Having grown my Zerodha account 5x in last 19 months since I started systematic intraday options trading, felt I am eligible enough to share my principles around below topics that helped me scale up.

A thread on my style of position sizing, compounding and handling drawdown 👇

My money management principles first:

1. Do not risk more than 1% capital per trade
2. Account for DD while sizing position
3. Do not reduce position size while on a losing streak
4. Increase position size during winning streak
5. Compound capital daily to scale up quick and big
Why cap rupee risk at 1% capital per trade?

- We can be wrong in any trade and got to cut losers short
- Intraday price action is random and can be irrational

Market can stay irrational longer than a trader can stay solvent

Risking <1% per trade⬆️odds of trader staying solvent
Why account for impending DD upfront while sizing position?

- because I do not want to reduce position size while on a losing streak, but I also want to increase position size while on winning streak

- because when DD happens I am not disappointed as I already factored that in
Why do I not want to reduce position size in a losing streak?

- Because if I do, I will need 25% gain to recover from 20% DD which is an uphill task

- If I factored in 20% DD upfront for sizing position, then I need only 20% gain (not 25%) to recover from 20% DD
Why do I increase position size on a winning streak?

- There will be phases when our strategy aligns well with price action regime in the market. Go full throttle then.

- When you get an over full of half volleys, you gotta make hay, hit'em outta da park and party hard baby🤟
Now, why compound capital daily?

- I factored in DD while sizing position
- I factored in taking probabilistic approach to trading by risking <1% per trade

Now what holds me back from reinvesting the profit ASAP in the business that generated it? Nothing!

So I compound daily
Example with 1% risk per trade, 16.7% max DD

Day 1:
-capital: 12L
-expected DD: 2L
-risk per trade: 10k

If day 1 was 1L profit:
Day 2:
-capital: 13L
-expected DD: 2.2L
-risk/trade: 10.8k

If day 1 was 1L loss:
Day 2:
-capital: 11L
-expected incremental DD: 1L
-risk/trade: 10k
If DD goes beyond historical max DD that I factored in, then by virtue of risking fixed % of capital per trade I reduce position size while on losing streak.

This makes sense to me logically as I would like to go on risking lesser per trade just in case the s/m lost its edge.
Following this methodology I have gone through 8.77% DD in 3 days and scaled back up to equity high without reducing size.

I risk max 4% per day, max 0.5% per trade and factor in 15% DD.

From risking 20k per day in Jul'20, have scaled up to more than 10x that in this style.
In this tweet thread I just shared stuff the way I do it.

This of course does not mean that it is flawless or the best way to size position, handle DD while scaling up.

The intent was just to provide food for thought to those on the lookout for it!

Hope it helped someone.
Seems growing "account" 5x got more focus than rest of the thread 😉

Guys,
1. I am not claiming 400% return in 19 months😂

2. My account growth on starting capital has 3 components:
- trading profit
- unrealized investment profit
- small inorganic growth from salary savings

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राम-रावण युद्ध समाप्त हो चुका था। जगत को त्रास देने वाला रावण अपने कुटुम्ब सहित नष्ट हो चुका था।श्रीराम का राज्याभिषेक हुआ और अयोध्या नरेश श्री राम के नेतृत्व में चारों दिशाओं में शन्ति थी।
अंगद को विदा करते समय राम रो पड़े थे ।हनुमान को विदा करने की शक्ति तो राम में थी ही नहीं ।


माता सीता भी हनुमान को पुत्रवत मानती थी। अत: हनुमान अयोध्या में ही रह गए ।राम दिनभर दरबार में, शासन व्यवस्था में व्यस्त रहते थे। संध्या को जब शासकीय कार्यों में छूट मिलती तो गुरु और माताओं का कुशल-मंगल पूछ अपने कक्ष में जाते थे। परंतु हनुमान जी हमेशा उनके पीछे-पीछे ही रहते थे ।


उनकी उपस्थिति में ही सारा परिवार बहुत देर तक जी भर बातें करता ।फिर भरत को ध्यान आया कि भैया-भाभी को भी एकांत मिलना चाहिए ।उर्मिला को देख भी उनके मन में हूक उठती थी कि इस पतिव्रता को भी अपने पति का सानिध्य चाहिए ।

एक दिन भरत ने हनुमान जी से कहा,"हे पवनपुत्र! सीता भाभी को राम भैया के साथ एकांत में रहने का भी अधिकार प्राप्त है ।क्या आपको उनके माथे पर सिन्दूर नहीं दिखता?इसलिए संध्या पश्चात आप राम भैया को कृप्या अकेला छोड़ दिया करें "।
ये सुनकर हनुमान आश्चर्यचकित रह गए और सीता माता के पास गए ।


माता से हनुमान ने पूछा,"माता आप अपने माथे पर सिन्दूर क्यों लगाती हैं।" यह सुनकर सीता माता बोलीं,"स्त्री अपने माथे पर सिन्दूर लगाती है तो उसके पति की आयु में वृद्धि होती है और वह स्वस्थ रहते हैं "। फिर हनुमान जी प्रभु राम के पास गए ।
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A thread 👇

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