Risk a fixed fraction
The single most important skill isn't picking entries — it's sizing. The standard rule: risk a small fixed fraction of your capital per trade (often 1%). On ₹5,00,000 that's ₹5,000 of risk. Your stop distance then sets the number of shares: shares = risk ÷ (entry − stop).
This makes every trade cost the same when wrong, regardless of the stock. A tight stop lets you buy more shares; a wide stop, fewer. Volatility (ATR) feeds straight into this.
Why it's survival, not timidity
A string of losses is inevitable. Risking 1% per trade, ten losses in a row costs ~10%; risking 10% each, they wipe you out. Position sizing is what keeps you in the game long enough for your edge to play out — the maths of ruin is unforgiving and doesn't care how good the chart looked.
The sizing formula
Risk a small fixed fraction of capital per trade — commonly 1%. On ₹5,00,000 that's ₹5,000. Your stop distance then sets the share count: shares = risk ÷ (entry − stop). Entry ₹1,000, stop ₹950 → risk-per-share ₹50 → 100 shares. Change nothing but the stop and the size changes automatically; a tighter stop buys more shares, a wider one fewer, and every trade still risks the same ₹5,000.
Heat, correlation and survival
Real risk is at the portfolio level, not the single trade. Five 'independent' longs in the same sector are really one big position when that sector drops together — count correlation as exposure. Watch total 'heat' (sum of open risk), and remember the maths of ruin: ten 1% losses cost ~10% and you trade on; ten 10% losses end the account. Sizing is the one lever fully in your control, and it's where survival is won or lost.