**The difference between a Formula and a System**

Let’s be clear, the Apiary Benjamin Formula is not a system for trading currencies, but a formula for evaluating, setting up executing, managing and exiting a currency investment. To our knowledge, no one ever offered Franklin a Sure-fire investing system. Instead, he studied and learned from the most successful investors of his day. He learned how to evaluate, set up, and execute a prudent investment – a Wisdom that proved far more valuable than any investing system ever created.

In your quest to become a successful investor, you will discover that the world offers many sources for trading systems. People promised fortunes in Franklin’s day and continue to do so today. All you have to do is open any financial paper and you will find a myriad of trading systems claiming incredible feats of success.

All these trading systems will tell you when to pull the trigger, but none of them will tell you how to evaluate whether the investment is good for your personal objectives. Most trading systems fail to answer the basic question of whether an investment is good for you or not. They fail to analyze your risk. They can’t tell you whether an investment is worth your money or your time. They don’t tell you how much to invest.

In short, trading systems cannot answer all these questions. But the Apiary Benjamin Formula will because the formula personalizes investing – it gives you a defined set of protocols to answer some of the toughest and least answered questions involved in trading.

**The Result**

To answer some of trading’s toughest and least answered questions, the formula starts with the end: your results. Is that not why you invest in the first place, to generate positive results?

What are positive results? What do you consider success? By focusing on answering these questions, you can define your goals. With goals, you can manage progress. With progress, you can maintain confidence. With confidence you have determination. With determination, you will practice. With practice you will succeed.

The Apiary Benjamin Formula makes this process simple, by suggesting a reasonable yet desirable goal of generating $100 a day. It just so happens that Benjamin Franklin’s profile compliments the worlds most sought after currency note in the world. In fact, many people call the $100 bill a Benjamin. (Hence the Benjamin Formula) The goals of this course is to learn how to structure your investing activity so that everting you do, every action you tak, leads you one step closer to generating a hundred dollars a day.

Your personal goal may differ, and that’s okay. But imagine what you could do if you made an extra $100 per day? This formula can be applied on your own, but we will illustrate this point by using the example of a level two trader involved in the Apiary Fund. If you made $100 a day, your return would be $70. By the first day, you can enjoy a nice dinner. In two days, you could go to that concert you always wanted to see. The net three days could go toward a new car. And the next 18 days could go toward your dream home. What more could you want? You will have a few more days in the month to get it.

Whatever your investment income goal is, you need to own it and share a passion for it. Frankly would never have become who he became without a passion and a drive for reaching his goals.

**Apiary Benjamin Formula Variables**

Includes a series of variables to help you reach your goal. In the research phase of investing, which is what you are doing when you evaluate an investment, the variables are the attributes or characteristics of the investment that can be manipulated or changed to produce the desired results. Some of the variables in the Benjamin Formula include the account size, max loss per day, stop loss, max loss per trade, max position, price cycle and time cycle.

Our next step is to consider the variables and walk through an investment that is adjusted for risk, is positioned correctly and gives you the ability to determine if the investment is right for your money and time. Let’s start with the account.

**The Account Size Variable**

When you deposit money into a brokerage account, you have what is called investment capital which represents the total cash that can be used for your investment purposes. Investment capital differs from savings capital and working capital. Working capital is used to manage your every day life. Savings capital is used for emergencies and specific needs or wants. Investment capital is used for investments. It is used with the understanding that you have the risk of loss. Under no circumstance should you use working or savings capital for investment purposes.

In the Apiary Benjamin formula, we

**recommend allocating $2,000.00 USD of the investment capital to open your brokerage account**. Of-course the decision of how much of your money to allocate to invest will vary from person to person. Some will start with less while others will allocate considerably more.

The important thing is to understand that your account size is a variable and therefore changing the amount will change everything about how you trade.

__More investment capital allocated will result in larger investments that only have to move small distances to reach your goals__. Small investment capital will result in small investment, which have to move greater distances to accomplish the same results.

