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Risk Management

Trader's Queries - Capital requirement for tradingQuery : How much capital is needed to trade? This is one of the most frequently asked query from new traders. I have seen people who have the opinion, “50 Lakh or one crore capital make trading safe & secure”, “only people who have capital more than 50 Lakh only earn money from trading” etc. Its true that without capital we cannot start any business. Its also true that we don’t need 50 L to one crore to start any business. Trading is a business. Its the only business which has the capacity to give us unlimited profit. To reach that level of gaining “unlimited profit”, a trader has to make him qualified. So when a trader is preparing himself to become a “pro trader”, he has to start with the amount he can afford to lose. Meaning, a person should not borrow or get loan to trade. The capital should not make a person sad or depressed if he lose his entire capital. Remember, a trader won’t gamble if he treats trading as a business instead of casino. Understanding this is the key for your success in trading.
NSE:CNXITEducation
by vanathi
11
📚 Leveraged & Margin Trading Guide + Examples ⚖️ Leveraged trading allows even small retail traders to make money trading different financial markets. With a borrowed capital from your broker, you can empower your trading positions. The broker gives you a multiplier x10, x50, x100 (or other) referring to the number of times your trading positions are enhanced. Brokers offer leverage at a cost based on the amount of borrowed funds you’re using and they charge you per each day that you maintain a leveraged position open. For example, let's take EURUSD pair. Let's buy Euro against the Dollar with the hope that the exchange rate will rise. Buying that on spot with 1.195 ask price and selling that on 1.23 price we can make a profit by selling the same amount of EURUSD back to the broker. With x50 leverage, our return will be 50 times scaled. With the leverage, we can benefit even on small price fluctuations not having a huge margin. ❗️Remember that leverage will also multiply the potential downside risk in case if the trade does not play out. In case of a bearish continuation on EURUSD , the leveraged loss will be paid from our margin to the broker. For that reason, it is so important to set a stop loss and calculate the risks before the trading position is opened. ❤️Please, support this idea with a like and comment!❤️
OANDA:XAUUSDEducation
by VasilyTrader
3
Trader's Mindset !The Pyramid showing how successful traders identifies their strength in the world of professional trading. Numbers may not be the perfect one but the idea behind this pyramid is to understand that most people spend most of their time in finding the best strategy which we know that does not exist. Strategy : - The top of the pyramid is strategy, which is really important but not as much as we think. off course we have to have a rule for entry, exit, and take profit. Risk Management: - We put risk management in the middle of the pyramid which shows that this is the 2nd most important thing that needs to be discussed. We must control our risk on each and every trade. Mindset/Psychology: So, we have put the trading psychology in the bottom of pyramid which means the trader's mindset is the foundation of his/her successful trading career. This trading education series around these three pillars will be continued ........ :)
OANDA:XAUUSDEducation
by thebullstreet07
Know When To Stop Trading !!!!🎯When to Stop Trading? We have spoken up to now about when to stop trading on a particular day. However, it is important to know if you should stop trading altogether – in other words, quit. It is not simple to find the right time to quit because often people quit when the going gets tough, but this may be just before success arrives. However, there are times when quitting is important: --You can’t see any possible positive outcome for a trading --You constantly feel overwhelmed and negative about your trading --Trading takes preference over your health or your family --Your financial situation is negatively impacted by your trading so that your family is suffering or your mental health is impacted. These are all red flags. At a minimum, take a break from trading in order to rest, relax and recharge. Save up some trading capital, assess your goals and reflect on your failures and successes. Use this to formulate a new trading strategy, while working on your perspective and objectivity. You may then be ready to try again. The markets are certainly not going anywhere if you need a break and quitting does not need to be forever.
NSE:NIFTYEducation
by ReviveTraders
6
Line tool Customized for Multi Timeframe view.Professional Price action trader's analysis will be from higher time frame to lower time frame. Higher time frames like Monthly, Weekly, daily, 4Hour are acts as Major Supply & Demand levels for any script. Lower time frames 1Hour, 15min, 5min are used to enter the market. In the chart of USOIL, I have mentioned the major Supply & Demand ranges in line and its text options. MSR - Monthly Supply Range WSR - Weekly Supply Range DSR - Daily Supply Range DDR - Daily Demand Range 4HDR - 4Hour Demand Range For Positional traders, it will be help full to see all major time frame Supply & Demand ranges in 1Hour chart to proper entry with good Risk to Reward ratios. Also no need to switch between Higher time frames every time. Hope everyone will utilize this content & take your trading journey to the next level. Take care & Trade wisely.
