The strategy that made ₹10 lakhs and the one that lost ₹10 lakhs are often the same strategy. The difference is size and discipline. How much to bet, when to stop, and how to survive the drawdowns everyone eventually faces.
“You cannot make money if you’re not in the game.”
Blowing up your account isn’t a bad trade — it’s the end of your trading. Everything in this chapter is about survival first, profit second.
Never risk more than 2% of your account on a single trade.
For an options trade, “risk” means the maximum loss if things go wrong. For a bought call, it’s the premium paid. For a short strangle, it’s the potential adverse move (not just premium collected — premium collected has nothing to do with risk).
Account: ₹5,00,000. Max risk per trade: 2% = ₹10,000.
Considering a Nifty iron condor with 200-point wings:
How many lots? 10,000 / 4,500 = 2 lots max.
Even if you feel very confident, don’t do 3+. That’s how you go from ₹5,00,000 → ₹4,86,500 → ₹4,73,000 → 12 trades in and down 25%.
Even with 2% per trade, if you take 5 trades in a week and they all lose, you’re down 10%. Add a weekly limit:
Never lose more than 6% of your account in a single week. If you hit that, stop trading. Review. Come back next week.
If your account is ever down 20% from its peak, stop trading entirely for at least 30 days.
The single most common way retail traders die: hitting drawdown, doubling size to recover fast, then losing everything.
Down 20% → need +25% to recover. Down 50% → need +100%. Down 80% → need +400%. The bigger your drawdown, the harder recovery becomes. Small sizing prevents big drawdowns before they happen.
Three common approaches, in order of complexity:
Always risk ₹X per trade regardless of account size or setup. Simple but ignores your equity growth.
Always risk N% of current account. As you make money, positions grow; as you lose, they shrink. Self-correcting.
Advanced. Adjust size based on edge and volatility. Not for beginners.
Stick with fixed percentage (2% per trade, cap total daily/weekly exposure). It’s the sweet spot for retail.
Beyond per-trade limits, cap your total exposure at any given time:
If any answer is no, don’t trade.
Streaks happen. You WILL have 5 losing trades in a row eventually. The math:
When it does:
Trading is 70% psychology, 30% strategy. What kills accounts:
The 2% rule protects you from most of these. Small size doesn’t feel exciting → doesn’t trigger emotional swings → doesn’t force bad decisions.
Expectancy = (Win rate × Avg win) − (Loss rate × Avg loss)
If expectancy is negative, no amount of clever sizing saves the strategy. If expectancy is positive, sizing determines whether you survive to collect it.
Strategy A: 90% win rate, +₹500 win, −₹4,000 loss Expectancy = 0.9 × 500 − 0.1 × 4,000 = 450 − 400 = +₹50 per trade
Strategy B: 40% win rate, +₹800 win, −₹400 loss Expectancy = 0.4 × 800 − 0.6 × 400 = 320 − 240 = +₹80 per trade
Both positive. But Strategy A has a 30% chance of a 4-loss streak (that’s ₹16,000 gone). Strategy B rarely loses more than 3 in a row (max ₹1,200 hit).
Strategy B is easier to size and survive. Same edge, better distribution.
Indian retail costs include:
Total: ~₹40-70 per round-trip options trade. If your average profit per trade is ₹500 and you take 20 trades/month, fees = ₹800-1,400 = 8-14% drag. Size and frequency choices should factor this in.