Risk management
Most traders do not fail for lack of good ideas. They fail because one bad day wipes out many good ones.
Risk comes first
SEBI's 2024 study of the equity F&O segment found that about 9 in 10 individual traders lost money over three financial years. The traders who survive long enough to improve almost always follow the same simple rules: small risk per trade, a stop decided in advance, and a record of every trade.
The 1% rule
Risk no more than about 1% of your trading capital on any single trade. "Risk" means the amount you lose if your stop is hit, not the amount you spend.
With ₹2,00,000 of capital, 1% is ₹2,000. Ten losing trades in a row would cost about 10% of your capital: painful, but you are still in the game.
Position sizing, step by step
- Decide your stop first, from the chart (for example, just below support).
- Work out the loss per lot if that stop is hit.
- Divide your 1% budget by that loss per lot, and round down.
Where to put stops
- Use the index chart, not a random percentage. Put the stop where your idea is proven wrong: below the support you bought above, or above the resistance you sold below.
- Leave room for noise. A stop inside normal one-minute wiggles gets hit by randomness. Look at the average range (ATR) before choosing.
- Convert it to a premium level. Ask what the option would trade at if the index reached your stop. SWOT TRADER's "Use auto levels" button does this for you.
- Never widen a stop once you are in. Moving it to break-even or trailing it to lock profit is fine.
Reward : risk
Reward : risk compares the planned gain at your target with the planned loss at your stop. A trade risking ₹30 to make ₹60 is 2 : 1. Many traders skip setups below 1.5 : 1, because a strategy that wins half the time still loses money if the winners are smaller than the losers.
Expectancy: are you profitable over 100 trades?
Expectancy per trade = (win rate × average win) − (loss rate × average loss).
Charges and STT
Every order costs more than brokerage. From 1 April 2026 the Securities Transaction Tax on option sales rose to 0.15% of the premium, and on futures sales to 0.05%. A typical breakdown for options:
| Charge | Typical rate (options) | Charged on |
|---|---|---|
| Brokerage | ₹20 per order | Common discount-broker rate; varies by broker |
| STT | 0.15% | Premium on the sell side |
| STT on exercise | 0.15% | Intrinsic value of options settled in the money |
| Exchange transaction charge | ≈0.035% | Premium, both sides (NSE) |
| SEBI turnover fee | ₹10 per crore | Premium, both sides |
| Stamp duty | 0.003% | Premium on the buy side |
| GST | 18% | On brokerage, exchange and SEBI fees |
Rates change with budgets and exchange circulars. SWOT TRADER deducts all of these from every simulated trade so your results are realistic.
Daily habits that protect capital
- A daily loss limit. Stop trading for the day after losing 2–3% of capital.
- No averaging down on a losing option. Expiry-day premiums can go to zero.
- Trade less after a big win. Overconfidence is a risk too.
- Keep a journal: setup, entry, stop, target, result, and one lesson. SWOT TRADER's end-of-day statistics page is a ready-made journal.