Teach A Man To Fish And.........

[pranayd]

Thanks Saint,

Now you are back in full flow.

According to me, this is the most important part of the entire thread. In my opinion, this section should have been taken upfront as elementary training for us novices, since we it is so imperative for us to imbibe this discipline before we even peep into the markets.

Can't thank you enough, Saint.

Pranay

 

[pranayd]

Let us say I take 1% loss in each trade.Therefore for the month of August,I would be risking Rs10,000 per tradeSaint

Just to reconfirm,

It is 1% per trade, right? Which means, if I am currently invested in 10 stocks, my total risk would be Rs. 100,000, right?

Pranay

 

[Saint]

Thanks Saint,

Now you are back in full flow.

According to me, this is the most important part of the entire thread. In my opinion, this section should have been taken upfront as elementary training for us novices, since we it is so imperative for us to imbibe this discipline before we even peep into the markets.

Can't thank you enough, Saint.

Pranay

Hi Pranay,

Cannot agree with you more.........this is the most important part for a trader,and should always be the first chapter.Strangely,it is always relegated to the last few pages in almost any book.

As far as this thread is concerned,it is basically a bid to vomit out all that one knows,but vomitting in a proper sequence of order,I am finding some difficulty with.

So,there will be lots of stuff all over the place(as messy as vomitus always is!!).......so,due apologies on that count.

All the best!
Saint

 

[Saint]

Just to reconfirm,

It is 1% per trade, right? Which means, if I am currently invested in 10 stocks, my total risk would be Rs. 100,000, right?

Pranay

Ah,Pranay,my friend,you're always one step ahead............on your query above,my answer would be No..........hope you don't mind waiting for the next post,then all your doubts would be cleared.

Saint

 

[nautilus]

Hi Saint:

You are doing a great job on risk and money management - a subject very close to my heart!

Thanks

Nautilus

 

[rahulg77]

Hi Saint,

Nice post going on. Missed out on it as am busy these days shifting my factory to a new location so hell lot of work coordinating everything.

ok back to queries Placing stop. do u exit on intra day fluctuation or if EOD is below your stop. Cause in Intraday like u have mentioned it might just hit it the stop loss for a couple of minutes and start moving up again and we miss the move. In EOD the stock might go down much more than our stop loss price and our loss %age to our capital will go wrong, So which is a better strategy or it depends to an individual.

It must be a common phenomenon that the stop gets hit and the stock starts running again. In such a situation do we analyse the stock again or should we just let it go.

Rgds

Rahul

 

[pranayd]

hope you don't mind waiting for the next post,then all your doubts would be cleared.

Saint

Definitely not Saint,

Shall await your clarification. Do write at your leisure.

Cheers,

Pranay

 

[ger06]

Dear Saint.

I am very much pleased to read this thread. fantastic Explanation like a professor teaching his students. Regularly I am awaiting yr post.Thanks.

Sorry for asking simple questions, but I hope u will not mind.

""Continuing with our SAIL example from above, say you set a trailing stop order for 10% below the current price, and the stock skyrockets to Rs.80 within a month. Your trailing-stop order would then lock in at Rs.72 per share (Rs.80 - (10% x Rs.80) = Rs.72). This is the worst price you would receive, so even if the stock takes an unexpected dip, you won't be in the red.""

Regarding
1. Trailing Stop - I like to know, shall I put at X% down of yesterdays close price. In this case though on one day the price will not come down X % & touch the stop point but in a week or so it will fall too much low but still will be above the X point as X is % of yesterday's close.

2.

So,therefore,first I look at my trading capital at the end of the month.I then assess how much my risk would be the next month.For example,let us say I have 10 lakhs at the end of July.Let us say I take 1% loss in each trade.Therefore for the month of August,I would be risking Rs10,000 per trade(to reiterate,that means the amount lost if stopped out).

Now I have my ups and downs in August,and landed up in August with an equity of 10.5 lakhs,now my risk in the month of September would be 1% of 10.5lakhs=10,500 per trade.

So too,if my equity had dropped that month to 9.5lakhs,then my risk of 1% for the following month would be 9,500 per trade..............so on so forth!!

Is it a cash available for trading in trade account or total portfoilo amount i.e. Cash + including unrealised value of shares. Because if I bought 10 shares worth 1 lakh this month but not sold then the cash will drop.
So please guide me.

Thanks.

 

[Saint]

Hi Saint:

You are doing a great job on risk and money management - a subject very close to my heart!

Thanks

Nautilus

Thank you for your kind words,my friend...........yes,know that fully well.We have some great posts from you on this topic,......and looking fwd to more of such posts whenever you find the time.

Take care,and all the very best!

Saint

 

[Saint]

Hi Saint,

Nice post going on. Missed out on it as am busy these days shifting my factory to a new location so hell lot of work coordinating everything.

ok back to queries Placing stop. do u exit on intra day fluctuation or if EOD is below your stop. Cause in Intraday like u have mentioned it might just hit it the stop loss for a couple of minutes and start moving up again and we miss the move. In EOD the stock might go down much more than our stop loss price and our loss %age to our capital will go wrong, So which is a better strategy or it depends to an individual.

It must be a common phenomenon that the stop gets hit and the stock starts running again. In such a situation do we analyse the stock again or should we just let it go.

Rgds

Rahul

Hi Rahul,

That's a common dilemma that we all face.............however accurate your stop is,and however much you give it room,it can still happen.

Now comes the problem,..........let us say we entered a stock at 50.The previous pivot low was 45.You decided to give it some room to wiggle,your stop is at 44.5 or slightly lower.Great,so far so good,all systems go,everything in place.

Now the stock corrects almost after you buy it(common phenomenon,my friend,happens to us all,can be rather irritating and frustraing,but that's part of the game!!)..........and it comes to 45,and falls through 44.5.

Now the dilemma is this.......is this a false breakdown,or a shake-out bar,etc,or is it a genuine move down.Now many people have different ways to deal with it.

Mine is simple......I exit!!

Why?Because this move could go down to 40,35,etc and I would be left with a huge loss in my account,left with a feeling of regret,and the would've-should've-could've syndrome.

So,I am very rigid about the stop loss,....... and am certainly out if it hits.Would be waiting on the sidelines though for an opportunity to reenter.

All the best!
Saint