Risk unit, stop distance, lot value and correlation — the complete sizing workflow in rupees.
Key takeaways
- Position size equals risk unit divided by stop distance, in rupees.
- For F&O, convert to whole lots and round down, never up.
- Halve size when two positions share the same driver.
Start with the risk unit: a fixed rupee amount you are willing to lose on one idea. On a ₹10,00,000 account at 0.5%, that is ₹5,000. This number does not change because you feel confident.
Next, measure the stop distance from your entry to your invalidation level — a structural level, not a round number. If you enter a stock at ₹640 with a stop at ₹624, the distance is ₹16, so the position is ₹5,000 ÷ ₹16 = 312 shares.
For derivatives, translate into rupees per point per lot. If one Nifty point is ₹75 for your lot size and your stop is 40 points, one lot risks ₹3,000. Your ₹5,000 unit allows one lot, not one-and-a-half — always round down.
Finally, apply a correlation haircut. If you already hold a correlated position, treat the second as sharing the same risk unit rather than getting its own. Traders discover correlation the hard way on the day every screen turns the same colour.
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Planning risk-reward before entry, in rupees
If you cannot state the loss and the target in rupees before entering, you do not have a trade — you have a hope.
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