Thoughts on Day/Swing Trading

[rjpatil]

Dear Senior(s0,
I don't know whether its appropriate question on this thread, but since risk management is discussed here, i will ask this question,
Suppose, we are trading with small capital like 3-4 lacs and swing trading leveraged instruments like nifty futures (or stock futures), which I am planning, because I cannot sit in front of computer during trade hours.
We cannot put after market hours orders for futures.
Secondly, if we calculate theorotically risk per trade, and market opens up with huge gap up like todays nifty (almost 130 points), then what about our risk per trade ?
Such trades will wipe up many trades' worth profits, and though the situation is infrequent it is not so infrequent.
What we can do ?
If we trade single stock futures, situation still worse as, liquidity is issue. Also, options in such stocks are very illequid.
For commodities, no options available either. Even if in nifty, theorotically, options are available, if we purchase options to hedge, our R:R ratio is always bad (as we have to add option premia)
Could seniors please through light ...
Regards

 

[DanPickUp]

Dear Senior(s0,

1 I don't know whether its appropriate question on this thread, but since risk management is discussed here, i will ask this question,

2 Suppose, we are trading with small capital like 3-4 lacs and swing trading leveraged instruments like nifty futures (or stock futures), which I am planning, because I cannot sit in front of computer during trade hours. We cannot put after market hours orders for futures.

3 Secondly, if we calculate theoretically risk per trade, and market opens up with huge gap up like todays nifty (almost 130 points), then what about our risk per trade ? Such trades will wipe up many trades' worth profits, and though the situation is infrequent it is not so infrequent. What we can do ?

4 If we trade single stock futures, situation still worse as, liquidity is issue. Also, options in such stocks are very illiquid.

5 For commodities, no options available either. Even if in nifty, theoretically, options are available, if we purchase options to hedge, our R:R ratio is always bad (as we have to add option premia)

Could seniors please through light ...
Regards

Sorry to interrupt this thread and sorry ST to do so. Hope you forgive me

1 The questions asked are appropriate in a variety of different threads all over the forum. You just picked one of the most informative threads which exist in this forum.

2 You talk here about swing trading. May I ask you what you really know about swing trading and why not use limit orders for what you plan?

Are you clear, that you need more money to trade your time frame than you would need to trade just a short time frame like one minute or 15 minute or even 60 minute ?

3 There are various strategies, which you can use to protect your self against such situations. This thread is a pure future trading thread. You may ask this question in the option section or open a thread about this subject over there or ST has some other ideas about it and I am with him.

4 What is a single stock future?

5 Yes. No options are available for commodity futures in India. So, there is no business for that in India and that's it.

Tc

DanPickUp

 

[rjpatil]

Sorry to interrupt this thread and sorry ST to do so. Hope you forgive me

1 The questions asked are appropriate in a variety of different threads all over the forum. You just picked one of the most informative threads which exist in this forum.

2 You talk here about swing trading. May I ask you what you really know about swing trading and why not use limit orders for what you plan?

Are you clear, that you need more money to trade your time frame than you would need to trade just a short time frame like one minute or 15 minute or even 60 minute ?

3 There are various strategies, which you can use to protect your self against such situations. This thread is a pure future trading thread. You may ask this question in the option section or open a thread about this subject over there or ST has some other ideas about it and I am with him.

4 What is a single stock future?

5 Yes. No options are available for commodity futures in India. So, there is no business for that in India and that's it.

Tc

DanPickUp

Hi,
Thank you for your answers.
I know that it is not an "options" trade, however, since the concept of risk reward etc are discussed here, thats why question placed here. (As somebody might suggest to use options instead of stop loss)
Single stock future - e.g reliance future (vs index future like minifty or banknifty).
Limit order usually I use to enter a trade by setting trigger and limit price. For stop, I would use stop market order, as I found that sometimes, market moves so fast, that the order still is pending while market passed beyond it.
Now coming to question - suppose I am short at Nifty 4800 at EOD, and market opened at 4920, and I have stop (of course in my mind, there will not be actual EOD stop) e.g. 4840... and market going up... I am already have more loss of 80 points than my stop.. We don't know beforehand this situation..
Regarding trading lower time-frame...market needs to be monitored continuously...
I am asking about other senior traders' experience - how they handle these gaps against them.
How they cope up with this risk profile (some trader might be trading 80-100 Nifty.. ) How to have still risk percent of trading capital etc....
Regards

 

[Smart_trade]

Hi,
Thank you for your answers.
I know that it is not an "options" trade, however, since the concept of risk reward etc are discussed here, thats why question placed here. (As somebody might suggest to use options instead of stop loss)
Single stock future - e.g reliance future (vs index future like minifty or banknifty).
Limit order usually I use to enter a trade by setting trigger and limit price. For stop, I would use stop market order, as I found that sometimes, market moves so fast, that the order still is pending while market passed beyond it.
Now coming to question - suppose I am short at Nifty 4800 at EOD, and market opened at 4920, and I have stop (of course in my mind, there will not be actual EOD stop) e.g. 4840... and market going up... I am already have more loss of 80 points than my stop.. We don't know beforehand this situation..
Regarding trading lower time-frame...market needs to be monitored continuously...
I am asking about other senior traders' experience - how they handle these gaps against them.
How they cope up with this risk profile (some trader might be trading 80-100 Nifty.. ) How to have still risk percent of trading capital etc....
Regards