TVC:USOILEducation
by Velmurugan_SimpleTrader
1
Entry Techniques : Ambush vs Retest vs ThresholdBackground: Kindly see my Asian Paint Short Trade Idea (Linked Below). Asian Paints was making Lower Lows and Lower Highs and was moving towards its long-term trendline. Hence, I was eyeing a short opportunity in this trade. However, my entry and exit were not great. So I have analyzed different entry techniques (credit to Franklin O. Ochoa - PivotBoss): My Entry (@2395): My idea was that the trend line was already broken and I should enter the trade. Price reversed the next day to make one more lower high. But my entry was too soon and without any confirmation. Ambush Entry: It is very Risky. The idea behind this technique in this context is that when the stock has broken the trendline it will go up again near the line joining the lower highs for a test. There a trigger order shall already be waiting for entry. It's risky because a trend reversal may also occur. this technique is to be used when we are absolutely sure about the levels. Retest Entry: Moderately Risky and the best entry technique. Franklin says that how many times you have seen that the moment you have made an entry, the trade goes against you. The retest entry allows us to avoid this (mostly). The idea is that once we have identified the confirmation candle we place an order for the next day at (High+Low)/2 of the previous day (confirmation day). This would allow us to enter the trade at the wick of the candle (most of the time). This method is less risky and one of the best. Threshold Entry: It has the lowest risk. The idea behind this is that once you have identified your confirmation candle you place a trigger order higher (or lower in case of a short trade) than the close price of the confirmation candle. This allows you to enter into the trade only if the price is moving in your direction. Retest entry would have allowed us to enter the Asian Paints Short Trade at a price of 2440. The best thing about retest entry is that it allows us to enter a trade much lower to our stop loss which was 2500 for me in this case. Compare it with my entry. SL with my entry was 105 points away i.e Rs. 31500. But for a retest entry, the SL would have been only 60 points away i.e Rs. 18000. And in trading every rupee matters and every point counts. Hope this doesn't seem boring :). Best of luck and happy trading.
NSE:ASIANPAINTEducation
by arunkrmishra2000
7
STOP-LOSS Trailing method in detail !! 🎯Conclusion :- 1. Trailing stop loss is an order that locks in profits as the price moves in your favor. 2.You can trail your stop loss using: Moving Average, Average True Range, percentage change, market structure, and weekly high/low as well . 3. Investors uses above way to ride the trend till the last, & enjoys profits 4. as a investor you can ride it with trailing stop-loss by shifting it on phases wise / market structures 5.Read the important points mentioned on the charts 6.Refer chart for more information 🙏FOLLOW for more ! 👍LIKE if think is useful ! ✍COMMENT Below your view !
NSE:BANKNIFTYEducation
by ReviveTraders
3
Professional Traders Vs Amateur TradersThere is a big difference between successful traders and amateur traders. Successful traders know how to allocate capital, calculate their risks, and move on after losing money. Ultimately, it is not what the trader knows, but who he is. The consistently profitable traders can ignore or subvert their natural tendencies to do what feels comfortable, and instead, do what is necessary, to be optimally profitable over the long run. I have mentioned just a handful of differences between professionals and amateurs. A trader’s goal should be to move from the red group (amateur trading) to green group (professional trading) as early as possible. Remember "amateurs focus on anticipating returns, professionals focus on the process and managing risk".
NSE:NIFTYEducation
by PranamGhagare
2
Trading Journey - 5 Step ProcessApproach your trading as a business. I know it sounds a little cliche, but if you approach your trading in this way you will start to build in a level of accountability for not only yourself but also your time. In any business, there needs to be a breakeven point and a point at which the business starts to show a profit for it to continue. By approaching your trading as a business in this manner you will quickly determine what parts of your business need to be improved to achieve your business objectives. The following actions can be undertaken in the following stages for anyone new to trading : 1. Learning Phase - This will probably be a starting point for all the traders out there unless he/she are using signals to trade the markets. This is the point where you should try out different systems, attend webinars/seminars of successful traders and select a system which suits you the best, meaning some prefer to day trade, some prefer swing trading etc. Try to get your hands on books which teach technical analysis and basic risk management techniques. 2. Building Your System - No two trading plans are the same because no two traders are exactly alike. You should select a strategy and make adjustments or certain changes along the way. At this stage, you need to have a selected strategy/system for further testing. But remember, deciding on a system is less important than gaining enough skill to make trades without second-guessing or doubting the decision. Confidence is key, which will be gained in the next step. 3. Paper Trading - Successful paper trading does give the trader confidence in the system they are using if the system is generating positive results. Test your system in the live markets either by paper trading or using the reply tool on the TradingView platform, which enables you to test your strategy on the previous year's data. Try to create a watchlist of stocks that work well on your trading system. 