Thread by @NiveshakBharat

#PositionSizing

🟢 It is an Intrinsic Principle of Money Management
🟢 It is a Key driver of a Trader's Emotions & Psychology
🟢 Yet least understood part of Trading & Investing Process

🛑 Objective
🟢 It ensures Consistent Profitability in Long Term, once practiced

(1/n)

🟢 Minimizes chances of Big Draw-downs in case of Gap-Ups & Gap-Downs
🟢 Ensures entire Account is not blown in a Single Trading Session, when one is leveraged too & Trade goes in Opposite Direction
🟢 Ensures Survival for Longer Duration in Markets

(2/n)

🟢 Ensures Psychological Comfort according to an Individual's Risk Profile, if followed sincerely

🛑 What is it?
🟢 It tells how much should I risk in a Trade or how big any Particular Trade should ideally be
🟢 It's a Bridge between Money Management & Risk Management

(3/n)

🛑 How is it Calculated?
3 Key Parameters have to Pre-defined & made available
🟢 Account Size or Trading Capital
🟢 Percentage of Risk Per Trade (How much % of that Account Size, am I willing to Risk, in a Single Trade)
🟢 Stop-Loss

(4/n)

🟢Risk Per Trade means that if Trade were to go in our Opposite Direction, what is that Pre-Planned Risk Point, where we will exit the Position, to avoid further BIG LOSSES
🟢 STOP LOSS = (Planned Entry Point - Planned Exit Point)

(5/n)

🛑 Calculation Procedure
🟢 Position Sizing = RISK PER TRADE/SL

where RISK PER TRADE = (ACCOUNT SIZE * % RISK of ACCOUNT SIZE)

#NiveshakNuggets

#BharatSahni

(6/n)