Position Sizing

Till now we have seen how to plan for starting trading business. Now taking it further in this we will discuss on how much should be capital and what should be ideal size of capital for intraday trading. Starting with on how much is capital needed to start trading. Answer to this is that you can start trading with little amount also. But important thing to remember is that:
1. Never trade with borrowed money or money taken on interest.
2. As per saying Never put all egg in a single basket, never put all capital in trading. Divide your capital and invest in different instruments based on past return and risk associated. Suppose you are having capital of 10 lakh, invest 5 lakh in mutual finds from remaning 5 lakh invest 5 lakh in equity long term trading and use only 2 lakh for intraday/swing/option trading. Spilt this 2 lakh also in 2-3 parts and trade accrodingly. The ratio of capital distribution can be changed based on your trading experience.

Above is image of our position sizing calculator.

Now coming to what is position sizing?

Position Sizing is nothing but number of share you should have in a single trade. Benefits of Position sizing are-
1. It help in keeping your risk in control.
2. Always know how much to lose and gain.
3. Create a pre-plan of your trade.
4. Keep you on trading objective and goal.

It basically answer to some of important questions like
1. What is risk you are going to take?
2. How many share/units to buy?
3. How much will be risk per unit?
4. What is percentage risk?
5. What will be reward as compared to risk?

Model for position sizing:-

There are many model for position sizing. We will be just looking what are different model and in some later stage will  discuss in detail different model and how to apply them.

1. Units per fixed amount: Our position sizing calculator is based on this model and we suggest to use this model in starting basis.
2. Equal units:
3. Percentage volatilty:
4. Portfolio heat map:
5. Fixed ratio positon sizing
6. Kelly criterion:
7. Basso-Schwager asset allocation
And many more....


More details on position sizing will be discussed in next blog. For Free Position Sizing calculator, please fill and form and we will provide it for free. You need to be member of our free telegram channel https://t.me/learntechanalysis for getting free calculator. If you are not member please join channel.

Plan your Trading Business

  "If you fail to plan, you are planning to fail"

Now since all us want to do trading lets take and discuss big picture of 'how to plan trading'. We will be looking only on different aspects from intraday point of view. Also will be comparing it with traditional business plan. So lets start our planning for intraday trading.

1. Can you do It? Now since you are at a step of planning how to proceed further in trading, you must very clear on you can do it or not. Intraday trading require lot of reflexes and quick decision making skills, with a blend of patience and aggressiveness both. It is job which require full time attention and can't left over simply. Look into yourself and ensure that you can do it.

2.  Capital Planning- It is most important thing to manage when it come to any business. For every business you need to plan expense and earning. Capital planning in trading can be done as allocate 40% for mutual fund, 30% for equity trade, and remaining 30% for intraday or swing trade. Capital planning will however more depend on how much capital you are working with. Since it is a business you can start with very low capital.

3.  Expenses- Another important part of business is expenses done. Expenses in this business will include cost like brokerage, slippage, carry over charges etc. Calculate all little expenses which are done.

4. Profit- What attracts everyone to this market is Profits. The big profit which are seen in this market makes it most attractive thing to do. But plan profit also, once you reach decided profit level exit the position. Being greedy is good but day dreaming is bad. Have predefined profit just like in most other business.

5. Risk- All business has some risk associated with it , and so is risk associated with trading also. Define your maximum risk too, just like you define profit. Never be afraid of loss, one who can master loss can only master profits.

6. Set Rules- Each successful business has set of rules which they follow. Same way have set of rules which you can follow. Make your own rules and follow them strictly. Don't deviate from rules. Review them from time to time and make changes only if you really need them.

7. Keep Track Record- I have seen most of shopkeeper/ businessman keep a record book and before sleeping they do finish it each day. But this thing is often ignored while trading. If you maintain record on daily basis it helps to identify mistakes, keep track of earning and expenses and keep an eye on your total capital. Always maintain proper records after day close. If you need track record excel sheet do fill below form and will provide you with same.

Trading has no guarantee that you will make money, but with proper planning your chances to be successful increases gradually. A successful trader always consider trading as a business and you should also plan it in same way to be successful.