4. Transition to Live Trading - Successful paper trading does not guarantee that you will find success when you begin trading real money. That's when emotions come into play. That is why you need to start with a small amount and gradually increase your account as you gain confidence and start seeing results. Before shifting to live trading, you should have proper risk management, trade management plans to tackle the volatility of the market. Write down details such as targets, the entry and exit of each trade, the time, support and resistance levels, daily opening range, market open and close for the day, and record comments about why you made the trade as well as the lessons learned. Maintaining a simple trading journal is one of the most important things that you can do if you want to be successful in the trading space. You should go back and analyze the profit or loss for a particular system, drawdowns, average time per trade, Risk to Reward and other important factors. Remember, this is a business and you are the accountant. You want your business to be as successful and profitable as possible. 5. Trading Psychology - I probably cannot emphasize in words, how important this part is for your trading success still it is not looked upon and given importance by the majority of traders. It is that minor difference between a highly profitable trader and a good trader. Professional traders know before they enter a trade that the odds are in their favour or they wouldn't be there. By letting their profits ride and cutting losses short, a trader may lose some battles, but they will win the war. Most traders and investors do the opposite, which is why they don't consistently make money. I have addressed some points of successful traders below, so you can get an insight into their trading mentality - 1 - They are all comfortable with taking risks. 2 - They are capable of quickly adjusting to changing market conditions. 3 - They are disciplined in their trading and can view the market objectively. 4 - They don’t give in to being excessively excited about winning trades or excessively despairing about losing trades. 5 - They make the necessary effort and take the necessary steps to be self-disciplined traders who operate with strict money and risk management rules. Trading is a difficult game to master. Very few people become highly successful at it. However, virtually anyone can become a master trader as long as they are willing to make the necessary effort.
NSE:NIFTYEducation
by PranamGhagare
5
Trading Psychology - The Cycle of Market EmotionsThe majority of traders spend most of their time looking for good trades. Once they enter a trade, they lose control and either suffer stress from losses or are jubilant with pleasure. They ride along with these emotions and forget about the essential element of becoming a successful trader – keeping emotions under control. Winning traders know the importance of psychology in trading, whilst amateurs are not aware of it or ignore it. Develop your mental framework, your psychology by reading books, attending psychology webinars, remember, trading is 70% psychology and 30% skill. If you develop your mental framework appropriate for trading, you have won half of the battle.
NSE:NIFTYEducation
by PranamGhagare
58
NIFTY Analysis [Potential Zones] & Risk Management RulesNSE:NIFTY has dropped more than 10% since 03-June-19 and the sharp fall will definitely provide long term investors and institutions a buying opportunity. The chart shows the zones which the the market could potentially react from. Technical analysis or market timing is not the only key methods to successfully trade or invest, its a combination of pre-defined set of rules of risk management principles for losing trades and the ability to have the patience with your winning trades. RMS rules for Intraday traders: 1) Risk 1% of the account size on each trade, not more not less. 2) Find maximum 3 trading opportunities each day. Make sure you find those high probability trades and place 3 trades on each trading day. 3) Risk/Reward at 2:1. 4) ALWAYS PLACE A STOP LOSS. Placing a stop loss separates a novice from a professional. 5) Do not forget rule no.4
NSE:NIFTYEducation
by BlackPearlA
TOP 10 Trading Plan EssentialsA trading plan is your roadmap for what you are going to do in the markets. It's something that you have to create and is not optional. 1. How Many Trades will You Use to Evaluate Your Performance? - The answer to this question is very simple. Base your evaluation period on the number of trades placed and not by the amount of time passed. Time is irrelevant in the world of trading. 2. Identify Your Key Performance Metrics. - This can be your Risk to Reward Ratio for each trade. 3. What Time of Day Will You Trade? - For day traders, It is highly recommended you limit your trading activity. 4. Define Your Trading Edge. - Similar to the times of day you will trade; keep your trading edge down to one or two setups when starting. The more strategies you hope to master, the more difficult it will become to consistently make money in the market. 5. Identify Stocks to Trade. - Have specific stocks to trade for the day or the week ahead. It can be in terms of news, technical analysis, backtesting results etc. 6. Place Your Stop Loss. - Stop losses are not a negative thing, they are what keep you in trading business over the long run. 7. When to Exit - The exit strategy should be as simple as when the stock crosses below a moving average or a trendline, it depends on your trading style. 8. How Much Money Can I Use per Trade? - Without money management, you will not stand a chance of making it in the business of trading. For me, the amount of money I can use per trade is fixed. All the best trading plans have a limited risk of 1-2% per trade. 9. Trade Management - Trade management is a crucial element that needs to be addressed in your trading plan. You must know your initial risk for each trade as determined by your initial stop loss before you risk any money on the market. You must plan when you will add to your winning positions and how you plan to exit your winning trades. 10. Take Breaks. - Taking breaks is essential in trading, which is not discussed a lot anywhere. Taking a break for days or a week can help you to relax and gain more focus for days to come because trading is a mental game.
