Saturday, October 16, 2010

HOW TO DECIDE TRADING QUANTITY.

This is the most frequently asked question by all day traders as you cannot move original Stop-loss level to any other levels. Than its become very difficult to decide in how much quantity you should trade. Normally 2-3% risk of your trading capital treat as good trading risk.

Lets take a case that your trading capital is Rs. 50000. as per 2% calculation you should take only Rs. 1000 risk per trade. Now question comes that how much quantity should I trade so that if stop-loss triggers than I must loose only 1000 Rs per trade. Infect Your trading quantity depends on your risk ability. Means your risk ability will decide in how much quantity you should trade. For Example you got tips to buy SBI at 2000 with stop loss of 1950. And your risk ability is Rs. 1000 per call. Than how much quantity u should buy of SBI??? Confused????

Quantity=Risk Ability/(buy price- stoploss price)
=1000/(2000-1950)
=20
That means should purchase 20 shares of SBI so that if sl trigger than you will loose only Rs 1000 as you had decided earlier.

Let’s take another example of unitech. For example you got a call to buy unitech at 70 Rs with stop loss of 68.50 and your risk ability is Rs 1000, than how much quantity you should buy unitech. Just calculate like this-

=1000(70-68.50)
=666.66
~666
Means you should buy only 666 shares of unitech. In any case if stoploss trigger in unitech than you will loose only 1000 Rs

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