750. You cannot deposit $100.000, but only $75.000. This is how much you can use for margins with the leverage of 1:100. We hope we presented this information in an understandable manner, as it’s very important. Margins are ONLY applied to the requested collateral, nothing else. You take profits and losses after multiplication by leverage, so you have to leave in your account everything you assume you can risk.

Understanding these basics is all we expect from you to know, as we will teach you the rest. If you want to be proficient in everything, it's a mistake, as no one can do that. Every business, even a small grocery store, must accept some expenses and losses, as the rent, the employee’s salary, a broken window, etc. It's always better to be a master in one particular style of trading than a semi-professional in lots of them, as the former instance will let you make money, while the latter will not. We teach our students exactly that skill – how to master one skill to the absolute perfection.

An example: before you prepare your own analysing tool, you need to make up your mind regarding the above mentioned issues, as every scanner / screener is a custom-made tool that works only for one need. If you try (believe us, we have seen it too many times) to make a toll that does everything, it will only bring you a bombardment of data, which will only confuse you. This is why universal, free tools available online are useless for professionals. We only look for one particular information that is the Trigger for our system. We don’t want to see all of the noise the Markets produce. So setting up a tool that does exactly what we need is the most valuable skill for professionals. But bear in mind that to do that, you need to know the nature of the Markets, you need to know what to look for. There is a thin line between brainless copy-paste of all the data (which gives nothing) and a hand-picked set of data precisely for your style. It’s like the difference between an axe and a scalpel. We will give you the mathematical scalpel. 

OVERWHELMED?

Don't be. It's not as scary as it sounds. It's just the matter of your effort to "install new data" into your brain. As a reward for reading all of the above – a little break. Please have a look at what "quantitative easing" is for economists :)

See you at the next page...