How to increase Trading Size
The Biggest Problem that the traders face, according to me, is increasing TRADING Capital & Quantity. There is a general feeling amongst the Traders that More the Quantity, more the profits.
That’s true in a sense but have u ever wondered if u are really ready for those kinds of Trades?
Isn’t it equally true that more the quantity more can be the loss?
Well, in my career, I came across Traders of All Sizes.
The Rich Class Traders:
There were some percent that were resourceful and traded big, their resources never allow them to think beyond their resources, losses didn’t hurt them until one day they realized they have gone beyond their limits. Believe me there is a vast percent of such Traders. Markets exists because of such resourceful traders.Their main problem I found with these RICH Traders was their resources which didn’t allow them to think and properly SIZE their trades till they reached a level where they felt they lost a big chunk of their Resources.
The Middle Class Traders:
This percentage are those who utilized their 100% savings or spare money whatever u call it into trading. They too missed on sizing a trade until they realized that they lost their savings of a lifetime. But these percent is large, those who loose leave the markets and new ones keep coming in. They story remains the same.
The Poor Class Traders:
The most tortured class in every segment, these are the people with little money, 10-50K, they manage that somehow, maybe they pull out a part of their monthly earnings from their main source of income and come to markets dreaming Big. As it’s a part of their regular income even they miss on sizing, they just dream on making big either through options or through margin trading. This class sustains a little longer than the rest as they pull out small amount according to their convenience from their main source of income. Most of that small capital keep going down the drain, but they really don’t care about it as they get another capital with new hopes and new dreams.
So, What actually Sizing is ?
Well there are two types of sizing, will try to explain with examples:
Your capital should never be more than 10% of your total spare capital. There is no place for dreams in this markets. The more the dreams, more will be the losses.For those who use from their main source of income it should be not more than 10% of your yearly income, for eg if ur annual salary is 2 Lakhs, it should not be more than 20000 Rs. I would give a detailed reasoning on why this much capital later in another topic.
The most important for a trader is quantity sizing. I will directly try to explain with a simple example.
Lets say u buy NF options @ 100 Rs premium, with SL 90, 2 lots. Its gives u a 30% profit and u book the trade at 130. Net profit of 3000 Rs.
Next trade boosts up ur confidence and u buy a option again at 100 with 90 SL but only because of the previous profit this time u buy 10 lots. Unfortunately this time it hits SL and u loose 10*500= 5000 Rs.
Here comes the mismatch for all traders. Its always very important to fix up the number of lots, no matter what. They should remain the same for a period.A period ranging from months to years.. Once u feel u have made good profits, u can gradually raise the number of lots. But irregular lots will amount to loss and loss only.
very good article it is normal mind set of the traders sir
Bramesh, You said ‘three types of sizing”. But, listed only two. Is it a mistake or typo error or you are going to explain later.
Thanks its corrected..
Is this alternative feasible. First fix the capital to be used and stick to only this fixed capital amount for every trade. Next see how many lots will fit into this fixed capital, and trade only these lots. The number of lots in various trades will vary but fixed capital and SL will limit loss.
How about less lots in ranging markets and more lots on trending markets?
It is a good idea. But, how do you know pre hand that it is a ranging or trending market.
Use techniques like pyramiding or enter with multiple lot, then start reducing it on small profits too. Leaving a few lots to run your profit, if market gives. However, I always suggest to take minimum lot what the stock may be (lot size). If one is going for multiple lots (over sizing) compromise on exit level. I mean reduce the exit rice.
This is a good article Bramesh.
Good one sir .Thank you.
Thank you for posting a nice article. I feel my self in it..
Good article sir….you perfectly explained the trader types and their mistakes………..thnx for your guidance
Sir aap 3 year pahale mile hote to mera 1lac aaj mere trading account main hote but koi bat nahi jab jago tabhi savera thanks for regular updates
god bless you
Thanks. Nice advice. Correct me ,if I am wrong, the trading lots are changed to 25 for Nifty.
(not %0 as assumed.)