Risk % ???

nac

Well-Known Member
#11
@ Anu, G, Cubt, Niranjan,
Thank you guys..

So this section of the forum is more active after 2200hrs... :)

long time.. are u trading positionals or are these intraday trades?
Hi!
Mostly, swing these days...

I allocate upto 10% to one company in my portfolio. Usually the % is 2-5 per scrip.
And you're trading in cash segment - positional.???
It is rare to find 2% risk trade always, sometimes u would find a trade which is worth risking more than 2% of ur capital.

Most of the time I trade on stock futures positional. I hold 2 stocks mostly n my total risk will not exceed 5% of my trading capital.
For intraday, I just hold one stock for which I risk 2% of my capital.

From my experience, its not that 2% risk tat matters. Its actually how much we are willing to lose, the money u lose should not have any impact on ur next trade decision
So, it's x% of capital. I understand now...

Knowing the number beforehand makes me to think... God!!! I don't have a stomach for that risk. But in real, I am losing more than that... You know "beginner" :(
2% risk impossible to trade..........

When i take trade, minimum 12% to 16% based on time frame. Reason being
This is what I see... Minimum of 12-13% risk.

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I am reading a book, where a writer interviews a fund manager. Fund manager says that he is risking about 1% and he handles some millions of dollars. I wonder how they can able to find such low risk trade...
 

Mr.G

Well-Known Member
#12
And you're trading in cash segment - positional.???
I work in fundamental. :p It's good to have a fundamentalist in a forum of technicalists.
 

Cubt

Well-Known Member
#13
@ Anu, G, Cubt, Niranjan,
Thank you guys..



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I am reading a book, where a writer interviews a fund manager. Fund manager says that he is risking about 1% and he handles some millions of dollars. I wonder how they can able to find such low risk trade...
When you have big capital, its easy to trade with 2% risk. Consider you have 10 lacs capital, you find nifty @ 5500 which is a strong support level. You can initiate a long position with 25 points 5475 as stop loss.
2% of 10 lacs is 20000. One lot is 25*50=1250, you can buy more than 10 lots, considering the risk of 20k.

So when people deal with huge capital, its all about position size than 2% risk.
 

nac

Well-Known Member
#14
Guys, please don't get me wrong.

If we are just using about 25% of the capital, what's 75% of the money doing in the account?

I can understand that we need some money left in our account for "buffering" if we are trading in Futures.

I am just thinking how one can use the whole capital (or at least close to that) effectively and efficiently in trading.

or...

I should take it that one is already too smart to be trading in leveraged instruments like futures. If we take whole value of NF for calculation, risking 20 points is well under 0.5%
 

DanPickUp

Well-Known Member
#15
The way i do it is....

i calculate risk as a % of my capital per trade.

Lets say my capital - 100000
Lets say I risk 2% of my capital on each trade.
so 2% of 100000 = 2000...this is the max risk i can take on a single trade.

Now lets say i want to buy nifty futures at 5500. My SL will be at 5480 i.e. 20 points. So if my SL is hit, I am going to loose 20 * 50 = 1000 per lot.
As my maximum risk on a single trade is 2000, hence i will buy only 2 lots of nifty.

The above is a simple calculation. If you want to be more stringent, then you can add your transaction cost , slippage etc and decide your position size accordingly.
That's the way it is. Very good explained. Our risk we define through the stop loss, if the amount invested in the trade is bigger compare to 2% of our whole capital.

Two absolute simple number examples with options as the futures are done:

Capital: 10'000
2% = 200
Price of the option: 400
Stop loss or amount we can lose on that trade 200
If the value of the option has reduced to 200, we act.

or we buy an option with a value of 200
Stop loss: Non as we can risk the whole amount as it not breaks our 2% rule.

Good trading / DanPickUp

Edit: If you go for margin trading, your margin is your risk capital. But that is an other subject.
 

DanPickUp

Well-Known Member
#16
Guys, please don't get me wrong.

If we are just using about 25% of the capital, what's 75% of the money doing in the account?

I can understand that we need some money left in our account for "buffering" if we are trading in Futures.

I am just thinking how one can use the whole capital (or at least close to that) effectively and efficiently in trading.

or...

I should take it that one is already too smart to be trading in leveraged instruments like futures. If we take whole value of NF for calculation, risking 20 points is well under 0.5%
You should not place much money with any broker, as you never know when one of them blows up or cheats his customer. So you put only as much money as you need and a bit more for the margin you use in your trades with your broker and all the rest is in a save bank, invested in bonds or what ever you like. You even can try to get an agreement with your broker that this safe papers are a guarantee for any unexpected events in your trading account.

Take care / DanPickUp
 

DanPickUp

Well-Known Member
#18
Really, I would like to hear more about this subject.
Well, most simple example: Credit Spreads. As far as I know no hedge is token into account in your market when it comes to that. So the margin request from the brokers in your market, include holding positions over night, is extremely high for retail traders at the moment any short leg of what ever derivative appears in any trade.

Isn't it? and if not, post the margin amount requested from your broker. I am clear that different option prices end up with different margin requests (That's the way at least it works here), so I ask for a simple number example you give from your market in case any hedge is taken into account include the over night holding. If not, the number of 25'000 is understood and clear.

Margin of 25'000 are 2% of 1'250'000
So in terms of going for margin trading, you calculate your risk through the blocked amount of margins you have and the reward you could and can have in that trade. That is in a nutshell explained what margin trading is.

DanPickUp
 

nac

Well-Known Member
#19
Yes, here the margin requirement is high

The minimum margin requirement is for Index, about 10%
Now Nifty is trading @ 5750 and the lot size is 50 units.
5750*50 = 287500
Margin = 28750
 
#20
You should not place much money with any broker, as you never know when one of them blows up or cheats his customer. So you put only as much money as you need and a bit more for the margin you use in your trades with your broker and all the rest is in a save bank, invested in bonds or what ever you like. You even can try to get an agreement with your broker that this safe papers are a guarantee for any unexpected events in your trading account.
Take care / DanPickUp
NAC sir , Sir u all are speaking about 2, 5 max 16-20% risks , i have 30-40 % risks in unrealised loss in shares i bought . !!!!.

DPU sir , what about if the broker n bank the same like (HDFC - im using now) , im going to start future trade one lot of nifty thats why im asking say margin requires 30k shall we put 5k excess? thank u sir.
 

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