General Trading Chat

[vivektrader]

Good that Simpletrader posted an old post on position sizing and risk control.
@ST sir I am putting a practical problem below (may appear stupid, but asking nevertheless)
Trading capital 10lakh
Trade: swing with a 5-10day hold
Risk per trade 1% which is 10000
Long signal in 'ABC'
stop loss fortunately small exactly at 1%
Now theoretically I will use up my entire capital on this trade with overall risk of 10000 or 1%

Its usual to get 1-2 more signals during the period my entire capital is being used for the "ABC" trade
What should be done:
??Leverage
??Fix capital allocation per trade, like divide 10lakh into 4 parts of 2.5lakh each for multiple trades
Taking lesser risk on entire capital at any given time will also reduce capital appreciation inspite of streak of winners.

 

[travi]

If there is extra capital that you can allocate, then I would suggest that.
The point to Note here, very important, is that this capital is not part of the trading capital and just to carry out trades.

For that, say I have life-saving critical amount that cant risk losing, so bought liquid bees and pledged them.
They will therefore live like any other liquid instrument without worries. Plus it earns interest nearly on-par with its peers.
Just check, I don't if all brokers allow CNC -Eq but some would. (else the next leverage part, Zerodha doesnt)

All you have to be sure is not to tap into this and manage the trades (profit / loss) from the trading capital itself, ie. 10L that you put up.
This way you can take more trades.
Obviously all this bcos your position size is still not near a futures lot.

Now, if this extra cap isn't available, then check with some local brokers, I know from my relative, they get upto 4-5 days of margin supports but since you're risk averse and not gambling this kind of leverage is ok.

Good that Simpletrader posted an old post on position sizing and risk control.
@ST sir I am putting a practical problem below (may appear stupid, but asking nevertheless)
Trading capital 10lakh
Trade: swing with a 5-10day hold
Risk per trade 1% which is 10000
Long signal in 'ABC'
stop loss fortunately small exactly at 1%
Now theoretically I will use up my entire capital on this trade with overall risk of 10000 or 1%

Its usual to get 1-2 more signals during the period my entire capital is being used for the "ABC" trade
What should be done:
??Leverage
??Fix capital allocation per trade, like divide 10lakh into 4 parts of 2.5lakh each for multiple trades
Taking lesser risk on entire capital at any given time will also reduce capital appreciation inspite of streak of winners.

 

[vivektrader]

If there is extra capital that you can allocate, then I would suggest that.
The point to Note here, very important, is that this capital is not part of the trading capital and just to carry out trades.

For that, say I have life-saving critical amount that cant risk losing, so bought liquid bees and pledged them.
They will therefore live like any other liquid instrument without worries. Plus it earns nearly on-par with its peers.

All you have to be sure is not to tap into this and manage the trades (profit / loss) from the trading capital itself, ie. 10L that you put up.
This way you can take more trades.
Obviously all this bcos your position size is still not near a futures lot.

Now, if this extra cap isn't available, then check with some local brokers, I know from my relative, they get upto 4-5 days of margin supports but since you're risk averse and not gambling this kind of leverage is ok.

You are practically suggesting leverage I guess, position size based on fixed risk can never match future lots, as stop-loss is different, even if a trade position size is 800 and lot is 600 what to do, when you take that 600 lot, you are taking less risk, which is not constant (which should be constant)
How trading future lots will solve this problem beyond providing leverage.

Vivek

 

[travi]

You are practically suggesting leverage I guess, position size based on fixed risk can never match future lots, as stop-loss is different, even if a trade position size is 800 and lot is 600 what to do, when you take that 600 lot, you are taking less risk, which is not constant (which should be constant)
How trading future lots will solve this problem beyond providing leverage.

Vivek

From what I understood in your original question, there is a throttling caused due to lack of funds to carry out the trade, right ?

 

[Smart_trade]

Good that Simpletrader posted an old post on position sizing and risk control.
@ST sir I am putting a practical problem below (may appear stupid, but asking nevertheless)
Trading capital 10lakh
Trade: swing with a 5-10day hold
Risk per trade 1% which is 10000
Long signal in 'ABC'
stop loss fortunately small exactly at 1%
Now theoretically I will use up my entire capital on this trade with overall risk of 10000 or 1%

Its usual to get 1-2 more signals during the period my entire capital is being used for the "ABC" trade
What should be done:
??Leverage
??Fix capital allocation per trade, like divide 10lakh into 4 parts of 2.5lakh each for multiple trades
Taking lesser risk on entire capital at any given time will also reduce capital appreciation inspite of streak of winners.

You can decide to take max of say 5 % on all the positions open at any particular time. So you can trade 5 stocks at and given point of time. Once one stock position is out of woods, then you can take 6th position but not before that. This way you can risk 1 % in each trade and still restrict the overall risk on all open positions to 5 % of the capital.

Smart_trade

 

[vivektrader]

You can decide to take max of say 5 % on all the positions open at any particular time. So you can trade 5 stocks at and given point of time. Once one stock position is out of woods, then you can take 6th position but not before that. This way you can risk 1 % in each trade and still restrict the overall risk on all open positions to 5 % of the capital.

Smart_trade

Sir
5% risk you are saying overall? Which is total absolute risk in all positions on total capital at any time, right?
My question was different, should I keep a backup capital or take leverage, so that the entire capital or large part of it is not used in one trade.


Vivek

 

[travi]

Lets take a practical example, say with the same inr. 10L

Now at 1% Risk, you can afford loosing 10K
You want to buy HUL at inr. 1700 with SL of inr. 1640

That is now 166 units with a Carry capital reqd of inr. 282K
but problem is 30% of the inr. 10L and some open positions may have blocked around the same amount.

so now you want to strike balance or either adding SAFE capital just to carry trades or leverage?
Lets say you can 4-5 positions open from a pool of 100 stocks roughly.

Sir
5% risk you are saying overall? Which is total absolute risk in all positions on total capital at any time, right?
My question was different, should I keep a backup capital or take leverage, so that the entire capital or large part of it is not used in one trade.


Vivek

 

[Smart_trade]

If you devide Rs 10 L into 5 parts of Rs 2 L each and risk 1% of Rs 2 L on any one position, it will be low risk for swing trades. In daytrading it is ok to trade with risk of 1 % or lower on a trade but in swing trades on all positions one can go to 4-5 % ...particularly if all 5 positions are not strongly correlated meaning 1-2 may be in stocks, 1-2 may be commodities etc.

One has to decide hopw aggressively he wants to trade and how much he wants to risk.....risking too little you make too little but risking too high also you end up making too little ....reward to risk is a bell shaped curve.

Smart_trade

 

[trader18]

Can someone please guide me what are good settings for stochastics intraday?

 

[vivektrader]

If you devide Rs 10 L into 5 parts of Rs 2 L each and risk 1% of Rs 2 L on any one position, it will be low risk for swing trades. In daytrading it is ok to trade with risk of 1 % or lower on a trade but in swing trades on all positions one can go to 4-5 % ...particularly if all 5 positions are not strongly correlated meaning 1-2 may be in stocks, 1-2 may be commodities etc.

One has to decide hopw aggressively he wants to trade and how much he wants to risk.....risking too little you make too little but risking too high also you end up making too little ....reward to risk is a bell shaped curve.

Smart_trade

Sir
I get your point, and 10lakh is just an example. Even if I want to take overall risk on all positions at 4%, the cash n carry required for largecaps stocks doesn't let me go above 1-2% overall risk, that's a problem.