Trading - Risk Management

NSE:NIFTY   Nifty 50 Index
Hi ,
All the post are on trading /technical analysis. So thought of putting something on risk management .

What is Risk Management ? Now don't look blank, if your in markets you have to know about it.

Does every trade has risk and Is quantum of profit assured ? Yes every trade comes with risk and no assurance of profit.

How much risk can you take ?

Lets begin by example , Let say you have capital of 1 lakh.
Than the Basic risk you can take is 7 % of capital , why 7 ? I just divided 1 lakh with 13 (fib number) , we get 7.69 (approx 8) which is also fib number. So lets round it to lower side 7 so 7 % of capital .
So your risk profile is 7 thousand on capital of 1 lakh, if you decide to take 2 trade it becomes 3.5 thousand per trade ,
3 trades is 2300 per trade.

What risk reward ratio trade you can take ?
Risk : Reward has be 1:2 minimum , 1:3 and above is better , 1:1 risk reward can ruin you out of market
(Refer : Google it : Nauzer Balsara :Risk to ruin)

What position size you can take ?

So once you know your risk is 7 thousand on capital of one lakh and let say you decide to enter a trade with stop loss of 10 Rs than the position size you can take is 7000/10 = 700 shares ,i.e you cannot enter into trade where lot size is 5000.

How muck risk can you take per day , per month ?

Your risk per day and per month remains same , if you suffer loss of 7 thousand on capital of 1 lakh in between the month than you have to wait for next month for taking a fresh trade (Remember markets are forever but your capital is limited)

Rather than taking 7% risk you can choose it on lower side also like 6,5,4 as per your choice,
Above points should act like a reference.


Thank you for your post on Risk Management.
neneram AMBRISH
@neneram, good 1
Good stuff...Appreciated !
neneram InsiderB
Thanks for appreciation.
InsiderB neneram
@neneram, I checked the link on your profile, though I can't choose a side, Good initiative but change will be tedious process !
neneram InsiderB
Appreciated Sir, Good attention to detail :-)

I have lot of ideas which i need from NSE,SEBI like

1)The Tame chart provided by NSE needs serious upgradation to level of trading view charts.(Even after paying so much STT , retail traders can't get such a simple thing)
2) Retail traders should get Top 10 bid,offer prices just to see if any fake volume is created in futures and options.
3) Blocks deals in F&O stocks can be done only in next month cycle , not in current month cycle , may times small traders get trapped .
+1 Reply
InsiderB neneram
@neneram, 1) The board members & directors willfully kept it tat way , TAME charts, to promote , vendors. STT, its gonna increase & discussions are going in finance ministry
2) I'm not sure how top 10 can help, so no comments
3)sounds logical
@InsiderB, I am not sure but you can view up to 25 bid, offer prices.
i have heard about it long back ,
Top 10 can help big trader to trigger your stop loss and pick up large quantity at your price.
I might be wrong .
neneram AMBRISH
Currently NSE provides TOP 10 Bid, Offer quotes at very high pricing , Retail traders simple won't be able to afford.

As per my understanding Stop loss orders are not managed by exchange but by your broker, So as soon as trigger prices occur broker sent the order to exchanges at your mentioned prices (As result when there is sudden spike , your Stop loss order sometime remaining pending)
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