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A Look Forward To 2014

|Includes: iShares Australian Dollar ETF (AUDS)

I'm looking to experiment with a betting strategy known as the cancellation system. It involves going after a set amount of units.

For example let's take 10 units and assume they each equate to 1% of the account:

1 1 1 1 1 1 1 1 1 1

We'll take the first and last 1's as the amount to risk on the trade. In this case 2%. If the trade/investment wins we will cross the two out, if not we will add them to the right (2 total) and repeat the process. See:

If trade wins:

1 1 1 1 1 1 1 1

If trade loses:

1 1 1 1 1 1 1 1 1 1 2

Assuming the trade lost you would take the side #s 1 & 2 and add them and use that as the amount to risk (now 3%). It looks like a safe alternative to martingale and could take months to see the cycle through until it ends.

It looks better for a day trader, but I can still incorporate this into my swing trading. My goal would be to get a full cycle of this in every quarter (4 cycles total) but it could be as many as 12 cycles!

Good luck trading out there.