**Max Loss per Day Variable**

Before you ever place a trade, you should draw your loss line in the sand. Actually, etch it in cement, so you cannot change it throughout the day. The stark reality of investing is that you will incur losses because no investment is a sure thing. By defining the maximum loss you will incur on a daily basis, you define your risk tolerance.

The max loss per day variable in the Apiary Benjamin Formula is there to help you manage your losses before they happen. In this way, the decision to exit is already made and you don’t have to fight the emotions when you are faced with a decision.

The max loss per day variable is calculated as a percent of your investment capital or account size. It’s been our experience that the most successful traders never exceed a maximum loss per day of 2-5% of the account size. In practice, if you hit your maximum loss per day, then you need to quit trading for the day. Here’s why: When you take a loss in your account, you will have to make it up another day in order to reach your goals.

Think of it like this, if you have a $10,000 account size and take a 5% loss, your new account balance will be $9500.

10,000 – (10,000 x .05) = $9500

It will take more than a 5% gain to get your account back to $10,000. In fact, it will take a 5.2% gain just to get back to $10,000.

9500 x (1+X) = 10,000 or X= ~.052 or 5.2%

But you are not out of the woods yet. You still have your $100 daily goal from yesterday plus today’s goal of $100.00. So, in order to get back on track with your goal of making $100 a day, you need to generate an additional $200 to get your account to $10,200. To accomplish this goal and get back on track, you actually need to generate a 7.4% return.

9500 x (1+X) = 10200 or X = -.074 or -7.4%

If you just didn’t lose the day before and made your $100, then you would only have to generate a 1% profit to keep on track. This was a lot of numbers to illustrate this very important rule: Keep your max loss per day variable small.

It is much easier to keep on track than it is to make up ground due to a loss -6.4% easier in this example!

**The Max Loss Per Trade Variable**

The second variable in the Apiary Benjamin Formula is the max loss per trade variable. This is important because it represents how many trades you can lose and still be able to trade before reaching your max loss per day. You don’t want to wager your entire day on a single trade.

To calculate your max loss per trade, you take your max loss per day and divide it by the total number of losing trades you will allow in a day of trading. Here is the formula:

Max Loss per Trade = (Max Loss per Day) / (Maximum number of losing trades in a day.)

Here is how it would work if the maximum number of losing trades in a day was 3 and your max loss per day was $300:

Max Loss per Trade = $300/3 = $100.

What this number tells you is that the most amount of money you should lose on any single trade during a day should not exceed $100. This will give you enough flexibility in your trading to generate up to 3 losses before you trigger your max loss per day.

This variable will have the following impact on your trading:

As you allow more losses in a day, you will have to reduce your stop loss, reduce your position size and increase the target of your trade in order to reach your goals.

The fewer number of losses you allow in a day gives you the opportunity to increase your stop loss, increase your position size and decrease your target to reach your “Benjamin a Day” goal.

**The Stop Loss Variable**

In addition to calculating your maximum loss per day and per trade, you will also need to determine where your stop loss will be for each trade you place. Your stop loss will vary from trade to trade and will depend on the unique characteristics of the trade set up you are evaluating.

A stop loss is the point where you will automatically close your investment if the trade goes against you. The stop loss point is actually an exchange rate. When you enter a trade to buy or sell a currency, you enter the position at the current exchange rate. The stop loss is the exchange rate where you will exit if the trade goes sour!

The rule for setting your stop loss goes right along with the rules for getting out of any trade – you want to exit your positions if the currency breaks a support or resistance zone. You will learn in a subsequent course that you enter trades when the market breaks out of a consolidation zone. If the market reverses after you enter the trade, then you would exit the position if the market crosses through the opposite edge of the consolidation zone, as shown in the diagram below:

In Alveo, you would enter your stop loss at a specific price level; however, the Benjamin Formula will want you to calculate the stop loss in pips.

