Position Sizing: The Holy Grail
You can have the best strategy in the world, but if you bet too big, you will go bankrupt.
The 2% Rule
Never risk more than 2% of your Total Capital on a single trade.
Example: Capital = ₹1,00,000.
Max Risk allowed = ₹2,000.
If your Stop Loss is 20 points (on Nifty Lot size 65), that's ₹1,300 risk per lot.
Max Position Size: 1 Lot (approx). Not 10.
Why it Saves You
If you risk 2%, you can lose 10 trades in a row (Drawdown) and still have 80% of your capital left to fight back.
If you risk 20%, 5 bad trades and you are finished.
*Disclaimer: NSE/BSE frequently revise Lot Sizes and Expiry Days (e.g., SEBI Circulars 2024/2025). Always check the latest circular on nseindia.com before trading.
Standard Disclosure: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. The content provided here is for educational purposes only and does not constitute financial or investment advice. AlgoStraddle Academy is not a SEBI registered investment advisor. Trading options involves high risk and capital can be lost.