Thoughts on Risk Management

Discussion in 'Risk & Money Management' started by vijayvaliya, Oct 9, 2009.

  1. linkon7

    linkon7 Well-Known Member

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    AUM = 40 cr
    20% target (post expenses+tax ) = 8 cr
    Assuming comm as 2% of AUM means, comm = 2% x 40 cr = 80 L
    Max exposure limit is 60% of AUM = 24 cr
    You need to make 55% profit on 24 cr, means profit = 13.2 cr
    Profit, After tax @ 33%, = 8.8 cr
    profit after comm = 8.8 - 0.8 = 8 cr = TGT met :clap:

    Now, what instrument to trade in ?
    One can trade in equity / derivative segment. Personally, i prefer instruments where options are liquid. That give me flexibility to adjust my risk per trade. I prefer Nifty as that has good liquidity at wider range of strike price.

    Options if used wisely can generate 90-95% probability trades. It also helps in minimizing risk at the cost of potential profit...

    Personally, i trade in Nifty and nifty options only. My profit target 15% per qtr and i have a very low risk appetite.
     
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  2. vijayvaliya

    vijayvaliya Active Member

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    have you managed a portfolio of 40 Crs size? or is it a hypothetical answer to the problem.Also as the portfolio size increases ( say 4000 cr) will this solution work?

    I feel 15% quarterly target is a very aggressive target, involving day and night work and planning.

    can you give me a plan for this april month?
     
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  3. linkon7

    linkon7 Well-Known Member

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    i manage a portfolio about 20 L....all in NF and NF options...

    Right now, I'm holding a sizable amount of 5200 put -5100 put spread which cost me -2 points (if we close above 5200 this series)....

    Today's trade was to sell 5200 straddle current month for a total of 37 points... meaning if NF closes between 5237 and 5163... i gain something....

    Another trade that i am holding is a ratio spread of long 5100 put and short 5000 put double qty... this trade needs action only if 5039 is broken on the down side...

    15% qtrly tgt is not that big if u think smart.... Each of my trade is planned out before the day begins and every what-if scenario is documented.

    I am very aggressive... and i trade NF and options because it gives me that room to be aggressive... But not stupid... I know what i am doing and there is no guess work...

    40 cr is a big sum of money, but my modus operandi remains the same...
     
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  4. vijayvaliya

    vijayvaliya Active Member

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    dear linkon,

    would you mind sending your resume? my e-mail id is v i j a y .v a liya@ gmail.com. I think it will help me to understand your solution better.
     
    Last edited: Mar 25, 2010
  5. oilman5

    oilman5 Well-Known Member

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    .........................................................................
    first understand enterpreneurship in trading.
    In trading .......knowledge /discipline/adaptability/understanding market/objectivity r supreme.......u have to acquire or learn it.
    It takes time.......according to me 10yr atleast.
    then understand risk involve in trade........basic difference is here risk is not potential but ACTUAL, where as profit is potential .Newcomer never understand it.
    Next prepare an Edge.......anybody against u should be loser.
    Use that EDGE , which timeframe suits u.......that modality of fitment by real time trade & analysis.
    Where & when u r right ........just keep that one...........all others r to be unlearned.THEN can u learn Pyramiding/leverage that edge.......
    again practice Discipline........only to stick to it,......may codify/or just follow it.Dont allow other variable to distract.
    oilman5
     
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  6. oilman5

    oilman5 Well-Known Member

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    actually in trading is thorough put,u continuously buy/sell in a discrete manner.......based on ur understanding/experiment/luck factor. Key is hold winner and throw loser early..........when u take a position ,i dont know what shall happen, so based on market observation , i shall book loss as per my criteria,.......best is can i add to winner.keep the ball/money so far u understand and getting return.....if its not, just stay out,.......sharpen ur skill and again comeback.
     
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  7. oilman5

    oilman5 Well-Known Member

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    In trade its very imp to to create a risk-shield.............u r ready to protect ur money like knight.
    after that learn.....what way u r comfortable............since u plan to continue as a marathan runner in market to earn atleast next 10yr........after successful trade learning.
    indicators basic purpose is to give u confidence,........definitely momentum, understand exhausion of trend is imp,.........toughest learning is switch from one timeframe analysis to another time frame...........as accuracy may vary drastically ..........both +/-.
    Mind it sensex is indicator of growth.
    order book is indicator of profit potential and research is indicator of longterm sustainability.
     
  8. vijayvaliya

    vijayvaliya Active Member

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    good insight into mind of a trader, looking forward to further
     
  9. vijayvaliya

    vijayvaliya Active Member

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    "toughest learning is switch from one timeframe analysis to another time frame...."
    can you explain this a little more?
     
  10. oilman5

    oilman5 Well-Known Member

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    "toughest learning is switch from one timeframe analysis to another time frame...."
    can you explain this a little more?
    ya explaining it.
    Ans : In normal 3 yr of learning ,all novices start to learn some method of entry, may be long term......bull entry, may be intraday.......% move and then profit book, similarly some swing buy.....like buy in pullback ie.bottom of a cup pattern.
    Soon ie. after 3yr , its not suffient to earn from market is now known to him.......unless by God gifted luck he had made enough and left out Market.
    So other method . other timeframe play, other forecasting idea like.......fundamental.ta or psychological + bookish random variable entry/exit system.....quantum method/fractal theory.........r read and variable strategy for different market condition which one to be applied.............r practiced for mastering.
    Another problem is to fit ,where he fits naturally.........thats timeframe and style gives higher return with better strike rate.
    In this search and learning ,he found out........its difficult to erase ......first pick up learning , it may be say break out play. So he has learnt it early......its with him now,........so even after 7 yr , .....if he finds a break out play in present market condition with poor probability , he may actually trade it only to lose money ,.......as he enjoys the thrill of early learning days.SIMILARLY its the time frame,.........many trader starts early as investor,........that backgroud stops not to trade at certain condition, because of complex RISK..NONO. THose who starts strong as dealer,......can not hold a 3day profit run..........knowing fully well it will move another 15% ,but block with condition of max 5%profit book, more than that u r greedy,,,,,,,,scalpers curse.
    Similarly a trained swing trader of booking around 10-12 % profit ,.......can not move down to 3-5 %profit in random time frame mode so easily.
    YES IT IS THE HARDEST THING TO DO
     
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