Sizing Positions for Intraday & Margin trades based on Stoploss.
Let us consider you have Rs. 1,00,000 as initial capital to trade in the market and let us also consider the margin/ leverage available is 5x (usually 3x to 12x based on stock and broker).
Being new or an intermediate to the trade i would request you to stay long in the business, i.e stay long to learn as you trade. Your motive should be to stay in the business for a thousand trades.
For an intermediate, you should look to survive 200 wrong trades.
Lets divide 1,00,000 by 200 its 500. So your position in the stock should be in a way such that the maximum loss in a trade should not be more than 500.
Let us consider 2 examples from our recent trading call
- Enter Zee ent. Stock Price 360.6. Target 364, 368 & 372. 2 sessions. SL 354.
- Oversold ICICI Pru. Share price 284.65. Target 287 & 290. 2 sessions. SL 280.5.
Beginners:
In the first example of Zee Ent. Stoploss is 1.75%. Therefore the Position size is calculated to be Rs. 28,500 (500/1.74%). Target profits are 276, 592 and 909.
With 3x margins, your initial capital required will be less than 10,000 for the trade.
In the second example of ICICI Pru. Stoploss is 1.47%. Therefore the position size is calculated to be Rs. 34,000 (500/1.47%). Target profits are 303 and 667.
With 3x margins, your initial capital required will be less than 12,000 for the trade.
With such low capital required per trade, you can have a comfortable 3 to 4 open positions at a time.
Intermediate:
If you are intermediate trader, i would suggest the stoploss to be at 1,000 and have atleast 3,00,000 capital to trade.
You can just double the numbers given in example for Beginners.
Pro Trader:
If you are a pro trader, i would suggest to trade in Futures with a Stoploss not more than 20,000 and have atleast 12 to 15 lakhs capital to trade, considering 8x margins available in the futures market.
Please understand that initial risk and rewards are equal.
Stocks can find re-entry points, fresh targets and revised Stoploss as the stock moves in the direction of our targets.
Booking Partial profits based on RSI and bollinger bands is always advised.
Don’t make yourself uncomfortable with low capital.
source
https://gale.in/sizing-positions-for-intraday-margin-trades-based-on-stoploss/