This article is made for tradingtoolx.com members in mind ,Feel free to tweak according to your risk appettite.In this article , we are going to see three types of Risk management.

Before I cover all these topic , let me explain the common rules you need to follow for all kind of trading.

Common Rules

• Never risk more than 2% of your capital in a single day.
• Have atleast 1:1 Risk Reward
• Never trade without stoploss
• No target , Trail your profits

Risk calculator

**click on above rows to see the list of trades.

I have created above calculator to help you visualize , how much you lose or how much you gain if you are risking fixed percentage of capital per trade / per day. For example if your capital is 1 Lakh and your risk per day is 2% of capital , Even if you are losing continously for 19 days , you will be losing only around 30% of your capital. We will see more of this as example in coming sections.

Importance of Risk Reward

In above table we can see the importance of risk reward.For example of 2:1 risk reward ,for 100 Rupees option if you keep 20 rupees Stoploss and 10 rupees target.you must atleast win in 7 out of 10 trades you take.And if you are trading with 1:1 risk reward , you must win in 5 out of 10 trades.That is why , I always recommend to have atleast 1:1 risk reward.But will be teaching some methods to have fixed stoploss and dynamic target in coming sections.

1. Scalpers Risk Management

As a scalper , you must control from over trading and be emotion free.

1. Emotion free - Enable points mode in oneclick trader instead of rupees mode.
2. Control Over trade - Enable Max loss mode in oneclick trader.

First of all Decide on maximum loss you can take in a day.



My basic Rules is take care of your losses and Profit will come automatically.Based on above Image you start with 1 Lakh capital and you are risking 1% of capital per day. on First day you have 1 lakh and 1% of 1 lakh is 1000 rupees. So you can take 1000 rupees loss.On 2nd day your capital is 99,000 and 1% of 99,000 is 990 rupees. So you can take 990 rupees loss and so on. And even if you lose continously for 11 days , you will be losing only 10% of your capital.

But people do the mistake of taking over trading without any rules and losing 10% capital in just one day or 1 trade.Please don't do this.Atleast if you lose 10% of capital in 10 days , you would have learnt lots of things in 10 days and different market situations.

Risk (Stop Loss) :

Reward (target) :

Trailing based on Max profit:

I say target is unlimited , but I know over trading will make you lose all your profit you made.That is why I recommend.Trailing your total profits.

Let me show you an example.

2.Intraday Traders Risk management

For Intraday traders , It is pretty much everything same as scalper Risk management, so please go through that section before proceeding.

Like I have mentioned above if risk is 1% of 1 Lakhs , that is 1000 Rupees , In scalping you will be able to take 10 trades with 4 Rupees SL each. But for Intraday Stop Loss will be something like 20 points or 10% of premium whichever is higher.So you can take only 2 trades per day with 20 points SL each.i.e 500 Rupees risk loss per trade.

Dont be confused that you must stop trading if your 2 trades Stop loss have been hit .See below example to understand this better.

Here your two stoploss has been hit , but still your Pnl is -500 , so until your max PNL -1000 , you can keep trading.But once your max SL of the day is hit , Please stop trading , no matter how good oppurtunity you get.You may recover your loss for couple of days , but 1 day will come when you will lose all your profits and more.Because your Emotion will be bad when you are in loss.This is also another reason why I tell you guys to continue trading when in profit , because your emotion will be in good state when you are in profit.

Target For Intraday :

If you are following Long term signals , Exit you trade either on SL hit , Trail hit or Target hit.For example if you are Buying at the beginning of green signal , Exit your position when green signal is turning blue or red color.And Vice versa for Red , exit at blue or green signal.

Systematic Trading :

3.Positional Traders Risk management

I dont recommend Positional trading.But If I am Positional trader I would trade only with following Scenarios.

OTM option buying:

You chose the option which has premium based on your risk appettite , so even if there is big move in opposite direction , risk is under control , Here you need to have some good method to predict the next day move.Else you will lose 90% of the time because of OTM option theta decay.But If you have some system developed to predict gaps on next day , this is good method with very good risk reward.

Option Selling With hedging:

Option selling comes with edge of theta decay already , so you can do some backtesting and sell straddles / strangles along with OTM option buying as hedge.People may give you good backtest result that even in blackswan event selling straddles without hedge gives better result , but that is not my cup of tea.

If you need more profit compared to traditional straddle strangles , you can do skewed strangles if you know the direction , for example if global is in down trend for couple of days and if our Indian market is in uptrend and if you feel our market will fall , you can sell Costly Call and Cheap put with same hedging.So when the market is falling you will get good profit.

Disclaimer

• Fixed Stop Loss
• Unlimited Target
• Trail your profit based on Max Drawdown
• Set Max Loss per day
• Follow your system if you are scalper or Intraday trader
• Make rules and stick to it