Risk Management for Intraday Active Discretionary Independent trader(IADIT)

An Intra-day trader is one who opens and closes his positions with in the same trading day ( for eg between 9.15 am - 3.30 pm in case of NSE). Active trader is one who does more than a couple of Intra- day trades. Discretionary trader  uses his understanding, intuition and gut feel to enter and manage and exit trades instead of a mechanical/ automated trading system. An independent trader is one who trades his own money instead of institutional money or also called retail trader.

1. In case of an IADIT, the same person acts as researcher, risk manager and trader. This poses unique responsibilities, role conflicts and inter twining of risks.
2.  As Dr Brett writes in his blog  www.traderfeed.blogspot.com                                                            "Risk management isn't just about keeping losses down; it also means taking maximum prudent advantage of opportunities that present themselves. It's taking more risk than reward in one's trades that ultimately can lead to failure."
3. Setting up of loss limits : The trader has to set daily loss limits and per trade loss limits and also a drop dead loss level for the day( what is the maximum I am willing to lose in a day).
4.   Further to quote   Brett on this issue
   
   "When we trade size that is too large for our account size, we subject ourselves to drastic swings in P/L, and that subjects us to drastic swings in mood. In turn, we then make trading mistakes that bring a negative expectancy to each trade, and the size eventually blows us up."