RISK MANAGEMENT

  • Will be sharing my experience towards the word called risk management.
  • As the word says it all risk is nothing but the amount/things which you are ready to expose to danger (yes i just googled the meaning).
  • Managing those risk, how much to risk,when to risk and where to risk is always a great deal, once you figure out yourself these questions no need to worry about the reward at all it takes care of itself. Once you define yourself the risk how much you are capable to take at one shot your 50% of the job is done.
  • Yes you heard it right its just 50%

RISK MANAGEMENT IN STOCK MARKETS

  1. Here risk management is all about the calculated amount of risk in which you are ready to take per trade/day.
  2. Is risk management the only thing lacking from traders in loosing money.
  3. If yes then everybody would have had one calculated every morning before trading.
  4. But i will be explaining about the next concept that is risk management with emotion control.

RISK MANAGEMENT WITH EMOTION CONTROL IN STOCK MARKETS

  1. As strategy, system, risk management plays an important role in trading and so does risk management with emotion control, plays an vital role in successful trading career.
  2. No doubt people write down or fix the amount ready calculated in which they are about to risk.
  3. what if there is a reward for the amount risked – All good.
  4. what if the risked amount exposed is lost – practically you are stopped out of the trade or for the entire day, if that was the case nobody would have lost huge in a single trade/day.
  5. Here comes into play Human Emotions, If no control over your emotion no strategy/system/RM works in the live markets, because always markets surprise us everyday, If rewarded everyday you are happy, If everyday is Risk then Humans are not happy at all even though it was calculated with great accuracy and you are stopped out.
  6. BELOW ARE THE EMOTION WHICH NEED TO BE CONTROLLED BY HUMANS ITSELF.

EMOTIONS WHICH PLAYS US AND NEEDED TO BE CONTROLLED.

  1. COMMON EMOTION ONCE LOST THE TRADE, AND IN NEGATIVE OF RISKED MONEY.
  2. a)REVENGE TRADE – EMOTION WHICH WANTS YOU TO RECOVER LOST MONEY
  3. b)FOMO – FEAR OF MISSING OUT EVEN THE MINOR MOVEMENTS AND WANTING TO BOARD IN TO MAKE THE MONEY.
  4. c)ILLUSION/ANTICIPATION OF MOVEMENTS – ONCE IN NEGATIVE OUR EMOTIONS CHANGE UNKNOWINGLY AND MAKES US TO LOOK THE CHARTS OR OPPORTUNITIES WITH ILLUSIONS BY ANTICIPATING THE MOVEMENTS RATHER THAN LOOKING AT IT AS IT IS, USUALLY HAPPENS IN ORDER TO WANTING TO TURN POSITIONS TO POSITIVE FROM NEGATIVE.
  5. These are the emotions which has to be controlled at any cost in order to save our capital rather than loosing it.
  6. RUPEE SAVED IS RUPEE EARNED – WORK ON THE EMOTION OF CONTROLLING AND NOT LOOSING THE CAPITAL, MARKET GIVES THE OPPORTUNITY TO MAKE MONEY, IF NOT TODAY THEN TOMORROW.

BANK NIFTY OPTIONS TRADING

INTRODUCTION:

WHEN TO TRADE AND MAKE HUGE MONEY

  1. OPTIONS WAS INTRODUCED FOR THE PURPOSE OF HEDGING,BUT THESE ARE USED BY TRADERS TO MAKE MONEY INTRADAY OR POSITION TO UTILIZE INCREASE/DECREASE IN PREMIUMS.
  2. AS JESSE LIVERMORE SAYS HUGE MONEY IS MADE ONLY ON TRENDING DAYS, YET TRADERS WANT TO MAKE MONEY EVERYDAY.
  3. BEING PROFITABLE IS NOT SUCCESSFUL TRADING, BUT BEING PROFITABLE CONSISTENTLY IS.
  4. KEEPING EXAMPLE OF 2018, WE SAW 2 BEAR MARKETS AND 1 BULL MARKETS.
  5. a)BEAR 1 – FEB 2018 PNB ( NIRAV MODI FRAUD) DISCLOSED NPA’S
  6. b)BEAR 2-SEP 2018 NBFC
  7. a)BULL 1- JAN 2018 ATH 1
  8. b)BULL 2-JULY-AUGUST 2018 ATH 2
  9. THESE ARE THE 4 MONTHS WHERE THERE ARE HUGE TRENDS BULLS OR BEARS, THESE ARE THE MONTHS WHERE OPTION BUYERS HAVE TO BOARD IN AND MAKE HUGE MONEY AND STAY AWAY FROM THE OTHER RANGE BOUND MARKETS.
  10. OPPORTUNITY ALWAYS KNOCKS YOUR DOOR IF NOT TODAY THEN TOMORROW, MAKE SURE YOU ARE LIQUID ENOUGH AT THOSE TIMES TO MAKE MONEY. MY GURU SAYS ALWAYS HAVE #SKIN IN THE GAME – MARKETS DECIDE WHEN TO GIVE YOU AN OPPORTUNITY, IT IS ALWAYS BETTER TO BE PREPARED FOR THE OPPORTUNITY THAN STARTING THE PREPARATION WHEN OPPORTUNITY COMES.

TRADING STRATEGY:

  1. IN THE MONEY CALL/PUT OPTION
  2. CURRENT WEEK OPTION/ PREFERABLY NEXT(FAR) WEEK OPTION
  3. BUY 5 POINTS ABOVE PREVIOUS CLOSE FOR TARGET OF 25/50/100 POINTS
  4. KEEP SL OF 5 POINTS, IF SL HIT AND PRICE COMES AGAIN BUY AGAIN
  5. BUY OPTION WITH MAX 1 POINT SPREAD, NOT MORE THAN THAT
  6. WHEN TO BUY, BUY ONLY IF OPTION PRICE CE/PE CROSSES PREVIOUS CLOSE FROM LOW PRICE, BUY AT PC+5 P.

OPEN DRIVE DAYS:

  1. THESE ARE THE DAYS WHERE MARKET OPENS GAP UP OR DOWN WITH STRONG TREND THE PRECEDING DAYS.
  2. AS SOON AS GAP UP ALL OPTION PRICE WILL BE AT HIGH PREMIUM, NOW AT THE MONEY CE/PE SHOULD BE BOUGHT AS SOON AS OPEN AND SL BELOW PREVIOUS DAY CLOSE ON SPOT PRICE.
  3. ONCE THE PRICE CROSSES PREVIOUS DAY CLOSE OPTION POSITION TO BE CLOSED, THERE IS A RISK OF INCREASED PREMIUMS ERODING ONCE PRICE REACHES PD CLOSE, BUT THESE ARE THE MOST REWARDING DAYS IF THE TREND CONTINUES TARGET WOULD BE 1:2,3….