Trading as Full time Job

I was planning to write on which type of trader you are, as you know from last article that you are made for trading or not. But before taking on type of trader a question arises can trading be done as full time job. Trading is a very lucrative thing to do, be it stock or commodities. Their is lots of money flowing each second in front of you every second. This easy money attracts everyone very easily. The initial success which one get make him think to go for full time as trading and leave current job. First thing here to understand is that trading is a business and is successful only if you follow all rules strictly. Benefits of trading business:

1. Very low entry cost: One can start trading from as low as Rs.2500 as many brokers provide big leverages.
2. No inventory or setup cost: One need to have only a demat / commodity account which can be opened for only Rs.200, And need smartphone with internet connection to trade.
3. No exit cost: Closing this business is very easy, just sell all portfolio and get money in account in next day
4. No running expense: No manpower needed, no other major expense, only a small brokerage and taxes on each trade
5. No fix time limit: You can have trade whenever you wish, if busy on a day then avoid trade on that day. No 9am to 5pm job absolute freedom

Inspite of all these benefits studies shows 90% traders lose money. Here arises a question can it be done full time. To go for full time trading you need to have proper strategy. Some steps are:

1. Small Trades: Take time to do trade on your own, avoid tips. We have different wonderful markets having time from 9am to 11:30pm. So take time to have trades in these market.
2. Manage expenses: Currently your expenses are set as per your income. If you break running income, have a plan to survive for 1 year without it.
3. Small Break: Take a break of 4-5 day from office and do full time trading in that. Observe results and repeat same after 3-4 months. Small trades you are taking will increase your accuracy and each time result will improve.
4. Big Break: Once comfortable and confident, take a big break of 15-20 days. If you are in some other business and not an employee, then you will be shifted automatically you don't have to leave current business. Observe result of this 15-20 days trading and see if you are able to meet your financial requirement or not.
5, Business Rules: Are you able to follow all rules which you have decided for trading or not. If not you need to work on psychology part and make it a habit to follow rules.

Before making any final decision remember that you are able to do tension free trading only because you are having other running income source. In big break try to work considering that your only source of income is trading and get all your expenses done from trading. If things are good, you are ready to have trading as a full time job.

Who are you?? Are you made for trading

Who are you? Seems answer to this is pretty simple. But in realty its not so, its more about discovering yourself. We have some hidden talents in us, some of which are by birth and others acquired. Still we have forgotten what are hidden talents in us. And same opposite to it we have some weakness also which we never want to look at. Does these knowing of strengths and weakness has anything to do with success (professional and personal) in our life? Well answer to this is a big YES!! One who knows his strength and weakness has high chance of success as compared to other. Now not going in more details on this lets come to "Are you made for trading"

Looking at our historical background trading is in our genes. Right from ancient times Indian were trading across globe trading wheat, cotton, spices, silk and many other items. So when trading was happening there was mechanism also for setting price. Taking it from zerodha's varsity platform " The easliest reference to the application of derivatives in India dates back to 320BC in 'Kautilya's Arthashasta' describing price mechanism for crops". Now historically its fine, but are you made for equity or commodity trading. Answers to this lies in all above we have seen,  you have to explore your strengths and weakness to identify it. You have to do an honest self appraisal of yourself. Based on this you have to identify your trading objectives and goals which should be in alignment to your life objective. And most important of all you should love trading, if its not what you love find a task which you love and work on that. Don't waste time in trading just to make money. Money will always follow the value you can create in any work. So don't run after money create value in task you love to do and money will follow you. Lets see in steps 'are you made for trading':
1. Identify your strengths and weakness.
2. Prepare your objective and goals.
3. Whats going on life and why you want to trade?
4. Create trading objective and goals.
5. Are you ready to face market.
6. How you feel about market (Are you confident, greedy, afraid etc. just know your feeling)
7. Are you ready to take responsibility of everything going in life or putting it on someone else head.

Well i think that all these steps will tell "Are you made for trading"

And if 'Yes' you are made for trading then no one can stop you from 'BIG SUCCESS'

Lets Begin

Hi Traders,

Many times in a trade we got stuck  in a trade. This could be due to wrong trade picked or market fluctuations can make you feel it is wrong trade. In order to help traders who are confused at any point, we are just taking this initiative to provide a helping hand to traders. Apart from this will be posting articles related to trading which you may find helpful. So lets start this new beginning together to make profit from markets.