You can use this on spread betting or CFD(contracts for difference)
You can use this method on index trading and currency mainly but you can use this on any form of trading. If your betting on the index to go up or down then your betting on the points.
So if your betting on the index to move higher then you would place 3 contracts to go long, which would mean:
• £3 a point trade.
• £1 for one contract.
• 3 contracts.
So once in the trade you would close 1 contract down after 20 points in your favour(or near the first resistance level near by), which ever you are comfortable with.
You then bring your stop losses to break even on the remainder of the contracts so taking all the risk off and in doing so you have got yourself a free trade as such.
Now you can set your self a limit on 1 off the 2 contracts left to close out at 50 points from original entry(or the next level of resistance).
Once this is closed out you can then adjust your stop on the last contract and let this one be your greedy trade.
The idea behind the 3 contract rule is to pay yourself to trade, most people don’t do this so hence why most traders lose.
Its a very simple system for money management and it helps in creating discipline. This will also help you take away some of the emotions out of trading.
Emotions is some thing that every new trader will experience and can be a big hindrance whilst trading. A trader that leaves emotions out of trading will stand a better chance of beating the markets
