# What is R? how do you calculate commission?

I have received some DM’s regarding,

What do you mean by "commisions come around ( 0.16 * R ) " ? What is ‘R’ ? How do you calculate it?

@Mahesh_Dudhnale

R is risk unit per trade.
if R is 1000rs, then each time you take a trade, If you lose 1R, then you lose 1000 rs. 2R you lose 2000 rs.

and the cost of taking each trade comes to around 0.16R

whether you profit or loss, you are setback by 160 rs, incase 1000rs as R value.

## this is for equity cash market.

so, to make a living in the market, you need to mind the commissions. What you see on screen is mtm profit, and depends on how many trade you took to arrive. That’s one of the reason, many people see profit on screen, but as contract note arrives, you are left with a peanut or a loss. The more trade you take, buy-sell, sell-buy, the more -0.16R.

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So, 1:1 will translate into

-1.16 loss and 0.84 win.

1160 rs loss
840 win.

which ll never translate into money, unless, you have a win rate of 80% and above. which maybe be possible for a short period of time.

That’s one of the many reason why you need bigger wins. That’s where psychology comes into play.

But most will look for accuracy and keep hunting strategies.

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This is a very important insight @ronin_sha

Thanks for sharing this.

I always used to carry the following philosophy :

There are 4 scenarios

1. Big gain
2. Small gain
3. Small loss.
4. Big loss.

As long as we have 3 of them, it’s all good. 4th one is the one that we should consciously avoid and that’s it. The chances of blowing the account up decreases considerably.

You mean, for every trade worth 1000 rupees, there will be 160 rupees commission, so if we win we will get only 840, and if we lose it will be 1160?

maybe more or less.

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Also, if we trade with a zero brokerage house then we save on 0.16R ( govt / exchange levies still remain).

Besides if we choose a brokerage house with zero a/c opening fee, zero AMC, zero API charges we save a lot over the long term as well.

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AKA Dhan or Finvasia?

? you have already figured that out.

Not just figured, reaping benefits too

True anything that cut costs, reflects bigger in the longer term.

Thanks a lot @ronin_sha for answering my query.

Yes! in stocks we cannot keep R:R less than 1:2

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