#Risk #Management #Secrets #Retail #Traders #Anish #Singh #Thakur
Hello guys. My name is Anish singh Thakur and I am back… …with the risk management video as you guys requested. Its important for you to watch this video because… …many a times, people tend to be… …’over all negative’ in spite of trading well.
Many of them who incurr loss in trading, try to recover them… …by taking extra risk, unknowingly. In the process, they lose more. You too might be one of them who… …is not able to make profit in spite of trading well because… …of, do you know what? Its because of a technical error.
There are certain formulas… …with regards to your position sizing. There are some terms… …called risk per trade and hit rate… …which you may be unaware of. I have explained everything in detail. So, make sure you have the time to watch the video till the end…
…because I shall provide you with two analyzed stocks as well… …to trade tomorrow that is on Monday. So, let’s see as to how much you would like and understand this video. Stratergies are over hyped and stratergies are under rated. Let’s see how many views, likes and shares would this video get.
I will now get to know my audience better, whether… …they are interested in high risk option stratergy or… …otherwise. So, let’s… …meet after the video ends. Thankyou. So guys, let’s start with the topic today which is ‘Risk Management’. ‘Risk management is an underrated …topic which is not discussed normally…
…because maximum people would not apply it. They think that its boring and their profits would drop… …which is not beneficial. I am going to tell you the exact reasons, rules and logic behind it. You can change the numbers a bit as per your finances. Is that okay?
Let’s start. I shall tell you about ‘Risk management’ in detail. Make sure to pay attention. Before we understand ‘Risk management’… …we must understand a few things The first one being RPT… …which means Risk Per Trade. We must bein with learning to decide the RPT. Secondly, as you may know already we would learn…
…about risk to reward ratio. Its about how much of risk you… …would take and the reward you gain from it. We shall discuss that as well. All of you might… …be aware of ‘Stop loss’ and how to apply it. I shall add another word and that is ‘Hit Rate’.
I shall discuss about the topic ‘Hit Rate’ with you. If we manage to understand these 3 points… …risk management would be easy. So, let’s start. First of all… …I shall give an example such that… …you understand the concept of Risk to Reward ratio. Everyone would be knowing about it anyway.
This is a commonly used term. In the concept of Risk to Reward… …if for example we consider SBI shares valued at Rs 224 currently… …and I opt buy them. I have placed my Stop loss at Rs 222,in this case. Okay? I have valued it Rs 2 below the actual value.
I then place my target value up here… …valued at Rs 228. Here, if I incur loss what would that amount be? It would be Rs 2. If I incur profit, I would gain Rs 4. So, the risk to reward ratio is 1:2.
But, if suppose, I am not sure to achieve that target amount… …I shall fix that at Rs 226. So, what could be my loss or profit? Its Rs 2. Let’s note down that in both cases. So, Risk to Reward ratio is 1:1. That’s completely okay…
…and that’s completely okay. Not an issue with it. Let’s move to the next scenario. Suppose… …my stop loss is Rs 2… …but my target is Rs 225… …which means if I lose, my loss would be Rs 2… …and if I gain my profit would be Re 1.
Here, the risk to reward ratio is lower than 1:1. You cannot take suck a risk where the… …Risk to reward ratio is less than 1:1. As I already said, the Risk to Reward ratio must be minimum 1:1. We must try for 1:2 ratio. But, 1:1.5 is also okay.
Sometimes when the market is high or low… …we could achieve 1:3 as well. But, let’s not consider that. We shall assume 1:1.5 ratio. Let’s assume 1:2 or 1:1.5. We have now discussed the first concept that is Risk to Reward. Now let’s discuss Risk Per Trade. If I… set the Risk Per Trade meaning…
…if I could decide to not lose… …Rs 500 for an investment of Rs10,000… …or lose Rs 5000 for an inestment of Rs 1,00,000… …or lose Rs 50,000 for an investment of Rs 10,00,000… …it would be a great option. But, is that possible?
