Basic risk limits

Risk per trade: Limit loss on any single position to 1–2% of total capital (for very conservative traders, even 0.5–1%).investopedia+1​ Total risk at a time: Keep total open risk (sum of potential loss if all SLs hit) within 5–8% of ***** Position size formula: Position size = (Capital × % risk per trade) ÷ (Entry price − Stop-loss price).britannica+1​ Example: Capital ₹1,00,000; risk per trade 1% = ₹1,000. If buying a stock at ₹500 with SL at ₹480 (₹20 risk), quantity = 1000 ÷ 20 = 50 ***** Stop-loss placement rules Swing trades (few days–weeks): Place SL just below recent support / swing low or below key moving average (e.g., 50-DMA), not at random round ***** Volatility-based: For active traders, SL can be 2–3 × ATR below entry for long trades to avoid getting shaken out by normal ***** Reward–risk: Enter trades only if potential upside is at least 2 times the risk (target minimum 1:2 reward–risk).quantinsti+1​ Portfolio-level rules Single-stock exposure: Avoid putting more than 10–12% of capital in one stock for a small portfolio; for very volatile names, cap near 5–8%.wrightresearch+1​ Correlation check: Avoid loading entire portfolio into the same theme (only banks, only PSU, only smallcaps etc.); diversify across 4–6 ***** Drawdown rule: Pre-define a maximum portfolio drawdown (say 10–15%). If reached, cut position sizes by half and reduce trading frequency until equity ***** Execution discipline Always place SL order immediately after entering the trade; never “mental SL” for small retail ***** Do not widen SL to avoid booking loss; either stick to original level or exit early if thesis ***** Review SLs and position sizes weekly; adjust only if new swing highs/lows or volatility justify it, not based on emotion