A pip represents the smallest incremental change in the currency’s exchange rate. For example, if the EUR/USD exchange rate is currently 1.3013 and it changes to 1.3014, they you have a 1-pip increase. Don’t let this new term confuse ou. A pip is simply a unit of change – the smallest unit of change in the currency quote.

To calculate the stop loss in pips, you take the absolute valued of the entry point minus the stop point. Here is the calculation:

(entry point)-(stop point)=[total pips]

For example, if the entry point is 1.3755 and the stop is 1.3745, then the stop loss, in pips, is 0.0010 or 10 pips.

1.355 – 1.3745 = 0.0010 or 10 pips.

There are some things to consider when choosing where to place your stop. First, a large stop will reduce the number of contracts you can purchase and you will have to increase the target in order to reach your goals. Similarly, a small stosp will allow you to increase your position size and decrease our target to reach your Benjamin Goal.

**The Max Loss Per Lot Variable**

Once you have calculated the number of pips in your stop loss, then the next variable is pretty simple to determine. The max loss per lot is simply the process of multiplying your loss in pips by the pip value of the currency you are looking to trade, as follows:

Max Loss per Lot = Stop Loss (in pips) x pip value

The pip value is different for different currency pairs. You will learn how to calculate pip value in other areas of the training. For our purposes here, you can assume that the pip value is $10 USD per standard lot. (this is correct pip value for any currency where the USD is the quote currency.)

To calculate the max loss per lot if your stop loss was 10 pips and your pip value is $10, then your max loss per lot would be $100:

Max Loss per Lot = 10 (stop in pips) x $10 (pip value) = $100.

**The Max Position Size Variable**

Now, according to the Apiary Benjamin Formula, you are prepared to calculate how much money you can allocate to this trade, given your risk tolerance and your stopping points. It’s important to note that capital allocation to any investment is perhaps one of the least understood and underappreciated steps in trading currencies.

When most people trade currencies, they assume it’s a risky investment. The reason is because they do not factor risk into how much they choose to allocate to their investment. The Apiary Benjamin Formula takes risk and standardizes it for any investment. It does not matter if you invest in the safest and most secure investment in the world or if you invest in the wildest, most volatile currency in the world, if you use the Apiary Benjamin Formula correctly, then the risk for either investment will be exactly the same!

This is one of the reasons why we claim that the currency market is the best place to invest. Currencies provide an incredible income potential and, while it’s true that incredible income could also to incredible loss, the Apiary Benjamin Formula has been created to limit your losses to a reasonable level – the max loss per day of your choosing.

Besides the fact that the Apiary Benjamin Formula is helping you standardize your risk when you calculate the max position size, you will ensure that you never “over-invest” or “over-position” in any currency. One of the biggest challenges new traders make is that they allocate too much money to a trade. This is called “oversizing your position,” and it’s one of the biggest reasons why people lose money in the currency market.

To calculate the correct position size, you take the max loss per trade and divide it by the max loss per lot. Here is the formula:

Max position size = (max Loss per trade) / (max loss per lot)

For example, if the Max loss per trade was $100 and the Max loss per contract was $100, then your max position size would be 1 standard lot. If you prefer trading the mini lot, then you would trade 10 mini lots since the minis is 1/10th of a standard lot.

Max position size = $100/$100 = 1 lot

Of course, could always invest less, but you should never invest more!

**The Price Cycle Variable**

Now, having optimized your position size to control risk, and identified all your exits, it’s time to evaluate whether this investment is worth your time and money.

First, let’s focus on money. You will learn in a subsequent course, that the currency markets are constantly moving from a consolidation to an expansionary phase and your objective is to open positions (long or short) at the beginning of an expansionary phase. But how do you know if the expansion is going to be big enough to make a profit?

What if you could know before you ever put money into a trade, how big the next expansionary phase is likely to be? This is exactly what we’re going to show you next. It’s called the price cycle.

