Position Sizing

Most blowups happen because someone bet too much on one trade.

Good position sizing ensures that no single loss can wipe you out.

A common rule is never to risk more than 1% or 2% of your capital on one trade.

In the Indian F&O market, position sizing is especially important because lot sizes can be large. A single Nifty futures lot requires a margin of over ₹1 Lakh. If that represents most of your trading capital, one bad trade could wipe you out.

For stock investors, a simple position-sizing approach is the equal-weight method. If you want to hold 10 stocks, allocate roughly 10% of your capital to each. This prevents any single stock, even a high-conviction pick like Reliance or HDFC Bank, from dominating your portfolio.

Your position size should also depend on the risk level of the stock. For a stable large-cap like TCS, you might be comfortable allocating 8-10% of your portfolio. For a volatile small-cap or a stock in the news like an Adani group company, you might limit your position to 2-3%.

Many Indian retail investors on Zerodha and Groww make the mistake of going 'all in' on tips from social media. Proper position sizing acts as a safety net, even if your stock pick turns out to be wrong, the damage to your overall portfolio stays manageable.