• What difference would it make if a stock moves by 300%?
• But then, what if you had only 1% capital allocation?
• Despite the stock performing spectacularly, your account won't reflect the same, due to small sizing.
The most valuable aspect in trading you aren't using:
POSITION SIZING
Sizing is the key, you'll make big money only if you own a significant size without compromising on risk.
Here are 10 of them, and they are for free: 🧵
Collaborated with @AdityaTodmal
• What difference would it make if a stock moves by 300%?
• But then, what if you had only 1% capital allocation?
• Despite the stock performing spectacularly, your account won't reflect the same, due to small sizing.
1. Fixed absolute Rupee amount that one is willing to risk.
2. % risk of the total capital.
3. Basis the edge.
Risk tolerance should be taken into consideration while determining appropriate position sizing.
• Eg: Total capital is Rs. 10 lacs and the max risk per trade is Rs. 7500
• Lets say a stock is trading at 1200 and your SL is 1120 (i.e. your risk per unit us Rs. 1200-1120 =Rs. 80)
• Optimum qty: 7500/80 = 94 units
• Lets say you want to risk 1% of the total capital on each trade.
• Considering the total capital of Rs. 10 lacs, you shall risk Rs. 10,000 i.e. 1% of 10lacs on each trade.
• Quantity to be traded/invested calculation remains the same.
• CMP: 1100
• SL: 1085
• If your max risk per trade is 1% of the total capital, this setup would allow you to allocate 73% of your total capital and still be within your 1% risk limit.
• CMP: 800
• SL: 791
• If your max risk per trade is 1% of the total capital, this setup would allow you to allocate 88% of your total capital and still be within your 1% risk limit.
• To go for size without risking huge, you need to reduce your stop.
• To avoid getting stopped out on such small SL's, you need to bet only on proven edges.
• Examples:
- Triangle BO has the highest winning streaks, so go for 2% risk per trade on this edge.
- Volatility Contraction Pattern (VCP): is the next best, so can go for 1.5% risk per trade.
- Inside Bar, works for 50% of the time, so risk 0.75-1%.
• Conviction on your edge drives sizing.
• To size based on your edge, you need to know what works for you and what doesn't.
• To understand what works for you you should dive into your trading journal.
• Position sizing is not just the only key factor to be successful in this game.
• The important factors are to know when to go big, when to stay small and when to fold✂️
“Rule 1: If you don’t bet, you can’t win
Rule 2: If you lose all your chips, you can’t bet”
https://t.co/TgUggw9R2d
7 effective trading journal tools that you can use to make better decisions (instead of just maintaining a trading journal):\U0001f9f5
— Nikita Poojary (@niki_poojary) June 18, 2022
Collaborated with @AdityaTodmal
If you did, share it with a friend!
Also show some encouragement for this thread, if its valuable to you.
Hop back up to retweet the first tweet
See past threads here:
@AdityaTodmal
&
@niki_poojary
More from Nikita Poojary
Over the past month, we have shared 15 powerful threads:
These threads cover topics like:
• Trading
• Psychology
• Strategies (both directional & non-directional)
• Investing
• Free tools for traders
• Free technical analysis courses, etc.
Here they are all in one place!
1/ Top 26 threads from the past 26 weeks of year
2/ How to build your Twitter
3/ The most simple set-up of Subasish Pani -
4/Free valuable tools that helps you to trader better!
These threads cover topics like:
• Trading
• Psychology
• Strategies (both directional & non-directional)
• Investing
• Free tools for traders
• Free technical analysis courses, etc.
Here they are all in one place!
1/ Top 26 threads from the past 26 weeks of year
Twitter is like a free university.
— Aditya Todmal (@AdityaTodmal) July 1, 2022
However, 98.8 percent of users missed out on the best content on this platform.
Here are the top 26 threads from the past 26 weeks of 2022: \U0001f9f5
Collaborated with @niki_poojary
2/ How to build your Twitter
I started at 0 and grew to 109,000 followers
— Aditya Todmal (@AdityaTodmal) July 3, 2022
Here's how we use Twitter and why:
Collaborated with @niki_poojary
THREAD \U0001f9f5 \u2193
3/ The most simple set-up of Subasish Pani -
Subasish Pani revealed the most simple, yet successful strategy: 5EMA set up!
— Nikita Poojary (@niki_poojary) July 3, 2022
Here is a thread of 23 video clips on the 5EMA set-up that will save you hundreds of hours and available to you for no cost!
5EMA set-up: \U0001f9f5!