The price cycle is the concept of looking at the most recent price movements or expansions from pivot to pivot, finding the average of those movements, and projecting that the next movement will probably be somewhere around the average.

There is a price cycle indicator that can attempt to do this automatically. It is located in the Navigator window under the custom indicator menu. To view the estimated price cycle, simply highlight the indicator and drag onto the chart of the currency you are evaluating.

The price cycle is kind of like the weather forecast – it gives you a little glimpse of what the future holds in store for you. You will learn more about the price cycle and how to use it in a later course, but for now, the great thing is that you can use the price cycle to help you evaluate whether a currency investment is worth your money!

The decision to put your money into an investment requires that the expected return in dollars must be equal to or greater than your goal. To calculate whether your investment matches your goal, you take the max positions size and multiply it by the price cycle minus the entry pips, where entry pips is the total number of pips between the entry price and the last pivot. If the resulting value is greater than or equal to your goal, then the trade is worth your money.

Here is the formula:

Income Goal ≤ (Max Position Size) x (Price Cycle) – (Entry Pips)

Example:

Income Goal: $100

Max Position size: 10

Price Cycle: 20

Entry Price: 1.3455

Last Pivot: 1.3450

First you need to calculate the “Entry Pips”

Entry Pips = 1.3455 – 1.3450

50 = 0.0005 of 5 pips

Next, you need to calculate whether the expected return is greater than the goal:

$100 ≤ 10 x (20 - 5)

$100 ≤ 10 x (15)

$100 < $150

In this example, the expected return of this investment is $150.00 which is greater than the income goal of $100 so the trade is definitely worth the money! Now let us see if it’s worth the time.

If makes little difference if the investment is wroth your time if it doesn’t occur in a timely manner. Most traders forget this important fact and go ahead and trade the currencies with little regard for how long they will be in a trade. Perhaps they like to be surprised?

However, with the creation of the proprietary Apiary MetaTrader tool called the time cycle, you can have an idea whether any investment opportunity is worth your time.

Like the price cycle, the time cycle performs a statistical analysis of every expansionary phase of the currency and plots how long the next expansion phase will most likely last.

To apply the same cycle to a chart, simply located the Navigator window and click on the “Custom Indicators” tab and scroll down to the “Time “cycle” indicator. Highlight it and drag it onto your chart.

If a trade is going to be worth your time, it must accomplish your goal in the appropriate time frame. For example, the goal of the Benjamin Formula is to generate $100 a day – emphasis on the “a day!” IF the trade fails to generate in a timely fashion then you should look for other opportunities.

First, you must calculate how much time is left in the trade.

To do this, you take the time cycle and subtract the number of periods since the last pivot. For example, if the last pivot occurred 4 periods ago and the time cycle is 10, then you have 6 periods left in the expansion phase. If you are looking at an hourly chart this is 6 hours. If you are looking at a daily chart, this is 6 days.

Next, you take the price cycle result and divide it by the time. For example, if the expected return from the price cycle is $150 and the number of periods remaining is the time cycle is 6 hours, the investment would be worthy your time. If the remaining time cycle is 6 days, then the trade is not worth your time because the expected return per day is $25 per day, not your $100 per day goals!

If you’re excited find out more about the concept of Price and Time Cycles, check them out in the glossary.

The Benjamin formula may seem like a lot of work: You set up your trade, adjust for risk, calculate position size, and finally, determine whether the trade is worth your time and money. By the time you come to the conclusion and do the math, the expansion phase will be over and you’ll be doing it all over again for another potential trade.

The fact of the matter is that nobody goes through formula every time they trade. You will start to trade in a zone, for example, if you know that your stops are under 10 pips and your position size is less than 10 mini lots, then your trade will most likely be turned for risk. Furthermore, if you know that the price cycle is over 15, then you are most likely going to want to take the trade as long as you have enough time left in the time cycle.

