Loss minimization model in forex trading

The mathematical model below describes how loss can be minimized while trading in the forex market. Assuming we trade USD/EURO and give an order to sell hoping that there would be an increase of 10 pips. However, if the there is an unexpected decrease in pips, open up the 1 minute chart. Having studied the one minute chart carefully, I believe there is always a chance that there will be a 10 pip increase during a fall of 80 pips or less. In some cases there is a fall of more than 80 pips without a change in the graph pattern. However, those can ignored as unexpected anomalies. So, our goal is to make up for the lost money in the 10 pip increase in the middle of a sharp fall.

Lots	Pips	Profit/Loss	Money Spent	Sum of Pips	Sum of Lots	Lots to Equalize(+10 Pips)
1	-20	$ (20.00)	$ 75.00	-20	1	1
2	-20	$ (80.00)	$ 225.00	-40	3	5
5	-20	$ (240.00)	$ 600.00	-60	8	16
16	-20	$ (720.00)	$ 1,800.00	-80	24	48
48	-20	$ (2,160.00)	$ 5,400.00	-100	72	144
144	-20	$ (6,480.00)	$ 16,200.00	-120	216	432
432	10	$ -	$ 48,600.00	-110	648	-648

In this model, we buy 1 lot assuming that there would be a 10 pip increase. However, there is a sharp fall. We wait for a 20 pip decrease and then sell another lot hoping that a 10 pip increase would neutralize our loss. Similarly, when there is another 20 pip fall, we sell another 2 lots hoping that a 10 pip increase would neutralize our loss. The process continues and it is highly unlikely that there is never a 10 pip increase across a fall of 120 pips. Hence, even if things don't go as planned, there is always a way to get your money back!

Lots	Pips	Profit/Loss	Money Spent	Sum of Pips	Sum of Lots	Lots to Equalize(+10 Pips)
1	-20	=SUM(B1,B2)	=(F2*75)	=SUM(B2)	=SUM(A2)	=-(C2/10)-F2
2	-20	=((F3*B3)+C2)	=(F3*75)	=SUM(E2,B3)	=SUM(F2,A3)	=-(C3/10)-F3
5	-20	=((F4*B4)+C3)	=(F4*75)	=SUM(E3,B4)	=SUM(F3,A4)	=-(C4/10)-F4
16	-20	=((F5*B5)+C4)	=(F5*75)	=SUM(E4,B5)	=SUM(F4,A5)	=-(C5/10)-F5
48	-20	=((F6*B6)+C5)	=(F6*75)	=SUM(E5,B6)	=SUM(F5,A6)	=-(C6/10)-F6
144	-20	=((F7*B7)+C6)	=(F7*75)	=SUM(E6,B7)	=SUM(F6,A7)	=-(C7/10)-F7
432	10	=((F8*B8)+C7)	=(F8*75)	=SUM(E7,B8)	=SUM(F7,A8)	=-(C8/10)-F8

COLUMN NAME	EXPLANATION
Lots	Number of Lots purchased each time
Pips	Number of Pips increased/decreased after purchasing lots
Total Profit/Loss	Total profit or loss incurred after the most recent purchase (amount within brackets indicate loss)
Money Spent	Amount spent to purchase the Lots each time
Pips Inc/Dec	Difference in Pip count since we started buying
Sum of Lots	Total number of Lots purchased so far
Lots Req. to Equalize(+10 Pips)	Number of Lots that are to be purchased to neutralize loss if we expect an increase of 10 pips

The IPL Economy

When the British came to the subcontinent, there were many kingdoms - each with a capital town, a distinctly different language, a different and unique culture and religion. The British in a way helped unite these forces together to create India. Thank God, we didn’t have money launderers (stupid financial institutions which crash every hundred years) in the 18th century; the British were economically quite sound to handle large colonies for 300 years and India was born. If the British had given the subcontinent a miss, we would have had 20 to 30 countries in the subcontinent and all of them would have been constantly fighting with each other over water and land. We would have seen the creation of several Islamic republics, Hindu majority states and possibly a Sikh country; most of them having just a few things in common: poverty, illiteracy, etc The region that now boasts to be the largest democracy in this world could have played host to several autocratic and military regimes. Good Lord! I love Britain. They saved the world from possibly several North Koreas and Zimbabwes and instead presented the world with a flourishing democracy!

