FREQUENTLY ASKED QUESTIONS about Trading, Capital Requirements, and Option Strategies
Index Option Trades
1. How much Capital is required?
The minimum capital requirement for index trades is Rs. 1 lakh for single and double leg trades.
2. What kind of trades will you get for index options?
You will receive intraday single leg option trade depending upon the opportunity, and double leg option strategies of Nifty, Banknifty, Finnifty, Sensex etc.
3. How much risk should you take in each trade?
We recommend not risking more than 3% of your trading capital on one trade. For example, if your FnO trading capital is Rs.1 lakh and the stop loss amount recommended by DGT is Rs.1,500, then you should not trade more than 2 lots in one trade.
Let's say DGT recommended two trades in a day:
* Single leg trade with a stop loss Rs.1,500 per lot. You can execute max 2 lots which has a risk of Rs. 3,000.
* Double leg strategy, stop loss Rs. 2500 per lot. You can execute max 1 lot which has a risk of Rs. 2,500. If you trade 2 lots here, your risk will reach 5% of trading capital. We suggest not going beyond 3%. So, trade only 1 lot in this case.
4. Why should I follow the risk management system?
If you do not follow risk management systems, you will be losing money in the longer run. Be a smart trader, not a gambler!
Stock Option Trades
1. How much Capital is required?
The minimum capital requirement for stock strategy trades is Rs. 2 lakhs. Each strategy will require an average Rs. 50,000 per lot.
2. What kind of trades will you get for stock options?
You will receive positional double leg option strategies of F&O stocks.
3. How much risk should you take in each trade?
We recommend not risking more than 2% of your trading capital on one trade. For example, if your FnO trading capital is Rs.2 lakhs and the stop loss amount recommended by DGT is Rs.4,000, then you should not trade more than 1 lot in one trade.
The reason is that we will have 4 to 5 open positions in stock strategies, hence your total risk will be 8% to 10% of total capital. At a time, the total risk of capital should not exceed 10%.
Let's say DGT recommended two trades in a day:
* Reliance Industries: Double leg strategy, stop loss Rs. 2,000 per lot. You can execute max 2 lot which has a total risk of Rs. 4,000.
* Tata Motors: Double leg strategy, stop loss Rs. 1,500 per lot. You can execute max 2 lot which has a total risk of Rs. 3,000. If you do 3 lot, then total risk per trade is Rs. 4,500, this exceeds the risk limit. Hence, trade within risk limit only.
4. Why should I follow the risk management system?
If you do not follow risk management systems, you will be losing money in the longer run. Be a smart trader, not a gambler!
For any other queries you can write us at @DGTOwner