Nifty Futures Risk Management

By | February 13, 2013

Many traders whom i have interacted during my trading course sessions and in other forums have no idea about the returns they expect out of market. Having an expectation will help you in trading as you have some goals to achieve and you will work to reach them. If one goes for Fixed deposit you have an expectation that i will get an assured 8% from my investment. If some one starts a business he will have an estimate than my annual returns should be 15-20% on yearly basis. Similarly we need to have a goal what kind of returns we are expecting out of our trading. As trading is full of risk, so my desired instrument is Nifty future which is a low volatile and high volume instrument. So if an average trader have an expectation of 50% return on its capital lets see how much points one needs to capture to achieve the target.

 

 

 

Nifty Future Lot size :50

Current Nifty value:5970

Nifty contract Value = 50 * 6080 = Rs 2,98,500

Approx margin required = Rs 30000

Cover for draw downs = 2 times margin = Rs 60,000

Total capital required = Rs 90,000

Desired annual gains = 50% on capital = Rs 45,000

Annual gain in points = 900.

Per month = 75

Do note this 75 points are excluding brokerage and other charges.

 

So all looks good till now achieving 75 points in Nifty does not looks like an herculean task. Lets talk about the most hated thing in trading Stop Loss. 

Stop loss will depend on your trading style and time frame you trade.If you are Intraday trader  thumb rule for say intraday do not keep sl more than 20 points as you will be trading using 5 or 15 mins charts. Positional  traders who use daily or weekly charts should not keep stop loss more than 50 points. Seasoned traders should be quiet aware of the facts traders will go through a time where he/she will face a continue run of losses. To avoid such scenarios its always to keep a monthly draw down limit like 15% of trading capital if you losses stop trading for that month analyze yourself and start again with fresh energy. Trading with a proper trading system with risk management and position sizing will help traders to make profit consistently. We teach these system in our trading courses. Click on Link to know more details.

 

 

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