Master Trading with Arjun Tandon's Insights on Diversification, Risk Management, and Leverage

Trading Right with Arjun Tandon

Arjun Tandon, partner at Kailasa Capital Advisors LLP and a full-time derivatives trader, provided invaluable advice during the Trading Right event organized by Groww in Mumbai. His guidance revolves around three core principles: diversification, risk management, and the effective use of leverage.

Diversification

Diversification is crucial in both investing and trading. Traders can broaden their exposure by participating in various indices, such as Nifty and Bank Nifty or Sensex, which lessens reliance on a single index’s performance. Furthermore, blending long and short strategies delivers added resilience against market movements. Employing different timeframes—mixing intraday with positional trades or expanding into asset classes like equities and commodities—also enhances diversification.

Risk Management

A fundamental aspect of risk management is approaching potential losses in terms of percentages. For instance, if a trader begins with Rs 50,000 and incurs a Rs 25,000 loss, this 50% decline necessitates a 100% rally to return to the break-even point.

Leverage

Ensuring sufficient capital in a trading account is vital to prevent margin shortfalls. Traders should ideally allocate 2-2.5% of their total capital to cover margin requirements. This practice minimizes the risk of being forced out of trades due to insufficient funds.

Strict Fund Allocation

Funds set aside for trading must be strictly used for that purpose only. It’s important to avoid reallocating money intended for other financial obligations.

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