Collaborated with @AdityaTodmal
4/Free valuable tools that helps you to trader better!
There are so many tools related to trading.
— Aditya Todmal (@AdityaTodmal) July 9, 2022
But very few provide any real value.
Here are 7 of the most valuable FREE Tools you're not using (but should be): \U0001f9f5
Collaborated with @niki_poojary
In the month of September 2022, we have shared 11 threads, which includes:
• Inside Bar set up
• Free option selling course for beginners with small capital
• List of best books on technical analysis and chart reading
• How to reduce your tax liability
and much more 🧵
1/ Powerful Concepts that every trader should
2/ List of Books based on Technical Analysis that will help you
3/ Free options trading courses from 10 different
4/ Points to know for beginners in
• Inside Bar set up
• Free option selling course for beginners with small capital
• List of best books on technical analysis and chart reading
• How to reduce your tax liability
and much more 🧵
1/ Powerful Concepts that every trader should
10 Powerful concepts every trader should know (to become better) and more: \U0001f9f5
— Aditya Todmal (@AdityaTodmal) September 7, 2022
Collaborated with @niki_poojary
2/ List of Books based on Technical Analysis that will help you
Some people think technical analysis is useless. But we use technical analysis in all our trades.
— Nikita Poojary (@niki_poojary) September 3, 2022
Here's a list of 13 technical analysis books to help you learn and grow: \U0001f9f5
Collaborated with @AdityaTodmal
3/ Free options trading courses from 10 different
10 excellent sources that offer FREE options trading courses (and which will advance your career): \U0001f9f5
— Aditya Todmal (@AdityaTodmal) September 16, 2022
Collaborated with @niki_poojary
4/ Points to know for beginners in
Things I know after Trading for 5 years that I wish I knew in my 1st year: \U0001f9f5
— Aditya Todmal (@AdityaTodmal) September 17, 2022
Collaborated with @niki_poojary
More from All
You May Also Like
I’m torn on how to approach the idea of luck. I’m the first to admit that I am one of the luckiest people on the planet. To be born into a prosperous American family in 1960 with smart parents is to start life on third base. The odds against my very existence are astronomical.
I’ve always felt that the luckiest people I know had a talent for recognizing circumstances, not of their own making, that were conducive to a favorable outcome and their ability to quickly take advantage of them.
In other words, dumb luck was just that, it required no awareness on the person’s part, whereas “smart” luck involved awareness followed by action before the circumstances changed.
So, was I “lucky” to be born when I was—nothing I had any control over—and that I came of age just as huge databases and computers were advancing to the point where I could use those tools to write “What Works on Wall Street?” Absolutely.
Was I lucky to start my stock market investments near the peak of interest rates which allowed me to spend the majority of my adult life in a falling rate environment? Yup.
Ironies of Luck https://t.co/5BPWGbAxFi
— Morgan Housel (@morganhousel) March 14, 2018
"Luck is the flip side of risk. They are mirrored cousins, driven by the same thing: You are one person in a 7 billion player game, and the accidental impact of other people\u2019s actions can be more consequential than your own."
I’ve always felt that the luckiest people I know had a talent for recognizing circumstances, not of their own making, that were conducive to a favorable outcome and their ability to quickly take advantage of them.
In other words, dumb luck was just that, it required no awareness on the person’s part, whereas “smart” luck involved awareness followed by action before the circumstances changed.
So, was I “lucky” to be born when I was—nothing I had any control over—and that I came of age just as huge databases and computers were advancing to the point where I could use those tools to write “What Works on Wall Street?” Absolutely.
Was I lucky to start my stock market investments near the peak of interest rates which allowed me to spend the majority of my adult life in a falling rate environment? Yup.
1/ Some initial thoughts on personal moats:
Like company moats, your personal moat should be a competitive advantage that is not only durable—it should also compound over time.
Characteristics of a personal moat below:
2/ Like a company moat, you want to build career capital while you sleep.
As Andrew Chen noted:
3/ You don’t want to build a competitive advantage that is fleeting or that will get commoditized
Things that might get commoditized over time (some longer than
4/ Before the arrival of recorded music, what used to be scarce was the actual music itself — required an in-person artist.
After recorded music, the music itself became abundant and what became scarce was curation, distribution, and self space.
5/ Similarly, in careers, what used to be (more) scarce were things like ideas, money, and exclusive relationships.
In the internet economy, what has become scarce are things like specific knowledge, rare & valuable skills, and great reputations.
Like company moats, your personal moat should be a competitive advantage that is not only durable—it should also compound over time.