NSE:NIFTYEducation
by PranamGhagare
3
Trading - Make it easy - Part 7Its said, "Knowing risk tolerance level is the key to success in trading". Let me explain this with an example. Refer the above chart. Two traders A and B saw double top formation and decided to go short. Trader A used leverage above his risk tolerance level. Trader B took trade as per his money management. Both traders went short. After few minutes price start to retrace a little. Trader A got emotional. He have risked more and if the trade hit stop loss, his loss will be more. He got panicked. After some time price started to fall. Since trader A was panicked he booked small profit and exit the trade thinking the price will go up again. After few minutes price reached the target and trader A was sad. Trader B was casual as his risked amount was normal and exit his trade taking full profit. Both traders had same analysis and traded with same plan but did not get same profit. To avoid such mistake, one should remember that, trading is a process. One trade wont make you rich. To carry on the process of trading we should know our risk tolerance level and follow money management.
CEducation
by vanathi
6
Survive before you thrive_TRADING PLAN THOUGHTS, KINDLY COMMENTRULES FOR ENTERING TRADE 1. No clarity, no trade. 2. Size the open. 3. Watch fair value. 4. Cover or liquidate trades in the pre- and Post-market; don’t open them. 5. Never use market orders. 6. Always use limit orders 7. Never chase stocks 8. Always look for confirmation among trading signals 9. Always know who the buyers and sellers are. 10. Survive before you thrive. 11. The market is unfair at times. 12. When in doubt, get out. RULES FOR EXITING TRADES 1. The market will lead the way. 2. Know why you are in a trade, and where you will exit. 3. Know how to route your order to reach your objectives. 4. Set mental stops. 5. Stocks tell their own story ahead of the news. 6. Don’t expect to squeeze all the juice from the orange. 7. Exit on reaction, not price. 8. Market is unfair 9. When in doubt, get out.
TVC:USOILEducation
by Financial_Lab
Newbie's Corner!Few of my friends here have started to think that I have forgotten Newbie's corner. I write, when I get some valid query. So here come a new question. Query : I have been trading for 4 yrs, I have learnt all technicals but still I am losing money. I dont know why. Answer : There are two possibilities. One is not knowing/learning technicals properly. People learn themselves from net, but dont know whether they read the correct content and understand it properly. They apply it with their own perception in a wrong way and lose money. 2nd reason is losing formed as a habit. If you ask a chain smoker, why you smoke, he will reply, I dont know/cant stop smoking. Anything you repeat form as a habit. Once it is wired with your brain, you cant remove it. So dear traders, if you are losing money, find the reason why and rectify it as soon as possible before you become addicted to losing money in trading.
NSE:BANKNIFTYEducation
by vanathi
26
Idea: Important Lessons to be learntGreetings of the day...!!! Sharing one case where we almost paid the penalty of not listening to chart... Some days earlier we recommended a short in idea around 78 for targets of 76 and 74 Things were going good and our 1st target was achieved within hours.... Booking partial profits when target 1 was achieved was good but there after... There were some elementary mistakes that we should have taken care of and should have avoided... Here were some mistakes that we made... sharing so that one can learn and avoid those mistakes and make himself/herself a better trader .... 1. Should have trailed SL to 78.30 instead of keeping it at 79.60 Looking at the charts will suggest the importance of 78.30 The stock came out of the falling channel.... The message was clear....Chart was telling us loud and clear.... EXIT EXIT EXIT There was a clear indication and ample time to exit from short position at cost itself for balance position... but we did not obey what charts were telling us... Even at 79.60 we should have exited but were adamant and expecting the stock to fall because of bias of our postion may be & We almost paid the penalty as the stock went up to 83 thereafter but luckily for us, again charts were at rescue and suggested not to panic but add short position again and we did so around 82.25 And today we were able to book profit at 79.70 and 78.80 respectively (our avg cost of open position was 80.125) Lesson to be learnt If we are looking at charts for our trade we should Listen to charts completely... and not let our will / expectation / ego to come in between, beacuse our expectation always has a desire attached to it and we become bias which is not good .... ------------------------------------------------------------------------------------------------------------------------------------------------------------------ So yes, Although the trade has given good profits overall ...we r not happy with the way we earned but I sign off thanking and respecting charts for helping and bailing us out this time... Regards & Take care...!!!
NSE:IDEAEducation
by indiamarketoutlook
2
Trading - Risk ManagementHi , 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.
NSE:NIFTYEducation
by neneram
15