Tomorrow, take the trade in Dabur in Equities segment. We will wait for a little longer to get into Sintex as the risk - reward is still not favorable. I want to highlight one more important aspect here. So, just read this carefully.
Now, those who are regular to this thread, must be noticing that I discourage sometimes to trade in futures for some stocks. Whereas, I encourage sometimes to trade in futures for some other stocks. I want to highlight the reason behind this. We will assume the account size to be of 10 Lac
We recently traded GSPL, where I had mentioned that futures segment poses significant risk for this stock and hence risk averse traders should trade in Equities. Let us walk through some numbers here. GSPL had a contract size of 4000. We entered around 113.5 and got out today around 110. That gives us a loss of 3.5 Rs + commissions. If we assume commissions in futures to be 0.03% each side, then our total loss would be [(113.5 - 110)*4000 + (113.5*0.03*4000)/100 + (110*0.03*4000) /100]. This amounts to loss of 14268. That is, when we deal in futures. This would roughly be 1.42 % of entire equity size of Rs 10 Lac. Under risk management rules, this is acceptable.
Lets look at the Equities scenario. Here, if we did a probe test with 1000 quantities, assuming the same exit and entry price (commissions at 0.3% each side), it would have resulted in a loss of [(113.5 - 110)*1000 + (113.5*0.3*1000)/100 + (110*0.3*1000) /100] Rs 4200. This would roughly be 0.4 % of the entire equity size of Rs 10 Lac. Under the risk management rules, this is something exceptional. Remember guys as traders, we want to avoid our losses being meaningful and want to ensure that our profits our meaningful.
Some of you must be wondering that our position size was small and hence our loss was small. This is true. But what if we add the similar amount of positions (that is, 4000) when the stock begins to move in our direction. Wont that be great? Well, definitely. We can always begin small (but begin meaningfully) and can always increase the position size. Point to remember is that the first position size should be big enough to make an impact at your equity. If GSPL has moved up 10 Rs, then gain of 10,000 Rs (1000*10) is meaningful as it forms 1% of your equity.
Going by the similar notion, trade Dabur tomorrow with Equity size which is meaningful to your portfolio. If the trade goes in our favor, we can add positions when stock begins to move in our favor. If you like to discuss your optimal position size and cannot disclose your portfolio size in the forum, you can always PM me.
Hope this helps.
Tc
Now, those who are regular to this thread, must be noticing that I discourage sometimes to trade in futures for some stocks. Whereas, I encourage sometimes to trade in futures for some other stocks. I want to highlight the reason behind this. We will assume the account size to be of 10 Lac
We recently traded GSPL, where I had mentioned that futures segment poses significant risk for this stock and hence risk averse traders should trade in Equities. Let us walk through some numbers here. GSPL had a contract size of 4000. We entered around 113.5 and got out today around 110. That gives us a loss of 3.5 Rs + commissions. If we assume commissions in futures to be 0.03% each side, then our total loss would be [(113.5 - 110)*4000 + (113.5*0.03*4000)/100 + (110*0.03*4000) /100]. This amounts to loss of 14268. That is, when we deal in futures. This would roughly be 1.42 % of entire equity size of Rs 10 Lac. Under risk management rules, this is acceptable.
Lets look at the Equities scenario. Here, if we did a probe test with 1000 quantities, assuming the same exit and entry price (commissions at 0.3% each side), it would have resulted in a loss of [(113.5 - 110)*1000 + (113.5*0.3*1000)/100 + (110*0.3*1000) /100] Rs 4200. This would roughly be 0.4 % of the entire equity size of Rs 10 Lac. Under the risk management rules, this is something exceptional. Remember guys as traders, we want to avoid our losses being meaningful and want to ensure that our profits our meaningful.
Some of you must be wondering that our position size was small and hence our loss was small. This is true. But what if we add the similar amount of positions (that is, 4000) when the stock begins to move in our direction. Wont that be great? Well, definitely. We can always begin small (but begin meaningfully) and can always increase the position size. Point to remember is that the first position size should be big enough to make an impact at your equity. If GSPL has moved up 10 Rs, then gain of 10,000 Rs (1000*10) is meaningful as it forms 1% of your equity.
Going by the similar notion, trade Dabur tomorrow with Equity size which is meaningful to your portfolio. If the trade goes in our favor, we can add positions when stock begins to move in our favor. If you like to discuss your optimal position size and cannot disclose your portfolio size in the forum, you can always PM me.
Hope this helps.
Tc
