Real Life Experiences of M&M, R&R, Position Sizing

#1
Greetings to All in Traderji Community,

This Thread specially for Beginners like myself to learn Money Management, Risk Reward and Position Sizing.
I will post my experiences here what i did wrong/right, Do's and Dont's.
Everyone are welcome to share their view and make is simple with step by step points to understand, and better to avoid outside links or "no links at all". Just share your experiences. if at all you want to share something apart from your experience, share it as a quote that too please from experiences or quotes from
"Our Country". There are a lot of wise men in our country.

I do day trading that too not regularly, i have a job, so i trade only when i get time and proper signals. so i won't be able to post here regularly.

Things i Learned
- Even without any technical/fundamental analysis if you take randomly with 1:2 Risk:Reward ratio, with 40% wins, end of the day we will be in profit. so if we add technical analysis that is called "edge" and that 50% will increase.


To achieve above position sizing is important. we need to continuously trade only with "X" number of shares and not deviate from it. see below:

Do's (Correct Way of trading for consistent profits)

Day/Trade 1: 500 quantity, profit - (1000)
Day/Trade 2: 500 quantity, Loss - (500)
Day/Trade 3: 500 quantity, Loss - (500)
Day/Trade 4: 500 quantity, profit - (1000)
Day/Trade 5: 500 quantity, Loss - (500)


Analysis
Total Winning Trades: 2
Total Losing Trades: 3
So 40% Wins and 60% Loss
Total Profit - 2000
Total Loss - 1500
P/L = 2000 - 1500 = 500
The above figure will give an rough idea how we need to follow 1:2 Risk : Reward ration and trade consistently with consistent position sizing

for ex: if you are trading in Equities then lets say you are going to trade net value of 1 Lakh consistently so how many share we need to buy every time?
stock price = 500.
100,000/500 = 200 shares

stock price = 1000
100,000/1000 = 100 shares and so on...



Dont's (Wrong way of trading and recipe for blowing the account)
Day/Trade 1: 500 quantity, profit - (1000)
Day/Trade 2: 2000 quantity, Loss - (3000) (after seeing success increased position with greed)
Day/Trade 3: 200 quantity, Profit - (100) (fear got in and reducing the size and taking small profits)
Day/Trade 4: 300 quantity, profit - (80) (little more confidence increased size but taking small profits)
Day/Trade 5: 500 quantity, Loss - (4000) (a little more confidence but traded without stop loss and got frustrated seeing the price going against waited... waited... and finally end up with huge loss )


Analysis
Total Winning Trades: 3
Total Losing Trades: 2
So 60% Wins and 40% Loss
Total Profit - 1180
Total Loss - 7000
P/L = 1180-7000 = -5820


Best Wishes!!!
 

newtrader101

Well-Known Member
#2
Hi Athma_shakti,
This is a very useful initiative.
BTW
- Even without any technical/fundamental analysis if you take randomly with 1:2 Risk:Reward ratio, with 40% wins, end of the day we will be in profit.
Can you share more details on this observation?
Thank you.
 
#3
Can you share more details on this observation?
Thank you.
Hello newtrader101. Greetings!

for example take some 20 trades just by flipping coin (head=buy/tail=sell) and if we follow 1:2 with probability of success even 40% wins we will be in profit. so if just add some simple technical like EMA, RSI or Price action etc.. % of winning is more.

In the long run the objective or the winning mantra is "cut the losses and let the profit run". so few trades chances are 1:10, 1:5 etc.. in those scenarios out of 20 trades even 1 or 2 trades will help us in stay green.

Best Wishes!!!
 
#4
Nice Thread :)
My question-if we take a trade anywhere with 1:2 will it be profitable at the month end?

What if 1st 4 days you lost 1R like this-
Day/Trade 1: 500 quantity, Loss - (500)
Day/Trade 2: 500 quantity, Loss - (500)
Day/Trade 3: 500 quantity, Loss - (500)
Day/Trade 4: 500 quantity, Loss - (500)
Day/Trade 5: 500 quantity, Profit - (1000)

So,2000rs Loss-1000rs Profit-Brokerage=-1500rs Loss
 
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#6
My question-if we take a trade anywhere with 1:2 will it be profitable at the month end?
Hi Kumar, Greetings!
yest it can happen. naturally the probability is 50-50
the objective is to apply 1:2 min risk reward with technical analysis and increase that probability
 
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