Unexpected price gaps against our position are called " Price Shocks" and every futures trader has to understand that such shocks he will get and though they are unpleasant but he has to take them in his stride as "unavidable evils" . These shocks are caused because of terrorist attacks,sudden change in Govt policies,assasinations of world economic and political leaders, currency devaluations,Acts of God such as earthquakes,floods etc. These events are sudden and never expected so after these events prices will gap against you but I have found that even such events ,the chances of gap against the trend are much less than gap in the direction of the trend........so if you are trading positional / swing then you will mostly get such gaps in your favour than against you. But still having such gaps against our position can happen.

This is where the importance of money management comes in. If you are trading say 50 nifty futures ( meaning one contract ) per Rs 1,00,000 trading capital such gaps will knock off 4-5 % of your capital but still your account will not get paralised.But if you are trading 300 nifty futures....then things could be much more difficult.....

Now let us see how we can minimise effect of such gaps. When our markets are going to be closed and other world markets open for trading , we always keep overnight positions light. In case nothing adverse happens, we can always open the positions which we open on the next trading day.....it is something like slowing down the speed of our car when we are on the blind turn...we all do it...don't we ??

You could have also considered selling 4700 strike Oct Nifty puts which would have given some relief if the market gaps against you.......some price decay if the market opens at the same level and a loss of 35 points if the market had opened 100 points gap down in your favour, but no complaints here....

Such price shocks cannot be predicted and hence cannot be provided for in our MM calculations......but we make sure that 200 points against us does nor criple our trading account( in present world economic scenario, a 200 points gap against our position is possible on any day....). And the good news is that these shocks don't happen too often......

Smart_trade

 

[ashwani chadha]

Dear Senior(s0,
I don't know whether its appropriate question on this thread, but since risk management is discussed here, i will ask this question,
Suppose, we are trading with small capital like 3-4 lacs and swing trading leveraged instruments like nifty futures (or stock futures), which I am planning, because I cannot sit in front of computer during trade hours.
We cannot put after market hours orders for futures.
Secondly, if we calculate theorotically risk per trade, and market opens up with huge gap up like todays nifty (almost 130 points), then what about our risk per trade ?
Such trades will wipe up many trades' worth profits, and though the situation is infrequent it is not so infrequent.
What we can do ?
If we trade single stock futures, situation still worse as, liquidity is issue. Also, options in such stocks are very illequid.
For commodities, no options available either. Even if in nifty, theorotically, options are available, if we purchase options to hedge, our R:R ratio is always bad (as we have to add option premia)
Could seniors please through light ...
Regards

first of all i would like to thank dear smart trade and dear dan pickup for their answer to this question
second-- i would also like to share my thoughts on the subject,with an excuse from both of them
basic thing is one cont is equal to 50 nifty
but traders who carry , 500 contracts not 500 nifty over night ,how they handle this situation
third --before close of market, every day they will assume ,that next day nifty will open 200 points gap down even if this happen once in two month
fifth--five 100 contract can not be baught at once,so they accumlate it over a period of time
sixth--when they accumulate long position on one side they also accumulate
short position on the other side
seventh--against long ,short is app 20 %
eight-short is a real short, it means,even if market will open up on normal days,even then their short position will open gap down and their both position will be in profit every day
ninth-if total position carried is say i crore on long and 20 lakh on short then mtm will be app 12 lakh of total position
tenth--now if market opens gap down 200 point,now if one crore long will be in 3% loss say 3 lakh and 20 lakh position will be being week in 6 % profit so 1.2 lakh 3-1.2=1.8
12-1.8=10.2 no problem
eleven-with in half hour they reduce nifty long and increase hedging short,by end of day ,they will recover this 1.8 also
tewelth-at 3.30 when market will close ,they will have converted their 12 from m to m to booked profit and will go home with no position but with a break even day--almost this is the way they handle these type of situations
at the end i once again thank you to both of you

 

[ashwani chadha]

Unexpected price gaps against our position are called " Price Shocks" and every futures trader has to understand that such shocks he will get and though they are unpleasant but he has to take them in his stride as "unavidable evils" . These shocks are caused because of terrorist attacks,sudden change in Govt policies,assasinations of world economic and political leaders, currency devaluations,Acts of God such as earthquakes,floods etc. These events are sudden and never expected so after these events prices will gap against you but I have found that even such events ,the chances of gap against the trend are much less than gap in the direction of the trend........so if you are trading positional / swing then you will mostly get such gaps in your favour than against you. But still having such gaps against our position can happen.

