Sleek One - Trading System

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Disclaimer: The sole purpose of this document is to introduce you to a sample trading system that uses both 'Position Size' and 'Money' for Risk Management. The rules defined here are not a trading advice. Consider this as a sample trading system for learning purposes. After reviewing, feel free to create your own system based on your risk tolerance, trading style and capital available. Merely following a trading system does not guarantee any success as success depends on a lot of other factors. However following a trading system may help you with risk management and discpline required for options trading.

You can either set up an excel sheet or log your paper/real trades in by creating your journals in order to manage, monitor and measure the peformance of your trading system. Feel free to modify this system to suit your personality, trading style and initial capital available.

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This trading system adopts the original 'ProfitCycle' System for money management with some minor changes.

Minimum Account Balance:
10K or more is ideal for this trading system.
Conservative. Capital Preservation is the primary goal of this trading system.
Focus Symbols:
Pick 3 Focus Symbols. Dont change your focus symbols for 6 Months. Trade only from your focus symbols.
MultiLots Method:
Yes. This trading system will use 'MultiLots' method for position size management. A 'MultiLots' method is where you will be investing incrementally once the trade is identified. For example: Let us say you planned on investing $500 in a particular trade. Instead of investing all of $500 in one go, you will first invest a portion of it, say $150 in starter lot. And then in a couple of hours or days you will add to this position by investing another $150. Please note depending on the trading system you choose, the rules to add second lot may vary.
Starter Lot:
Starter Lot trades will be taken from Primary setups triggered for any of your Focus Symbols. Primary Setups are the setups triggered by the core algo.
Second Lot:
Second Lot trades will be taken from any Medium or Low risk Dip Setups for the Same symbol. Dip-A, Dip-B, Dip-C. Setups.

Second lot trade will be added only to adjust a starter lot trade that did not go your way. Dip setups are not completely algo driven. Check the FAQ to see how the Dip Setups are triggered.
Protection Lot:
None. Protection lot trades are not applicable for this trading system.
Maximum Investment Per Trade.
No more than 4% of your capital account balance in a trade ( All lots combined). For example: Assuming your account balance is 8k. Maximum Investment per trade ( all lots combined) should not exceed $320 (4% of 8K). Since this is a 'MultiLot' trading system and the proposed lot ratio between starter and Second for this trading system is 1:1. You will only invest $160 in your starter lot. The other $160 is reserved for Second lot. ( Please factor in commissions when calculating how much to invest in each lot)
Maximum Market Exposure.
No more than 12% of your capital account balance in all active open positions. ( All symbols + All lots combined). Excluding open positions (trades) from profit account.
What type of Option Contracts can we trade for this Trading System?.
You can trade both CALLS and PUTS for this trading system. As a variation, you may want to trade either only CALL alerts or only PUT alerts to further narrow your focus.
Logical Accounts:
Two Logical Accounts. Capital Account and Profit Account. You don't need to seperate brokerage accounts. Just manage two logical accounts in an excel spread sheet or by creating journals in
Lot Ratio:
Lot Ratio for trades placed from capital account will be 1:1 in terms of dollar value. ( First Lot : Second Lot). For example: If you purchased $100 worth of MSFT Calls for your statert lot, your 2nd lot you will invest for the same $ value. The number of contracts may vary.
Profit Transfer Formula:
For every profitable trade from capital account, transfer 50% of the profit to profit account and retain the other 50% in the capital account.
Minimum Accmulated Balance for 1st Trade from Profit Account:
$250. Keep transfering profits from capital account trades until this balance is reached in the profit account. You can place your 1st trade from profit account only after the profit account balance is $250 or more.
Number of Consecutive Trades from Profit Account:
Two. After two trades, move the entire balance from profit account to capital account and start all over again. This completes the 'ProfitCycle' and you will be starting a new ProfitCycle. If you are using journals in to record and manage your trades, create a fresh journal every time you start a new round of ProfitCycle. You can name your journals 'ProfitCycle1', 'ProfitCycle2' and so on..
Minimum Investment for the second trade from Profit Account:
80% of the Proceeds from your first trade from Profit Account. Transfer 20% to your capital account. If your first trade from profit account resulted in a loss, then invest 90% of the profit account balance in your second trade and transfer 10% to capital account. If your balance in profit account is not sufficient enough to place a good trade, move the entire balance from profit account back to capital account and start all over again.
Trading Days Gap between Trade1 and Trade2 from profit account:
Three Trading Days. After you close your first trade from profit account, give a gap of three trading days before you place your second trade from profit account.
Can I trade from Profit Account when one or more Capital Account Trade is still active and open?
No. Wait until all the capital account trades are closed before you place your first trade from profit account.
Follow 'MultiLots' position system for trades placed from Profit Account?
Yes. But not Mandatory.
Should I trade only from My Focus Symbols for Profit Account Trades?
Exit Strategy for Capital Account Trades when trade is in Profit
Exit when profit is around 40%
Exit Strategy for Profit Account Trades when trade is in Profit
Hold until current trend is broken to maximize returns
Exit Strategy for Capital Account Trades when trade is in a Loss
1. If the trade peaked around 40% but you missed to take the profit and if the position is in a loss of more than 25%, exit the position for a loss.
2. If the position never peaked around 40% profit. Hold the position and add second lot when triggered. See rules for adding second lot for more details.
Exit Strategy for Profit Account Trades when trade is in a Loss
1. If the trade peaked around 40% but you missed to take the profit and if the position is in a loss of more than 25%, exit the position for a loss.
When do I add Second Lot?
1. If your first lot is profitable you will not add 2nd lot in this trading system.
2. if your first lot trade is in a loss, wait until Medium and Low risk Dip setups are triggered for the same symbol and in the same direction as starter lot. Strike and Expiry can be different.
3. Add 2nd lot only when your starter lot position is still open and never peaked above 40% and currently in a loss.
My first trade from profit account resulted in a loss. Should I proceed with my second trade from profit account?
Yes. With whatever balance that is left after the first trade.
My first trade and second trade from profit account resulted in a loss. Should I proceed with third trade from profit account as there is still some balance left?
No. Move the balance to capital account and start a fresh 'ProfitCycle' .
When to EXIT 2nd lot Trade?
1. Exit both Starter Lot and 2nd Lot if the profit of the combined position is around 40%.
2. If the combined position is in a loss. Don't add 3rd lot to a loosing position. You can either take a loss or hold until expiry.
3. As an alternative, to maximize returns you can do this. If your 2nd lot trade really went up so high that it even recovered the cost of your 1st lot trade, you can exit only your 2nd lot and hold your 1st lot for some more time.
Multiple alerts are posted in the same direction. What should I do?
Just take one alert and skip the rest until this position is closed.
Multiple alerts are posted in different direction. What should I do?
Take only the starter lot in the opposite direction.
An alert is 2 days old but has not moved much and has not expired yet, can I trade that alert?
No. Wait for a fresh alert.
Any other trading systems that are similar to this?
Check out the below

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