Simplified Technical Analysis with

Risk Management & Position Sizing

By- Rishikesh Singh

(Trainer, Investor, Trader & Co-Founder Equity4Life)

Free Telegram Channel ID: Equity4Life (t.me/equity4life)

www.equity4life.in
 DISCLAIMER
 I am NOT a SEBI certified Research Analyst or
Advisor.

 All the stocks discussed & examples taken in this

webinar is solely for educational purpose.

 Do not consider it as a buy or sell recommendation.

 Do your due diligence before investing in such stocks

and consult your advisor for the same.
 What we will
What I willbe covered
cover today
Today ! ?

 Understanding Price Action.

 Trend Following using Moving Average with Price Action.

 Risk Management & Position Sizing with real time examples

 Real time case studies based on Price Action + Moving

Average.
PRICE ACTION, Moving Average
Chart Types
 TYPE OF CHARTS

An up day is signified by a white This is the simplest chart format and is

/green (or empty) box. A down day is
represented by a black/red or shaded
box. The "box" shows the open to
close range. The "wick" displays the
full day’s range
generated by using a line to join the data
points.
The daily line chart is perhaps the simplest
of charts available, showing only the
closing price of each day.
PRICE ACTION
DCM SHRIRAM WEEKLY CHART
SPICE JET WEEKLY CHART
JAIN IRRIGATION MONTHLY CHART
TCS WEEKLY CHART
DLF WEEKLY CHART
 TREND
Price moves in trends “Trade with the trend” is the main strategy behind
technical analysis.
Once a trend has been Established, the future price movement is more
likely to be in the same direction as the trend than to be against it. Technical
analysts frame strategies based on this assumption only.
 Moving Averages
The moving average (often shortened to "MA" in our research) is one of the
most popular indicators and is used by technical analysts for a variety of tasks:

 to identify areas of support/resistance

 to determine the trend

Advantage :
1) They smooth the data and thus provide a clearer visual picture of the
current trend
2) M.A signals can give a precise answer as to what the trend is.

Disadvantage :
1) They are lagging rather than leading indicators but this should not be a
problem to longer term investors.
Main moving Average to follow : 20 , 50, 200.
Real Time Case Study

TATACHEM
POWERGRID
BRITANNIA
INOXLEISUR
PFC
ABBOTT
LT
Risk Management & Position Sizing
 RiskWhat
Management & Position
I will cover Today !Sizing
TOPICS TO BE COVERED IN RM & PS
 Focus on risk management ?
 How to lessen the impact of losing streaks and draw downs?
 Steps to ensure proper risk management
 How to calculate your position size

What should be the primary goal of trading ?

Making Profit…….. ?
The main object of trading should be to PROTECT CAPITAL.

NO CAPITAL, NO CAPITAL MARKET

We have to strike a balance between NOT TAKING RISK (Not
more then what you can afford to loose) & TAKING ENOUGH
RISK (So that is winning is meaningful).
What makes a successful trader
5%

15%

Psychology
Position Sizing
Setup
55%
Luck a.k.a Karma
25%
 POSITION SIZING
Position sizing is an important part of a trading system that tells
us how many shares to buy or sell per trade.

Position sizing help us to determine:

 How many shares to buy or sell for a particular trade .
 Your risk per trade and overall risk to your portfolio.
 Your expected returns to your portfolio.

The risk reward ratio (R:R) should always be greater than or equals to 1:2
 POSITION SIZE CALCULATOR

Step to calculating position size

Step 1: calculate your capital = share holding + cash
• Example: Rs. 10,00,000/-

Step 2: Determine your risk per trade?

• Risk refers to the maximum you can loss per trade.
• This is the maximum you can lose if your stop loss is hit.
• Never risk more than 1%-2% of your capital on any one investment.
• Once you have decided a percentage of your risk, always follow same % of
risk & do not change in between.
SPICEJET Weekly Chart
Step 3: Determine your position size for each investment

No of shares = % Risk Per Trade x Capital

Risk Per Share

Example : You want to go long on SPICEJET in cash market at

Entry rate of 93
Stop loss 72
Target at 150

How many shares can you buy (Taking 1% risk)

No of shares of SPICEJET = 1% X 10,00,000 = 10000 = 476 shares
21 21
Total investment in SPICEJET = 476 shares X 93 = 44285/-
Here position size is 44285/- Risk is 10000/- Reward 27130/-
 POSITION SIZING CALCULATOR
ACCOUNT SIZE 1000000 <-- Input Data
RISK PER TRADE 1.00% <-- Input Data
(Ex. 1% or 2%)

Number of Shares 476.1904762

ENTRY 93 <-- Input Data

STOP LOSS 72 <-- Input Data
TARGET 150 <-- Input Data

Total invested 44285.71429

Allocation (%) 4.428571429
RR ration 2.714285714 (Always make sure that RR is > 2)
Return on Invested Capital (%) 61.29032258
Return on Total Capital (%) 2.714285714
 Drawdown on Trading Capital % return to break even

10% 11.11%
20% 25%
50% 100%
70% 233%
90% 900%
100% Wiped out

 Larger the drawdown on trading capital, the more its is difficult to return to break even.
 So do not take more then 10% cumulative risk on your trading capital or else max 20%.
Important point to note:
 At any point of time one should not have more 10% of cumulative risk.
 Always diversified your investment into different sectors. For example if
you buy 10 stocks make sure they are from different sector. (Ex. Recently
we hade turmoil in NBFC sector.)
 Also make sure you have equal number of long & short position.
 Sometimes waiting for the right trade or right risk reward ratio is also a
best option. (NO TRADE IS ALSO A GOOD TRADING DECESION)
 HONOR YOUR STOP LOSS.
 Do not get affected by continuous loosing trades
 Outcome of all the trades will be random i.e. profit & loss never follows a
fix pattern.
 Trading Without
Risk management
is Injurious to your
Trading (WEALTH)
& Mental capital

 You can recover the loss made in your trading capital but recovering
the loss of your mental capital is very difficult.
 In order to survive in any competitive field protection of mental
capital is must.
 Protecting mental capital means not getting frustrated with
continuous loss making trades & thus not effecting subsequent trades.
 Never Stop LEARNING,
because MARKET never stop TEACHING.
 THANK YOU
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Twitter Handle: @Rishikesh_ADX

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Website: equity4life.in