if u are prepared to lose max 1 L on any given day (but of course hope to make money overall) , spead the risk across 50 different scrips, to minimise yr losses.
hi, aligent
it does not mean that 2% stop rule is spreading risk to 50 scrips!!!!!
eg. you have 1,00,000/- and buy 250 Shansun chem at 106 with stop at 98 as per 2% rule, your trading capital on this trade is 250 * 106= 26,500/-.........case (i)
then you have 1,00,000 - 26,500 = 73500. 2% of this is 1470.
then if you wanna buy Media Video at 51 with stop 45, you should buy 1470 divided by 6 = 245 shares . Here ur trading capital = 12495..........case (ii)
now you have 61005 and 2% of it is 1220, and wanna buy 3MIndia at 1510 with stop at 1460,
you should by 1220 divided by 50(stoploss) = 24 shares.
So your trading capital used is 24 * 1510 = 36240..............case (iii)From case i , ii , iii,
your total trading capital used = 26500 + 12495 + 36240 =75,235/-
now only in three trades your 75% capital is used up, dear Aligent can u explain how can i make 50 trades by 2% rule.
This rule is to limit losses , and take good profit.
thanxs
winston