Benjamin Franklin arrived at the point in his life through repetition and consistency where he could make important decisions quickly. However, he did not start that way. In fact, many notebooks were filled during the early days of the Junto Club as he carefully crafted his philosophy as he created his formula for business and investing.

You also will hone your skills until you become proficient at analyzing investments quickly and confidently. This week’s quiz will require you to analyze several trades to determine whether they are worth your time and money, so make sure you practice and understand the variables in the Apiary Benjamin Formula.

Here is the formula:

Income Goal ≤ (Max Position Size) x (Price Cycle) – (Entry Pips)

Example:

Income Goal: $100

Max Position size: 10

Price Cycle: 20

Entry Price: 1.3455

Last Pivot: 1.3450

First you need to calculate the “Entry Pips”

Entry Pips = 1.3455 – 1.3450

50 = 0.0005 of 5 pips

Next, you need to calculate whether the expected return is greater than the goal:

$100 ≤ 10 x (20 - 5)

$100 ≤ 10 x (15)

$100 < $150

In this example, the expected return of this investment is $150.00 which is greater than the income goal of $100 so the trade is definitely worth the money! Now let us see if it’s worth the time.

**The Time Cycle Variable**If makes little difference if the investment is wroth your time if it doesn’t occur in a timely manner. Most traders forget this important fact and go ahead and trade the currencies with little regard for how long they will be in a trade. Perhaps they like to be surprised?

However, with the creation of the proprietary Apiary MetaTrader tool called the time cycle, you can have an idea whether any investment opportunity is worth your time.

Like the price cycle, the time cycle performs a statistical analysis of every expansionary phase of the currency and plots how long the next expansion phase will most likely last.

To apply the same cycle to a chart, simply located the Navigator window and click on the “Custom Indicators” tab and scroll down to the “Time “cycle” indicator. Highlight it and drag it onto your chart.

If a trade is going to be worth your time, it must accomplish your goal in the appropriate time frame. For example, the goal of the Benjamin Formula is to generate $100 a day – emphasis on the “a day!” IF the trade fails to generate in a timely fashion then you should look for other opportunities.

First, you must calculate how much time is left in the trade.

To do this, you take the time cycle and subtract the number of periods since the last pivot. For example, if the last pivot occurred 4 periods ago and the time cycle is 10, then you have 6 periods left in the expansion phase. If you are looking at an hourly chart this is 6 hours. If you are looking at a daily chart, this is 6 days.

Next, you take the price cycle result and divide it by the time. For example, if the expected return from the price cycle is $150 and the number of periods remaining is the time cycle is 6 hours, the investment would be worthy your time. If the remaining time cycle is 6 days, then the trade is not worth your time because the expected return per day is $25 per day, not your $100 per day goals!

If you’re excited find out more about the concept of Price and Time Cycles, check them out in the glossary.

**Conclusion**The Benjamin formula may seem like a lot of work: You set up your trade, adjust for risk, calculate position size, and finally, determine whether the trade is worth your time and money. By the time you come to the conclusion and do the math, the expansion phase will be over and you’ll be doing it all over again for another potential trade.

The fact of the matter is that nobody goes through formula every time they trade. You will start to trade in a zone, for example, if you know that your stops are under 10 pips and your position size is less than 10 mini lots, then your trade will most likely be turned for risk. Furthermore, if you know that the price cycle is over 15, then you are most likely going to want to take the trade as long as you have enough time left in the time cycle.

Benjamin Franklin arrived at the point in his life through repetition and consistency where he could make important decisions quickly. However, he did not start that way. In fact, many notebooks were filled during the early days of the Junto Club as he carefully crafted his philosophy as he created his formula for business and investing.

You also will hone your skills until you become proficient at analyzing investments quickly and confidently. This week’s quiz will require you to analyze several trades to determine whether they are worth your time and money, so make sure you practice and understand the variables in the Apiary Benjamin Formula.