Can we do so? Yes, you can.But, many a times people… …people compromise with stop loss. So, pay attention. Let’s talk about Risk per trade. But, before that let me brief you about ‘Hit Rate’. I have done a complicated calculation… …and telling you the probabilities.
As per my calcuation if the Win Rate(Not Hit Rate)… is kept at 50%, meaning, 5 out of 10 incurrs loss… …that is 5 of 10 shares I hit stop… …loss and rest 5 I hit the target. I keep the Risk to Reward Ratio above 1:1…
…yet I can make profit.I will calculate and show it to you. If the Win Rate is 50%, then there’s no problem. This means that I win in 5 out of ten and lose in the rest 5 shares. The calculation that I have done for Hit Rate… …would be clear to you in sometime.
It might seem to be complicated in the beginning. We have just begun. So, I must explain it to you. The Hit Rate calcuation is such that… …after every 8 trades… …you will face a streak which means continous loss… …of 3 trades. Its a probability, not as a rule.
When 3 losing trades occur, and if I choose the RPT… …of 30% that is for an investment of 1lakh … If I accept to lose Rs 30,000… …I would be left penniless after 8 trades. So, I cannot risk RPT of 30%. That’s obvious too. Many people do that although, 30% or 40% RPT.
Moving on, after every 16 trades… …you will face a streak… …probably, as per my calculation… …of 4 losing trades. This means that after 16 trades there is a… …possiblility of losing 4 trades at a go. If I consider RPT of 25%…
…that is, if I accept Rs 2500 loss for an investment of Rs 10000… …then, after 16 trades, I would lose everything. So, 25% is also not feasible. Next, after 32 trades… …you wold face a streak… …of 5 losing trades that is you might lose 5 times in a row.
After 32 trades, you might have to face a loss of 5 trades continously. Then, how about 20% RPT? Your account would get blown away for sure. Then,what do we do? So, because of the hit rate issues… …huge financial institutions have done these calculations.
They bluntly say that you must not risk more than 1% of your aacocount. Several books suggest the same too. True. If your account is more than 10 lakhs… …I mean, if you trade with 50 lakhs, 1 or 2 or 10 crores…
…I agree to the fact that you must not risk more than 1 percent. Don’t risk more than 1%. So, your RPT should be 1%. But, peope who trade with Rs 10000, 25000, 50000, 1 or 2 lakh… …might think that its low. No problem. You can risk from 1%-2%.
I say that you can go upto 3% if your win rate is 60, like I do. My win rate is not 50:50, mine is 60:40. So, I am ready uptil 3%. You can consider 2% or 2.5%… …or 3.5% depending on your choice. What I said was…
…that RPT must not be more than 3%. First rule of risk management is that if your account is of 1 lakh… …you cannot lose more than Rs 3000 per trade. The second rule in this says that you can’t take more than 2 stop losses. 2 stop losses. Day over.
This is another risk management rule. I shall write them out seperately for you. Do not worry. First rule is that we cannot risk more than 3%… …that is for Rs 10,000, we must not incur loss more than Rs 300. If your investment is 10 lakhs, then do not incur loss more…
…than 3% which is 30,000 or 2.5% that is Rs 25000. Or, if you buy 1 or 2 trades simultanoeously and… …hit stop loss together, then close the trade. If you buy 1 trade and hit stop loss… …then, no problem. Take one more opportunity if you get it.
Then, if you hit stop loss again, close the trade. If you do not stop trading, you might lose almost 15% of your investment. Some people lose 100%. I have done that mistake in the past… …due to the psychological reasons to recover the losses on the same day.
We fail to understand that this is a test match… …and not 20-20… …that you complete everything in a day. So, you must be sure of the Hit Rate that I explained because of which… …there are chances of 5 losing streaks after 32 trades. So, you cannot raise beyond this number.
