Hello everyone, Im a total new beginner and have been trading for last 1 year only in equity. CNC, buying long and selling it when in profit. I am planning to start intraday. I have no knowledge futures/options etc. I plan to trade only stocks. So when I entered MIS, I see the that a stock of BANKBARODA is available for 25.32rps as compared to 126 CMP. I have two questions. Please clarify. i have watched so many videos on internet and am still clueless.
Do we primarily take intraday trade so that we can buy more shares as compared to the cmp, This way we can buy more shares and make more profit. Apart from not leaving the money in the stock market overnight.
Secondly. position sizing. my risk is 1% of my capital. for example, 100/- for 10,000capital. I was easily able to calculate my position sizing using trading view indicator. No matter what my stoploss is , the risk always remained same. Now when I enter intraday, I’m totally confused. yesterday I had a trade.
Stock price- 123.35 , TARGET- 126.15 STOPLOSS - 0.35
as per cnc, i could only buy 285quantity in a capital of 10,000 with SL of 100 rps. So profit was 800rps.
But wanted to buy more shares from using leverage. This was an excellent trade with very good Risk reward. But i didnt know how many shares to buy intraday while still keeping SL at 100rps. BANKBARODA gave a leverage of 5x
Am I missing something. I have watched countless youtube videos. intraday live videos. but people seem to be entering numbers of shares as per their wish. Can anyone please guide me about position sizing intraday using leverage.
Leverage only allows you to trade more, you are not forced to do so.
Focus on risk. So if 1% per trade is good for you, then stick to that.
Previously, we used to get crazy leverage of even 50x. That does not mean position size will be 10x.
Risk% should be taken based on historical max dd, so that you can try to keep your drawdown manageable.
So if max dd was 10x at 1% risk per trade, that’s slightly less than 10% - a good number. But if max DD was say 60x, then 1% per trade is way too much risk. Also expect future drawdown to be worse than past. 2x seems like a good multiple.
As a beginner , you need to work on your analyzation . Don’t be in a hurry to use leverage . Leverage excites us to make more profit with less money . Leverage is that type of tool if not handled carefully , it can work against your hard earned money . Firstly increase your winning probability by gaining some experience through spending more and more time with charts to understand the behavior of stock market .
My suggestion to you is, as you are beginner, forget about the numbers completely and experience what intraday feels like, both winning and losing. See if you can take it mentally and by heart. What kind of emotions you go through. They say that losing gives more sadness than the joy that winning brings. So see if you can handle the emotional part, see if you handle the speed at which you have to take the decisions. Once you have understood yourself, then think about margin, target, stop loss etc.
Say for example, I don’t mind a loss of 10,000 when I invest in a stock, but when I see eve 100 rupees as intraday loss, I feel sad, because it is too fast and too up and down for me emotionally. I do know that if I spend more time, practice more, I will get better, but the rollercoaster ride, the ups and down in such a small time was hard for me. Of course when I win, I am happy, but when I lose I feel very sad. So I do it occasionally.
My point is, forget about the numbers for a few sessions, just do it with a very small capital, just a few shares, and experience the emotional journey first.
As everyone is saying, don’t take too much risk as a beginner. You are going to lose, everyone does. So best to trade with small capital in learning phase - capital that you know you will lose a decent chunk of.
Drawdown means how much % you give back from top during bad phases when your system is not working. This happens to all, its unavoidable. Ex - You start with 10000 capital and some wins increase it to 11000. Then you lose some and your capital becomes 10500. DD here is 500Rs - about 4.5% from 11000. Every system goes through good and bad phases. We need to find the worst phases historically and then adjust position size so that we only risk say 10-15% max DD ( or whatever you are comfortable with).
Leverage does not come into equation in position sizing as such. It can only act as a barrier if leverage is lower that what you can use while managing risk. If its more, then we don’t have to use all of it.
I’ll try to educate you a bit. As you said you are in the market since a year. So CNC You will be able to buy any company share by paying full amount. Let’s say, For example Bank Baroda Approximate price is 135. You have safe advantage that you don’t need to worry about losses. You can wait or hold the stocks as long as you want. Years, decades.
Where as, Leverage product, MIS In this case, positions will be auto squared of from zerodha at 3:20 irrespective of your profits or losses. If, Bank Baroda Trading at 150 or 120 or any price. It will be squared off.
Using Leverage you get a chance to buy 5 times more. Prescribed stocks ( only limited stocks available for mis)
If your question is how to calculate easily? Just use 5x in calculator. If you have 10000 just multiply by 5. Which is 50000 and then divide with stock price which ever stock you want to buy.
firstly, thank you to all, taking your time to help me! I have read carefully all that has been suggested above and 100% agree.
I have been doing paper trading, if that’s what its called. About last 6months. Spending time watching market, taking position hypothetically and noting it in my book . All the details of the trade , why I took it etc and exactly what happened at the end of the day. Some trades have hit my stop loss but overall, I have been in profit hypothetically. I also took about 5 real trades on intraday basis in last few months, just buying 1 share. Just to experience the emotions of involving actual money(intraday). So far, I feel am getting better at my calls but still not there yet. I plan to watch till the year end before I actually jump in with my 10k capital
Anyways, coming to my original question-
Stock price- 123.35
TARGET- 126.5 (gain of 3.15rps)
STOPLOSS - 122.95 (SL of 0.40paisa)
capital is 10000/-.
Risk is 1% of 10k
Trading view long position tool shows I can buy 250shares. if trade is successful , I gain 787.5rps and if lose, I lose 100rps. ( as decided, 1% of my capital)
so when I go to place my order on MIS, I place order for 250shares? is that right?
My apologies if I’m bugging you all. I just want to confirm that I have understood this.
Trading view has International values. I dont know about their value system. Specially paper trading. I can surely tell you, Trading view Paper trading position system is Forex style i guess . Just ignore that.
Follow as i say or mention what exactly you want? And your stop loss is really sick. Keep minimum 2% away from LTP.
thank you! but in this case, the stop loss will be 1%? so for 50k, stop loss will be 500?
yes, I did CNC. buy low and sell when in profit. holding for many days. Now, i want to do intraday, MIS. I only got confused when stock ended up showing as 25rps when stock price was about 123rps . I have never done MIS, so i didnt know what was happening.
So lets say i can buy more using 5x leverage, in this case, 50,000rps hypothetically, will my loss be 1% of 50k, thats 500 if i buy the X shares as you said above ( x being 50000/stockprice)