Manage Risk as a Scalper

What to do when your strategy stops working →

Hey there!

In today's edition, we’ll talk about a risk management strategy followed by one of India’s best scalpers, Sivakumar Jayachandran.

The same strategy won’t work every day…

Trading involves making the most of market trends by capitalizing on momentum. If the market is moving in a particular direction, it's common to experience a winning streak for days, especially when it comes to scalping.

However, this could come to a halt when market environments change. And your strategy may end up backfiring. What do you do then?

What to do when your strategy doesn’t work

It can be confusing to see the same strategy working brilliantly one day and crashing the other. The answer is not in changing your strategy now and then, rather it is about making the best of the strategy when it works and managing to stay afloat when it doesn’t.

During the latter, you can adopt the following risk management strategies to protect your capital

1) Split your funds

Don’t put all your eggs in one basket, even when it comes to trading accounts. Split your funds into 5 different accounts. This ensures that you won’t lose more than 20% of your capital even in the worst conditions.

2) Use the previous day’s profit as a stop loss

The idea is to limit your losses to the amount of profits made the previous day. This way, you’re less likely to revenge-trade, and your total capital will be saved from diminishing.

Note that these are just some of the ways you can manage your risk and protect your capital as a scalper. Different trading styles may require a different approach.

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