Its difficult for people who have incurred loss to accept this number . If they think of taking more risk to recover, it will lead to more loss… …if this rule is not followed. We made the concept a bit lengthy. We learnt Risk per trade as well.
We also learnt about 2 stop loss a day and Risk to reward. I also taught you Hit Rate. Now, I shall tell you how to start. Now begins the real risk management. So… …what do you think will help… …you manage the risk? Stop loss? Will stop loss save you? Tell me.
Then, how do you think swing traders would mange with multi day stop losses? So, stop loss does not help. Look into any of the related books… …or any serious trader, they will always talk about this. Position sizing will save you. But, people do not understand the term.
I shall tell you the meaning of that. What is Position sizing? Let me tell you. Position sizing will save you not your stop losses. Okay? What is Position sizing? It means quantity. Quantity means, how many shares to be bought or sold. If you follow this formula with discipline…
…all your psychological issues would disappear. You will not find it hard to find winning trade. You will not find it difficult to accept stop loss, if you understand this formula. So, let me show the formula to you. The formula is that the quantity should be… [RPT(Risk per trade)/Stop loss] in Rupees.
I shall repeat. Pay attention. Quantity must be RPT/Stop loss. What does that mean? I shall tell you with an example. Suppose you invest Rs 1 lakh… …and place RPT at 3% as discussed. What is 3% of 1 Lakh? Rs 3000. Is that clear?
Let’s take the example of SBI. It costs Rs 224/share. I shall buy that. I place stop loss at Rs 222… …and target at 226. So,what is the stop loss? So, my stop loss and target are valued at Rs 2. So, how much is the stop loss? Its Rs 2.
So, I shall divide 3000 by 2. Divide it. How much do you get? Rs 1500. So, you cannot buy more than 1500 SBI shares. You must buy less than that. It can be 1200. 1300, 1400 or 1500. No problem. But, not more than 1500. If you can accept this…
…and do so, then, no one can stop you. You do not need excel sheets or calculators to do this, like people do normally. Its simple. You must remember your RPT. Let’s take an exampe of a smaller account. Let’s suppose a person invests an amount of Rs 25,000.
He wants to buy Reliance shares. Let’s place his stop loss at Rs 11. We shall assume Rs 20 as his target and the stop loss is mentioned too. Guys, what quantity of shares must he buy? If you are not able to say, write down QTY.
Next is RPT. How much is that? 3%. 3% of what? Rs 25,000. What is 3% of Rs 25,000? It is Rs 750. Stop loss is Rs 11. If I divide Rs 750 by Rs 11… …what will I get? 750/11… …equals approximately 68. So, quantity can go upto 65…
…or can be 60 or maximum 68. In this case, what is the maximum amount that you can lose? Its equal to RPT which is nothing but Rs 750, here. So, Rs 750 loss can be managed. 3% loss is fine. Second stop loss can be managed too.
Its 6% loss. Next day, if you again lose 2 stop loss and are at 12%, its fine. Third day too you lose and are at 18%, its fine. If this continues, stop trading. Win rate cannot be this bad. Even in the worst scenario you cannot go beyond 8-10% of your account.
While trading, people tend to lose 15-20% of the account. So, I have explained you what risk management is all about. Stop loss does not save you. Quantity does. Quantity equals RPT divided by stop loss. Stop loss, I have explained too.
RPT can be 3%, 2.5% or 2% but not beyond 3%. Stop loss cannot be below Rs 2 per day. We will otherwise have to stop trading for the day. So, do add these rules. 2 Stop loss a day and quantity, RPT divided by stop loss, in number.
You are completely done, my friend. Why is quantity at 2 or 3%? Hit rate. As per Hit rate, no matter how good the trader is… …he is bound to come across losing streak and if that stretches too long… …he would lose everything in is account. Better not to be greedy.
Learn Risk management rather than thinking of recovery of 10 or 50 lakhs in a day. Stop trying to make 5-10 lakhs in a matter of 2 days. If you understand this, you will hold winning trade… …and not get perturbed by losing trade as well.