The British stayed long enough and were cruel enough to unite the people of the Indian sub-continent. For the first time, people in this region started to look beyond caste, religion and linguistic divides to call themselves 'Indians'. The India that we have now is by far the most diverse country in this world. Unity in diversity - India's beauty and strength.

This unification of 1 billion people also created the market and the workforce that an emerging economy needs. I know that a large percentage of that population cannot read and write, is below poverty level, not efficient workforce, etc. However, let’s assume we have just 1 in 3 Indians who are well educated, skilled and have the buying power - that’s 300 million people which is the total population of the United States. The companies around the world are investing in India because of our huge market that is growing every day.

A comparison of per-capita coke consumption in US and India:

* Based on U.S. 8 fluid ounces of a finished beverage

(Source:http://www.thecoca-colacompany.com/ourcompany/ar/percapitaconsumption.html)

This graph shows the per capita coke consumption in US has not seen much increase in the last 10 years. Though, India has doubled its tally, it's still way behind US. Imagine a country with a population of 1 billion having a per-capita coke consumption that is 60 times smaller than that of America. Now, that is a market to be captured! If I were Indra Nooyi, I would buy an IPL franchise the next time BCCI decides to expand the number of IPL teams. I'll tell you why...

For those who have no idea what the IPL is, wikipedia: "The Indian Premier League (also known as the "DLF Indian Premier League" and often abbreviated as IPL), is a Twenty20cricket competition created by the Board of Control for Cricket in India (BCCI) and chaired by the Chairman & Commissioner IPL, BCCI Vice President Lalit Modi. It is now the most watched domestic Twenty20 competition in the world. The first season of the Indian Premier League commenced on 18 April 2008, and ended on 1 June 2008 with the victory of the Rajasthan Royals against Chennai Super Kings in the final at the DY Patil Stadium, Navi Mumbai."

To add more, it is a franchise based club cricket competition based on the English premier League and the American franchise-based competitions. The loyal following every EPL club has earned over 100 years has turned the EPL into a huge industry. A club like Manchester united commands a great amount of fan following even in Asia. England being such a small country without the kind of diversity that India has produced such a successful league. Imagine the kind of market, a diverse country like India proposes. When Liverpool and Manchester United were established, there was no immediate fan base for these clubs apart from the people living in and around the region. However, look at the kind of fan base the Kolkata Knight Riders or the Chennai Super Kings can generate. With each region in India having such a uniquely distinct cultural identity, and each culture trying to constantly establish their supremacy in a virtual culture rankings, the rivalry and fan base for these clubs is going to grow manifold in the years to come. Cricket being the most popular sport in India, the IPL has to be the biggest marketing tool in the future.

Now coming back to why The Coca-cola Company should invest in an IPL franchise, it is quite apparent that the per-capita coke consumption of an average American has reached a saturation level and it is very difficult to go beyond the current level. Hence, it makes more sense to approach emerging markets like India which have a tremendous potential for growth. The Coca-cola Company can almost double it's profits through coke sales if it can replicate even one-third of the American coke consumption in India. For that, they need to market their product very well. As I had mentioned before, with the IPL being the most appealing marketing tool for the future, I see a lot of firms investing in it. With more investment, the IPL is only going to grow bigger. The other big advantage that IPL holds over EPL is that, Indians living abroad are more than half of the total population of England! So, the market for IPL expands beyond Indian borders instantly, unlike the EPL which took several years to capture markets in Asia and Middle East.

I wouldn't be surprised if after a few years, bars in England screen IPL matches (if it does not clash with a English premier league match of course, not in England!)