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Trader knight
@Traderknight007 5 years, 4 months ago 1415 views

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How position sizing can affect your trading performance-

Assuming that you are trading a Trend-following system with Big RR and low win-rate.

For example, assume that you risk one percent per trade on a 100,000 account
and you have 20 straight losses.

That one percent is of your remaining equity and at the end of 20 losses, you would be down to 81,790.60.

Now if you got a 30R winner and you are risking one percent of your balance of 81,790.60, your new equity would be 106,327.9,

You’ve had 20 losses and one winner though you are still up 10Rplus your equity is up by 6.3R percent.

Now, let’s say you risk five percent per trade on your balance. At the end of 20 straight losses, you would be down to 35,772.89 or down 64 percent.

If you risk five percent on this amount and get a 30R winner, you would be up to 89,621.48. You are up 10R, but because of your position sizing, your equity is still down over 10 percent.

#positionsizing
#Trading
#nifty50

This is why position sizing is the most important factor in trading if you get it right and you have an edge, you will do good.

Thanks for reading till here.
@AnandableAnand @jitendrajain @quatltd @sohamtweet

More from Trader knight

Trader knight
@Traderknight007

Why It's Hard To Run Profits And Limit Your Losses-

A thread-

In trading one of the important things we learn is that we should cut our losses short and hold on to the profits.

Most of us plan to implement the same from the next trade.

BUT!

When we take the trade, If the trade goes in profit we panic more then we would have panicked if the trade would have gone wrong.

Strange right, why would someone panic if the trade is going in profit.

New traders may not go through this emotion as they may have not gone through the Fear which a little more experienced (still not profitable) trader goes through.

Let’s name this little experienced trader Rahul.

So, lets say Rahul takes a trade, he buys Reliance at 2000, with SL at 1980.

He is ready to “ FOLLOW THE PLAN” of holding the profit and exit if trade goes wrong.

Now, Reliance goes to 2010, Rahul is happy, panicked, Feared.

Trader knight
@Traderknight007

The four stages of markets-

1. Accumulation
2. Markup
3. Distribution
4. Decline

Thread-

1. Accumulation phase-

This phase starts after the completion of a downtrend.

In this phase the furious selling activity of downtrend comes to a rest.

During this phase there is a gradual shift from sellers to a more neutral environment .

Institutions starts to show interest in stock, Because they can not buy the stock in one time ;they buy it slowly over a long period of time.

Sometimes it takes years for a stock to come out of this phase.

The easiest way to recognize if a stock is in this phase is that the Longer term moving averages will start go decline even when the stock bounce higher.

This shows that there is indecision and there is no powerful force present In the stock at this time.

But, Its super risky to buy in this phase because it can also be a second distribution zone , and the stock may again go lower in many cases.

The first signs of an accumulation zone is the stock will try to make higher lows and try not to break the swing lows often .

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Trader knight
@Traderknight007

Pyramiding 2.0

A thread-

What is pyramiding?

It is simply adding to your winners.

Why use pyramiding?

1. It makes your winners bigger than your losers.

• Because you are adding positions when your trades are going your way, you are increasing your gains but your losers will be small comparatively.

2. You lose less during Draw-down time ( it saves you from losing big during whipsaws )

• Many times when the market is in sideways mode, Entering a trade with full risk might not be the best idea.

• So, you test the waters with a small position first, it could be ⅓ or ¼ of your total risk.

• So if the Breakout fails or whipsaws come, then you will only lose a small part of your overall risk.

• Then when position starts to go in your favor you can add to it.

3. It helps you to concentrate on a few trades,

They say that don’t put all your eggs in one basket, but don’t put them in too many either.

• See, Everyone can see charts and find breakouts, pullbacks etc.

Trader knight
@Traderknight007

"The 200 EMA play."

As most of you may know, that 200 EMA is mostly used to find the Value zone at any time frame, many times we see reversals happening at this zone.

Thread on How to use 200 EMA as a trading setup.

I use this setup mostly on daily and weekly time frames.

So ,what to look for -

1. First check whether the index is in uptrend or not, simple way to know this is if the index is above 20 and 50 DEMA then its in uptrend.

2. So if the index is in uptrend we will try to find the stocks for buying and if the index is in downtrend , find stocks for selling.

3. Now the best setup would be if the stocks is getting close to 200 EMA after a long time, buying/selling would be more furious in that case.

4. The best condition will be if the stock first touches the 200 EMA and shows rejection from that , it would be the ideal condition.

5. We have to buy above above the high of the rejection candle.

6. Stop loss can be 2 ATR away from the entry, ATR will be based on previous candle of the entry.

7. And trail sl with every 1R move in our favor.

Example 1 - Canara bank

Trader knight
@Traderknight007

"A trend once established, is more likely to continue than it is to reverse"

A thread on Trend (Market structure)-

A trend is a path of least resistance, basically the side where the smart money is betting upon.