So, there is no haste. So guys, I hope I explained you well… …about the future options. Yet, I received certain comments… …that Risk management concept is useless. I felt it right to post on instagram too. My instagram too has more Risk management videos. So I opted for it.
I shall make few more too, later. I have a bonus for you. I have something for you. What is it? I have 2 shares that I wish to share with you all. First of all I wish to share Bajaj auto trading with you all.
Bajaj auto is supported by a really good trend line. It has taken a support for the second time, here, at the green candle… …and made it a good engulfing one. Now, we could expect it to raise high potentially upto Rs 3074.
That is the target number 1. Target number 2 is Rs 3129. If it cannot sustain that level… …it would get support at Rs 2973. You can set a selling target over there in case the trendline breaks. This was Bajaj auto for you in the Auto sector for tomorrow.
Now, let’s discuss Ultratech cement. This is a 1 hour chart of Ultratech. I shall show you here that there’s a 200 moving average support here. Apart from the support of 200 moving average… …this area here shows a good resistance. Alright? So, I am drawing a resells here.
I am drawing a line here too. What is it for? This is my no trading zone. I am not going to trade in this box. Let me grade this box for you. Please look at the range of the box here.
See the range of the box here. 4079 to 4026. Take it as 4080. Look at this box. We cannot trade within this range. But, if it takes support and raises high then… …I am going to chase a great target this week. If intraday traders can hold upto 4131 from 4086…
…its quite a big target in a 5 minute time frame. As soon as it jumps from the no trading zone… …intraday traders can try the first taget while swing traders can raise much higher. Suppose, it moves downside, it can get support from this area as seen here.
You can bring in selling trade at 3990. But, make sure… …you do not trade in no trading zone. So, that’s the no trading zone and we are done for the video. I have given you 2 examples. If I am able to… edit and upload the video on time, great for you.
If you are able to watch it tonight, that is Sunday night, then… …I wish you all a happy trading week. All the very best… …all of you. Do it with ease. Less confidence is a negative trait found among traders. There’s some pain attached to it. Trading is impossible without confidence.
You must build confidence within you gradually and for that you have to… …do small things with the help of Risk management. I hope this video… …adds value in your life and I know that all of you… …have shared and brought in 50,000 subscribers. Thankyou. I shall continue to make videos.
Please give maximum shares to this video. Stratergies are less, Risk management more. If you are a good friend… …then share it on every wsapp group… …so that everyone whether he be a Retail trader or a normal guy, sees it.
Let them not lose atleast, even if they are not able to make huge profits. Let them do better in life. So, if you are a genuine trader you have to… …you must share it with all your friends who trade or with whom you wish to.
Its always lovely to create videos like these guys. Thankyou so much. Let me meet you in the outer video. Alright. I hope all of you saw the entire video and loved it too. You must have got to learn something serious. After seeing the video…
…take some time out for calculation. Hope you know your account. Set your Risk per trade as per account size and calculate… …in a few shares of reliance, HDFC… …SBI as well as the ones I gave you, Bajaj Auto and Ultratech cement. Make calculations in all of them about buying and stop loss.
Decide now itself as to what quantity you wish to buy or sell tomorrow. Okay. So, great guys. Thankyou so much for… …helping me reach 50,000 subscribers. I am so grateful to all of you. I want this video to be the highest viewed.
So, you all must help me by sharing the video just like you did earlier… …to all your Wsapp groups. If you are new then subscribe my channel. Definitely, I would love to see maximum likes on this video… …because this is based on a stratergy that is least discussed among people.
Risk management, this is the truth. Trading is all about analysis,Risk management, good psychology… …and trader’s life management. Anyone can trade with these 4 traits. So, thankyou so much. See you soon. Now, I shall not vie for any target. I shall tell you about my target the next time. So, thankyou so much.
50,000 subscribers, love you all… …and see you soon in the next video. Thankyou.