2. DISCLAIMER
➢ I am NOT a SEBI certified Research Analyst or
Advisor.
➢ All the stocks discussed & examples taken in this
webinar is solely for educational/learning purpose.
➢ Do not consider it as a buy or sell recommendation.
➢ Do your due diligence before investing/trading in
such stocks and consult your advisor for the same.
3. What I will cover Today !
➢ Understanding Price Action.
➢ Trading using Moving Average with Price Action.
➢ Risk Management & Position Sizing with real time examples
➢ Real time case studies based on Price Action + Moving
Average.
➢ Q&A Session
What we will be covered today ?
11. TREND
Price moves in trends “Trade with the trend” is the main strategy behind
technical analysis.
Once a trend has been Established, the future price movement is more
likely to be in the same direction as the trend than to be against it. Technical
analysts frame strategies based on this assumption only.
12. Main moving Average to follow : 20 , 50, 200.
Moving Averages
The moving average (often shortened to "MA" in our research) is one of the
most popular indicators and is used by technical analysts for a variety of tasks:
➢ to identify areas of support/resistance
➢ to determine the trend
Advantage :
1) They smooth the data and thus provide a clearer visual picture of the
current trend
2) M.A signals can give a precise answer as to what the trend is.
Disadvantage :
1) They are lagging rather than leading indicators but this should not be a
problem to longer term investors.
13. Real Time Case Study
• MGL
• LT
• GODREJCP
• HAVELLS
• HUL
• NIFTY, SENSEX & BANKNIFTY
• VOLTAS
• ASIAN PAINT
• FINEPIPE
15. What I will cover Today !
➢ Focus on risk management ?
➢ How to lessen the impact of losing streaks and draw downs?
➢ Steps to ensure proper risk management
➢ How to calculate your position size
What should be the primary goal of trading ?
Making Profit…….. ?
The main object of trading should be to PROTECT CAPITAL.
NO CAPITAL, NO CAPITAL MARKET
Risk Management & Position Sizing
TOPICS TO BE COVERED IN RM & PS
16. We have to strike a balance between NOT TAKING RISK (Not
more then what you can afford to loose) & TAKING ENOUGH
RISK (So that is winning is meaningful).
17. What makes a successful trader
55%
25%
15%
5%
Psychology
Position Sizing
Setup
Luck a.k.a Karma
18. Position sizing is an important part of a trading system that tells
us how many shares to buy or sell per trade.
Position sizing help us to determine:
➢ How many shares to buy or sell for a particular trade .
➢ Your risk per trade and overall risk to your portfolio.
➢ Your expected returns to your portfolio.
The risk reward ratio (R:R) should always be greater than or equals to 1:2
POSITION SIZING
19. POSITION SIZE CALCULATOR
Step to calculating position size
Step 1: calculate your capital = share holding + cash
• Example: Rs. 10,00,000/-
Step 2: Determine your risk per trade?
• Risk refers to the maximum you can loss per trade.
• This is the maximum you can lose if your stop loss is hit.
• Never risk more than 1%-2% of your capital on any one investment.
• Once you have decided a percentage of your risk, always follow same % of
risk & do not change in between.
21. Step 3: Determine your position size for each investment
Example : You want to go long on SPICEJET in cash market at
Entry rate of 93
Stop loss 72
Target at 150
How many shares can you buy (Taking 1% risk)
No of shares of SPICEJET = 1% X 10,00,000 = 10000 = 476 shares
21 21
Total investment in SPICEJET = 476 shares X 93 = 44285/-
Here position size is 44285/- Risk is 10000/- Reward 27130/-
No of shares = % Risk Per Trade x Capital
Risk Per Share
22. POSITION SIZING CALCULATOR
ACCOUNT SIZE 1000000 <-- Input Data
RISK PER TRADE 1.00% <-- Input Data
(Ex. 1% or 2%)
Number of Shares 476.1904762
ENTRY 93 <-- Input Data
STOP LOSS 72 <-- Input Data
TARGET 150 <-- Input Data
Total invested 44285.71429
Allocation (%) 4.428571429
RR ration 2.714285714 (Always make sure that RR is > 2)
Return on Invested Capital (%) 61.29032258
Return on Total Capital (%) 2.714285714
23.
24. Drawdown on Trading Capital % return to break even
10% 11.11%
20% 25%
50% 100%
70% 233%
90% 900%
100% Wiped out
➢ Larger the drawdown on trading capital, the more its is difficult to return to break even.
➢ So do not take more then 10% cumulative risk on your trading capital or else max 20%.
25. Important point to note:
➢ At any point of time one should not have more 10% of cumulative risk.
➢ Always diversified your investment into different sectors. For example if
you buy 10 stocks make sure they are from different sector. (Ex. Recently
we hade turmoil in NBFC sector.)
➢ Also make sure you have equal number of long & short position.
➢ Sometimes waiting for the right trade or right risk reward ratio is also a
best option. (NO TRADE IS ALSO A GOOD TRADING DECESION)
➢ HONOR YOUR STOP LOSS.
➢ Do not get affected by continuous loosing trades
➢ Outcome of all the trades will be random i.e. profit & loss never follows a
fix pattern.
26. Trading Without
Risk management
is Injurious to your
Trading (WEALTH)
& Mental capital
➢ You can recover the loss made in your trading capital but recovering
the loss of your mental capital is very difficult.
➢ In order to survive in any competitive field protection of mental
capital is must.
➢ Protecting mental capital means not getting frustrated with
continuous loss making trades & thus not effecting subsequent trades.