Characteristics of a personal moat below:
I'm increasingly interested in the idea of "personal moats" in the context of careers.
— Erik Torenberg (@eriktorenberg) November 22, 2018
Moats should be:
- Hard to learn and hard to do (but perhaps easier for you)
- Skills that are rare and valuable
- Legible
- Compounding over time
- Unique to your own talents & interests https://t.co/bB3k1YcH5b
2/ Like a company moat, you want to build career capital while you sleep.
As Andrew Chen noted:
People talk about \u201cpassive income\u201d a lot but not about \u201cpassive social capital\u201d or \u201cpassive networking\u201d or \u201cpassive knowledge gaining\u201d but that\u2019s what you can architect if you have a thing and it grows over time without intensive constant effort to sustain it
— Andrew Chen (@andrewchen) November 22, 2018
3/ You don’t want to build a competitive advantage that is fleeting or that will get commoditized
Things that might get commoditized over time (some longer than
Things that look like moats but likely aren\u2019t or may fade:
— Erik Torenberg (@eriktorenberg) November 22, 2018
- Proprietary networks
- Being something other than one of the best at any tournament style-game
- Many "awards"
- Twitter followers or general reach without "respect"
- Anything that depends on information asymmetry https://t.co/abjxesVIh9
4/ Before the arrival of recorded music, what used to be scarce was the actual music itself — required an in-person artist.
After recorded music, the music itself became abundant and what became scarce was curation, distribution, and self space.
5/ Similarly, in careers, what used to be (more) scarce were things like ideas, money, and exclusive relationships.
In the internet economy, what has become scarce are things like specific knowledge, rare & valuable skills, and great reputations.
I think a plausible explanation is that whatever Corbyn says or does, his critics will denounce - no matter how much hypocrisy it necessitates.
Corbyn opposes the exploitation of foreign sweatshop-workers - Labour MPs complain he's like Nigel
He speaks up in defence of migrants - Labour MPs whinge that he's not listening to the public's very real concerns about immigration:
He's wrong to prioritise Labour Party members over the public:
He's wrong to prioritise the public over Labour Party
One of the oddest features of the Labour tax row is how raising allowances, which the media allowed the LDs to describe as progressive (in spite of evidence to contrary) through the coalition years, is now seen by everyone as very right wing
— Tom Clark (@prospect_clark) November 2, 2018
Corbyn opposes the exploitation of foreign sweatshop-workers - Labour MPs complain he's like Nigel
He speaks up in defence of migrants - Labour MPs whinge that he's not listening to the public's very real concerns about immigration:
He's wrong to prioritise Labour Party members over the public:
He's wrong to prioritise the public over Labour Party
1/OK, data mystery time.
This New York Times feature shows China with a Gini Index of less than 30, which would make it more equal than Canada, France, or the Netherlands. https://t.co/g3Sv6DZTDE
That's weird. Income inequality in China is legendary.
Let's check this number.
2/The New York Times cites the World Bank's recent report, "Fair Progress? Economic Mobility across Generations Around the World".
The report is available here:
3/The World Bank report has a graph in which it appears to show the same value for China's Gini - under 0.3.
The graph cites the World Development Indicators as its source for the income inequality data.
4/The World Development Indicators are available at the World Bank's website.
Here's the Gini index: https://t.co/MvylQzpX6A
It looks as if the latest estimate for China's Gini is 42.2.
That estimate is from 2012.
5/A Gini of 42.2 would put China in the same neighborhood as the U.S., whose Gini was estimated at 41 in 2013.
I can't find the <30 number anywhere. The only other estimate in the tables for China is from 2008, when it was estimated at 42.8.
This New York Times feature shows China with a Gini Index of less than 30, which would make it more equal than Canada, France, or the Netherlands. https://t.co/g3Sv6DZTDE
That's weird. Income inequality in China is legendary.
Let's check this number.
2/The New York Times cites the World Bank's recent report, "Fair Progress? Economic Mobility across Generations Around the World".
The report is available here:
3/The World Bank report has a graph in which it appears to show the same value for China's Gini - under 0.3.
The graph cites the World Development Indicators as its source for the income inequality data.
4/The World Development Indicators are available at the World Bank's website.
Here's the Gini index: https://t.co/MvylQzpX6A
It looks as if the latest estimate for China's Gini is 42.2.
That estimate is from 2012.
5/A Gini of 42.2 would put China in the same neighborhood as the U.S., whose Gini was estimated at 41 in 2013.
I can't find the <30 number anywhere. The only other estimate in the tables for China is from 2008, when it was estimated at 42.8.