How to Stop Losing Money in trading

By | December 17, 2012

Nifty Futures Moved from 5500 to 6000 and back from 6000from 5870  today. How many points were you able to made out of it.

When I interact with my readers on Mail or Phone I feel most of the people loose money for  reasons as mentioned

1. They are very rigid in there views — They have made there minds Nifty will go down so even if it goes up keep holding the positions. Keep on averaging your loosing trade till you are exhausted of your cash

2. Most of people Trade in Naked Options — A reader of mine took 10 Lots of 5500 CE@104 and he is still holding on a hope of recovering his money. In a single trade he has lost 70% of its capital.

Please Stop trading in Naked Options

If you are unable to understand the trend of market.Options looks rosy till you hear stories of someone buying at 10 rs and selling at 100. But did some one ever told u he bought at 100 and it went till 0(ZERO).

When u experience it yourself after loosing your hard earned money than you will understand the same.

 

One of the major objectives of being a successful trader is to stay in the game so that probability can work its magic.


3. Trading should always be done with a capital that you are willing to loose if trade goes down. Loosing that capital should not effect your financial life. If you trade with money you will need you are bound to loose that money because you will never be trading with a free mind.Always in a Fear that you can loses your money.

 

To trade with little fear of losing money, you need to feel enough of the wealth effect that losing trading capital doesn’t faze you at all.

 

Suppose you have Rs 2,50,000 as your trading capital. As a general rule, most traders will not trade more than 5% of the trading account on any one trade and will establish a maximum trading account drawdown limit of about 40%. In this case, a trader would not risk more than Rs 1,2500 on any one trade nor draw the account down below Rs 1,50,000. Typically, when a draw down limit is reached, the trader stops trading and analyzes what is happening.

If your trading plan calls for achieving a 30% annual return on your trading capital, your trading activities would need to generate Rs 75000 before taxes in trading gains. That works out to be Rs 6250 per month in gains. Let’s say your trading system can normally produce a 65% win-loss record. If you plan to trade at least three times per week, that would be 12 trades per month. With your estimated win-loss ratio of 65%, that means about 8 winning trades per month. But that also means that you will probably have 4 losing trades per month. If you set your stop loss at 4% of any trade (Rs 12500), then you would lose about Rs 500 plus any transaction fees; therefore, you would lose about Rs 3250 on losing trades.
That means you need to have about Rs 8250 in gains on the 8 trades for an average gain of Rs 103 per wining trade to achieve the 30% ROI. That is a profit target of 8.24%. So before you enter any trade, you will be looking for at least an 8.24% gain and a stop set loss set at 4%. You never back off of you stop loss and you decide whether or not to let profits run after hitting your profit target.

 

Establishing your risk profile

What do you prefer

1. To make a trade that will give you a potential return of 100% but with only a 10% chance of winning

2. To have a trade that would yield a 15% gain and have a 60% chance of winning?

For 1 Type of trader sorry gambler 😛 Naked  Options are the best route.

For 2 Type of Trades You would require a trading system with  a fairly consistent win-loss ratio of 65%-75%.

Will you trust your own analysis or will you lean heavily on recommendations of others? If you have such a good system.

SO guys develop a system and Start Trading with the same.

 

 

If you require Professional Course to Learn and Start Trading with Intraday and Positional System do contact me@09985711341.

I take 1-1 Session in explaining all these concepts and How to use the Trading  system for your trading.

 

 

 

13 thoughts on “How to Stop Losing Money in trading

  1. RAVINDRAN

    Sir
    i am retired.
    I am living near Chennai
    Can you guide me specifically for F & O.
    Pl. send your already offered course details with tariff.
    Regards.
    Ravindran
    Mob: 8903567343

  2. Bramesh Post author

    Hi Sir,

    I have sent the details.

    Rgds,
    Bramesh

  3. Vikas

    Hi Bramesh;
    Can you please let me know the details of your course and fees?
    Regards;
    Vikas

  4. Bramesh Post author

    Dear Maulii,

    Sent you the details.

    Rgds,
    Bramesh

  5. EASWARAN

    Dear Bramesh
    thanks for your offer, of teaching
    where are you placed, are you in bangalore
    i would love to learn and also how much it will cost
    thanks
    easwaran
    bangalore

  6. Bramesh Post author

    hi Hitesh Sir,

    I truly agree with u,People trade in options to get rich quickly.

    They trade in assumption that they can make a fortune in a trade but forget to understand they can loose shirts and pants trading the same.

    Thanks again for ur experts views

    Rgds,
    Bramesh

  7. hitesh jethva

    DEAR BRAMESH, IF I AM NOT WRONG OPTIONS ARE FOR SAFETY AND HEDGING THE POSITIONS, I CANT UNDERSTAND WHY PEOPLE PLAY ONLY OPTIONS. OPTION IS NOT A INSTRUMENT TO MAKE MONEY

  8. Vishal Nadar

    I would be interested in learning the trading system. I would like to know where you are located and the structure of the course and the fees for the same. You make mail me at vishalnadar212@gmail.com

  9. BALA

    It is nice reading this message. I apppreciate having a reliable trading system that you recommend. before that i would like to learn the
    art of trading. pl. guide me. I have lost many a bugs knowingly or unknowingly. but ofcourse not as a gambler or emotional trader

  10. Anon

    Can you also give an intro on F&o? I like your way of explaining things 🙂

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