And our work is to be on their side, to make some money.

Why do we use trend?

In an uptrend, the sum of the rallies will always be greater than the sum of the declines.

In a downtrend, the sum of the declines will always be greater than the sum of the rallies.

How to Find the trend?

There are 3 methods which one can use-

1. Swing points method.
2. Moving averages.
3. Trend lines, channels.

1. Trend identification by using swing points-

• UPTREND in simple words - Higher highs, higher lows

• DOWNTREND in simple words - lower lows, lower highs.

• Flat trend - The price stays in a range

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Abhishek Kar
@Abhishekkar_

FREE MINI STOCK MBA
If you wish to learn abt trading,psychology,options,business etc
You can go through this thread.
Other than this I do post videos on my YT channel : -Abhishek Kar & Tradiostation
-Intraday views on FREE telegram : Abhishek Kar Official
RT will be appreciated

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https://t.co/wabkek43I8

2. https://t.co/OIDenHKdWN

3. Some core rules to investing
https://t.co/37d1pygp7P

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5.Effects of margin change on

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Trader knight
@Traderknight007

A thread on SCALING IN - OUT METHOD -

What is scaling in - out?

1. Scaling in is adding on to the positions when they move in our favor (Pyramiding).

2. Scaling - out is exiting the portion of the position when the trade moves in our favor.

I have explained about pyramiding in previous tweets.

// Why use scaling out instead of exiting all position at once ?

When you are using ALL - out method where you exit positions at once, mostly you use wider Trail SL as you want to capture big moves and exit all when trail sl hits.

The problem with this method is that either you make too big or many times your medium size winners turns out to become Scratch trades.

So, when we use the scaling out method, we are trying to capture most of our medium size trades , so that they do not turn into scratch trades.

// How to use scaling out method -

Say we have to got a signal to enter in a trade, and we have to buy 1200 qty according to our Position sizing.

So, we have to divide this 1200 qty into parts, how much? It depends on you.

We can divide into 3 parts, each part 400 qty.

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Vikrant
@Trading0secrets

Trendline is basically use for majoring trend 📈 of any stock.

It is also useful for indentify demand & supply ....

Here it's applications 👇

➡️It is formed when a diagonal line can be drawn between a minimum of three or more price pivot points.

And that all three points must tested equally.

example 👇 #sis

➡️ Trendline is mainly useful for identifying trend 👇

⚡Uptrend - #happiestmind

⚡Downtrend - #bluedart

➡️ It is also useful for support & resistance.

Ex - ⚡ #happiestmind

⚡ #omaxe

➡️ If three point 📍have not be touched clearly then it is wrong ❌

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⚡#zeemedia

Nikita Poojary
@niki_poojary

Thread: Free Options Trading Course for Beginners with small capital.

Reference: Option trading marathon series, part 1 from Mr. Subasish Pani ft. @PushkarRThakur

Collaborated with @AdityaTodmal

1/ Trading journey of Mr. Pani

• He has an experience of 7 years.

• He has made a profit of Rs. 20 cr. over these years with a capital of Rs. 2 cr.

• However, it's not easy to make such profits.

• More difficult, is to retain those profits and build more on it.

2/ How he ventured to options selling

• He started with futures and option buying however after a certain point when his capital grew, he faced scalability issues and hence he resorted to options selling.

3/ Investing becomes imp once the capital grows:

• Since his trading profits have grown well, he has started investing (investing is always for LT).

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4/ Covered calls strategy for the portfolio:

• Pledge the portfolio and receive margin ~80% which he would then use to sell OTM CEs of the stocks which are in his portfolio.

• This helps in generating fixed income from the portfolio.

Saurabh Bajaj
@JigyasuInvestor

Saturday Thread Time.
Re-Read interview of Ed Seykota from @jackschwager
book "Market Wizards". It's the most philosophical interview among all interviews. Needs to re-read it over and over.
@vivbajaj Sir, a re-tweet would be highly appreciated.

1. Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible

2. The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system.

3. The profitability of trading systems seems to move in cycles. Periods during which trend-following systems are highly successful will lead to their increased popularity.

3.1 As the number of system users increases, and the markets shift from trending to directionless price action, these systems become unprofitable, and undercapitalized and inexperienced traders will get shaken out. Longevity is the key to success.

4. In order of importance to me are (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell.

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How to trade on Expiry day with Nifty straddle?
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Triple straddle is one of the best and accurate methods for expiry day

If nifty trading at 15720 then will sell three straddles above 50 points from ATM, below 50 points and ATM.

Ex.
Sell straddle 15700(ATM), 15650(ATM-50), 15750 (ATM+50)

Stoploss of 80% on every leg and run your trade till 3 PM

Once SL hit in any Leg just keep holding other leg till expiry with SL (Never or less chance to hit both SL on expiry day)

Trading timing at 9:20 the Morning

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