This is where the importance of money management comes in. If you are trading say 50 nifty futures ( meaning one contract ) per Rs 1,00,000 trading capital such gaps will knock off 4-5 % of your capital but still your account will not get paralised.But if you are trading 300 nifty futures....then things could be much more difficult.....

Now let us see how we can minimise effect of such gaps. When our markets are going to be closed and other world markets open for trading , we always keep overnight positions light. In case nothing adverse happens, we can always open the positions which we open on the next trading day.....it is something like slowing down the speed of our car when we are on the blind turn...we all do it...don't we ??

You could have also considered selling 4700 strike Oct Nifty puts which would have given some relief if the market gaps against you.......some price decay if the market opens at the same level and a loss of 35 points if the market had opened 100 points gap down in your favour, but no complaints here....

Such price shocks cannot be predicted and hence cannot be provided for in our MM calculations......but we make sure that 200 points against us does nor criple our trading account( in present world economic scenario, a 200 points gap against our position is possible on any day....). And the good news is that these shocks don't happen too often......

Smart_trade

thanks for your thought

 

[Satyen]

Unexpected price gaps against our position are called " Price Shocks" and every futures trader has to understand that such shocks he will get and though they are unpleasant but he has to take them in his stride as "unavidable evils" . These shocks are caused because of terrorist attacks,sudden change in Govt policies,assasinations of world economic and political leaders, currency devaluations,Acts of God such as earthquakes,floods etc. These events are sudden and never expected so after these events prices will gap against you but I have found that even such events ,the chances of gap against the trend are much less than gap in the direction of the trend........so if you are trading positional / swing then you will mostly get such gaps in your favour than against you. But still having such gaps against our position can happen.

This is where the importance of money management comes in. If you are trading say 50 nifty futures ( meaning one contract ) per Rs 1,00,000 trading capital such gaps will knock off 4-5 % of your capital but still your account will not get paralised.But if you are trading 300 nifty futures....then things could be much more difficult.....

Now let us see how we can minimise effect of such gaps. When our markets are going to be closed and other world markets open for trading , we always keep overnight positions light. In case nothing adverse happens, we can always open the positions which we open on the next trading day.....it is something like slowing down the speed of our car when we are on the blind turn...we all do it...don't we ??

You could have also considered selling 4700 strike Oct Nifty puts which would have given some relief if the market gaps against you.......some price decay if the market opens at the same level and a loss of 35 points if the market had opened 100 points gap down in your favour, but no complaints here....

Such price shocks cannot be predicted and hence cannot be provided for in our MM calculations......but we make sure that 200 points against us does nor criple our trading account( in present world economic scenario, a 200 points gap against our position is possible on any day....). And the good news is that these shocks don't happen too often......Smart_trade

If anybody trading positional nifty this is Absolutely True

Thank you Dada

 

[rjpatil]

Unexpected price gaps against our position are called " Price Shocks" and every futures trader has to understand that such shocks he will get and though they are unpleasant but he has to take them in his stride as "unavidable evils" . These shocks are caused because of terrorist attacks,sudden change in Govt policies,assasinations of world economic and political leaders, currency devaluations,Acts of God such as earthquakes,floods etc. These events are sudden and never expected so after these events prices will gap against you but I have found that even such events ,the chances of gap against the trend are much less than gap in the direction of the trend........so if you are trading positional / swing then you will mostly get such gaps in your favour than against you. But still having such gaps against our position can happen.

This is where the importance of money management comes in. If you are trading say 50 nifty futures ( meaning one contract ) per Rs 1,00,000 trading capital such gaps will knock off 4-5 % of your capital but still your account will not get paralised.But if you are trading 300 nifty futures....then things could be much more difficult.....

Now let us see how we can minimise effect of such gaps. When our markets are going to be closed and other world markets open for trading , we always keep overnight positions light. In case nothing adverse happens, we can always open the positions which we open on the next trading day.....it is something like slowing down the speed of our car when we are on the blind turn...we all do it...don't we ??

You could have also considered selling 4700 strike Oct Nifty puts which would have given some relief if the market gaps against you.......some price decay if the market opens at the same level and a loss of 35 points if the market had opened 100 points gap down in your favour, but no complaints here....

Such price shocks cannot be predicted and hence cannot be provided for in our MM calculations......but we make sure that 200 points against us does nor criple our trading account( in present world economic scenario, a 200 points gap against our position is possible on any day....). And the good news is that these shocks don't happen too often......

Smart_trade

ST Da,
Thanks button not enough for this post with deeper thoughts.

 

[rjpatil]

eight-short is a real short, it means,even if market will open up on normal days,even then their short position will open gap down and their both position will be in profit every day

Dear Sir,
Can you please elaborate this point further.
regards

 

[Satyen]

Where are we now on Daily time frame Nifty .....??

My View is in below chart , after a Nice trend We are going through a sideways stage , Though volatility is high but we dont have a specific Dirrection yet

Seniors please comment