April 6, 2014

Example of risk management

RANBAXY... an interesting trade. This stock was not on my watchlist but someone at my brokerage shorted when it was up 10%. According to him, the 10% move was not warranted and so he shorted.

I saw the EOD charts and immediately bought delivery shares... Now the stock is up 14% from my entry level and I am still holding. Needless to say the gentleman who shorted is still short and is likely to average or book loss.

My ROI is 14% in 3 days!!!

Now RANBAXY has been a volatile stock for some time and there is still a small chance I can lose money. But now I have increased by SL to well above my purchase price so unless the stock loses 20% in a day, my trade should be fine.

How much quantity did I buy? only 5 shares. Yes, this is a laughable but if you can learn to trade like this, you will automatically manage your risks and you will eventually make money. Always buy a quantity you can sleep peacefully with and have no worries if your internet does not work the next day.

If you are worried about your position, then something is certainly wrong with the way you are trading.

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