Trading - Risk Management
Hi ,
All the post are on trading /technical analysis. So thought of putting something on risk management .
What is Risk Management ? Now don't look blank, if your in markets you have to know about it.
Does every trade has risk and Is quantum of profit assured ? Yes every trade comes with risk and no assurance of profit.
How much risk can you take ?
Lets begin by example , Let say you have capital of 1 lakh.
Than the Basic risk you can take is 7 % of capital , why 7 ? I just divided 1 lakh with 13 (fib number) , we get 7.69 (approx 8) which is also fib number. So lets round it to lower side 7 so 7 % of capital .
So your risk profile is 7 thousand on capital of 1 lakh, if you decide to take 2 trade it becomes 3.5 thousand per trade ,
3 trades is 2300 per trade.
What risk reward ratio trade you can take ?
Risk : Reward has be 1:2 minimum , 1:3 and above is better , 1:1 risk reward can ruin you out of market
(Refer : Google it : Nauzer Balsara :Risk to ruin)
What position size you can take ?
So once you know your risk is 7 thousand on capital of one lakh and let say you decide to enter a trade with stop loss of 10 Rs than the position size you can take is 7000/10 = 700 shares ,i.e you cannot enter into trade where lot size is 5000.
How muck risk can you take per day , per month ?
Your risk per day and per month remains same , if you suffer loss of 7 thousand on capital of 1 lakh in between the month than you have to wait for next month for taking a fresh trade (Remember markets are forever but your capital is limited)
Rather than taking 7% risk you can choose it on lower side also like 6,5,4 as per your choice,
Above points should act like a reference.
All the post are on trading /technical analysis. So thought of putting something on risk management .
What is Risk Management ? Now don't look blank, if your in markets you have to know about it.
Does every trade has risk and Is quantum of profit assured ? Yes every trade comes with risk and no assurance of profit.
How much risk can you take ?
Lets begin by example , Let say you have capital of 1 lakh.
Than the Basic risk you can take is 7 % of capital , why 7 ? I just divided 1 lakh with 13 (fib number) , we get 7.69 (approx 8) which is also fib number. So lets round it to lower side 7 so 7 % of capital .
So your risk profile is 7 thousand on capital of 1 lakh, if you decide to take 2 trade it becomes 3.5 thousand per trade ,
3 trades is 2300 per trade.
What risk reward ratio trade you can take ?
Risk : Reward has be 1:2 minimum , 1:3 and above is better , 1:1 risk reward can ruin you out of market
(Refer : Google it : Nauzer Balsara :Risk to ruin)
What position size you can take ?
So once you know your risk is 7 thousand on capital of one lakh and let say you decide to enter a trade with stop loss of 10 Rs than the position size you can take is 7000/10 = 700 shares ,i.e you cannot enter into trade where lot size is 5000.
How muck risk can you take per day , per month ?
Your risk per day and per month remains same , if you suffer loss of 7 thousand on capital of 1 lakh in between the month than you have to wait for next month for taking a fresh trade (Remember markets are forever but your capital is limited)
Rather than taking 7% risk you can choose it on lower side also like 6,5,4 as per your choice,
Above points should act like a reference.
Clause de non-responsabilité
Les informations et les publications ne sont pas destinées à être, et ne constituent pas, des conseils ou des recommandations en matière de finance, d'investissement, de trading ou d'autres types de conseils fournis ou approuvés par TradingView. Pour en savoir plus, consultez les Conditions d'utilisation.