Effective money management is key to controlling risk, protecting capital, and maximizing profits in trading. Below are essential strategies with practical INR-based examples to help you trade wisely.
Effective money management is key to controlling risk, protecting capital, and maximizing profits in trading. Below are essential strategies with practical INR-based examples to help you trade wisely.
Limit your risk to 1-2% of your total capital per trade to ensure long-term sustainability.
Example:
Adjust your trade size based on capital and stop-loss levels.
Example:
Always set a Stop Loss (SL) to minimize losses and follow a Risk-Reward Ratio (RRR) of at least 1:2.
Example:
Spread your investments across different sectors to reduce risk.
Example:
Make decisions based on strategy, not emotions.
Example: If a stock drops 5%, avoid panic selling. Stick to your predefined stop-loss and trading plan.
Focus on consistent, long-term returns instead of chasing high daily profits.
Example: Instead of expecting 20% daily returns, aim for 10-15% annually to prevent overtrading and unnecessary risks.
Tracking your trades helps analyze performance and refine your strategy.
Example:
| Stock | Buy Price | Sell Price | Profit/Loss |
|---|---|---|---|
| Infosys | ₹1,500 | ₹1,600 | ₹100 per share |
Leverage amplifies both profits and losses—use it wisely.
Example: A broker offering 10x leverage allows ₹10,000 to control stocks worth ₹1,00,000. High leverage increases risk—use only if you are experienced.
Avoid trading in highly volatile market conditions.
Example: Avoid trading during:
Stick to a well-defined trading plan and withdraw profits periodically to secure gains.