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Trading The 1/3 Method

 
 
 

Trading the 1/3 Method

 

Actually shorting a stock or other financial instruments can be a bit difficult to wrap your head around, and you better have plenty of money in case thing go against you.  For those who wish to keep things simpler, and trade the ups and downs in cryptos while at the same time HODLing, there is the Law of Three.

 

Let's say you want to buy $900 of Litecoin (LTC).

 

Divide your capital into 3's: $300, $300 and $300.

 

Buy $600 of Litecoin

 

If you think LTC is going to have a short-term rally, put the addition $300, or however much you have sitting on the side lines, into LTC. Remove that $300 as soon as your Stop or Target is hit.

 

IF you see a short-term dip coming, sell 1/2 of your LTC. In this example that would be $300 when you start out. As soon as the Stop or Target us hit, put that money back into LTC.

 

Using this method, you will never make a profit by shorting, but your loses will be less than if you had not sold that $300.

 

Here is an example:

Click image to enlarge

 

 
   
       
 

 

 
 
 Copyright 2002 - 2018, Handler & Associates, Inc.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.

Futures trading is complex and carries the risk of substantial losses. It is not suitable for all investors. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns.