Originally Posted by rakeshluthra430
Extremely sorry for bringing this issue again....my nemisis, the Position Size.
Yes..you had explained it logically this Sunday and I seemed to get it...but i think im again confused.
See...we took 2 lots yesterday...at a risk of 120 per lot....now even if we buy 1 lot...we will be assuming more risk, as the stops are exactly where they were yesterday..on our original position. So basically we are risking 1.5% instead of 1% that we should be doing.
I am sure I am missing something important....wat is it, I dont know.
Kindly help in your spare time.
Sorry for bothering again,
Rakesh
ps: by lots i mean the basic unit...it may be 50 for some...200 for others. the idea is of risking a certain % of cap and buying/selling accordingly.
Rakesh,
Excellent question as always........
I had seen that,and you are not wrong in your Math.
Presuming we are having the same capital,and 1% is your risk....First Buy is at 4062.We did our Math and could take on about 82 shares,so we buy 1 lot NF.Add 1 more at 4024.......your risk is still 1% of your capital.
Presuming you took on slightly more risk yesterday--you took on 2 lots at 4062.If you add another 2 lots at 4024,you are assuming 2% risk to your capital.If you add 1 lot at 4024,still you are at 1.5% risk.Now you will have to assess the Risk percentage acceptable to you.........some might take on 2%,others 1.5%,others 1%.........
Case scenario 1:Mr A has a range of percentage,not a point.Meaning he takes on Risk of 1% and would like to keep it thereabouts,but even if on an add it rises to 1.5%,he would go for it.That is,initial positions are 1%,adds are equal to less only,he would like things to remain at 1%,but understands that circumstances may exist(like a gap),that may push the percentage out of 1%.He is prepared to take up to 1.5% but that's about it........anything more is sacrilege.......My strategy is like Mr A.
Case scenario 2:Mr B has a risk percentage of 1%,he buys it at 4062 using his 1%...........the question is:How does he then add at 4024?
Both Mr A and Mr B are faced with a dilemma at 4024............Now both A and B are going to find it difficult.A buys 2 lots at 4062,B buys 2 lots at 4062.......4024 ADD 1 opportunity comes along.....A would like to buy 2 lots,which would send his Risk up to 2%.He doesn't mind up to 1.5%,but not 2%......B has the same dilemma but he is not happy with 1 lot either as 1.5% is not in line with his Plan either.
So,B has to give up on both lots opportunity,and A has to give up one lot.................Here's what I did today:A buy at 4024 was juicy.But that would send my Risk up to 2%,bought 2 lots nevertheless........with a close watch on pivots.Risk 2%........by the latter part of the day,we have managed to bring our stops to 3980.Means our risk is back down to 1.2%.
If that had not happened,would have removed 1 lot at the end of the day,been happy with a good DayTrade,and holding 1.5% risk overnight.
Now,for you,you are willing to take on only 1% .........you have 2 choices.Either do what I did and if the move did not take place,exit both lots and you are back at 1% risk..........If the move does take place,you are raising stops and all is well...............Other way out is to not add there.
At the end of the day,you should take on only as much risk that can be handled by you..............
All the best!
Saint
