Dr. Rajiv C.
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Articles : Trading / Financial
Management in Trading
following principles are towards survival in the stock market over the long
run. Please note that a lot of people try their luck in stock market but
only a few remain in the business for a long time!
First and foremost important principle is "Capital conservation"
The following measures will help.
Rule: Traders should limit loss to maximum of 1% of total capital for
any one position.
I will elaborate this further.
Suppose your Trading Capital is Rs. 250000 then your Risk Amount Per
Trade should never exeed Rs. 2500. You should put a stop loss and should
not alter it when it is about to get triggered!
When trading with Futures I generally see to it that I put Stop Loss
Orders but while trading options as a buyer (while buying naked
Calls/Puts) I tend to forget (only to repent later!) this above Stop
Loss priciple due to relatively smaller amount to be paid at the time of
As a option buyer and especially not adhering to Stop Losses in Options
Trading my Trading accounts have bled quite a lot in long run!
use Actual Stops. No mental Stops!
For overnight positions especially in Futures consider hedging with
options since NSE is not allowing us Good Till Cancellation Stops.
to trade in the main direction of the larger trends.
In a Bull Market: look only for opportunities to enter long.
In a Bear Market: look only for opportunities to enter short.
assess Reward/Risk Ratio.
Enter a position only when Reward/Risk Ratio > 2:1.
are day trading then Maximum of 3 trades to be traded per day. That too
if you get stopped out with loss 2 times in row then better to stop
trading for that day.
Further if you lose 3 days in row stop for that week. This will
automatically take care of your bad time period.
Diversify. Never too much in one or one type of trade.
end of week or month take out at-least half of your earned profits away
from your trading account so that you would not be tempted to risk it