// 01 Stop Loss — The Most Important Rule
A stop loss is the maximum rupee amount you are willing to lose on a single trade. In algo trading, it must be hardcoded into the algorithm — not left to manual discretion.
Two types of stop loss work best for NSE intraday algo trading:
- Fixed rupee stop: e.g. ₹200 per trade regardless of stock price. Simple, predictable. MyAlgoKart implements this directly.
- ATR-based stop: Stop placed at 1.5× the Average True Range below entry. Adapts to current volatility — wider during volatile periods, tighter during calm.
// 02 Position Sizing — How Much to Trade
Position sizing answers: "how many shares do I buy on each signal?" The most widely used approach is the 1-2% risk rule:
Position size = (Account capital × risk %) ÷ stop loss per share
Example: ₹5,00,000 capital, 1% risk = ₹5,000 max loss per trade. Stop loss = ₹10 per share. Position size = 5,000 ÷ 10 = 500 shares.
This ensures no single trade can significantly damage your account. With a 50% win rate and 1:2 risk-reward, you need 33+ consecutive losses to lose 25% of capital — virtually impossible with a working strategy.
// 03 Maximum Drawdown — Know Your Worst Case
Maximum drawdown (MDD) is the largest peak-to-trough decline in your account equity during the backtest period. It represents your strategy's worst losing streak and is the single most important risk metric.
If your backtest shows a maximum drawdown of ₹30,000, and you are trading with ₹1,00,000 capital, you need to be prepared for your account to drop to ₹70,000 before recovering. If that drawdown is psychologically or financially unacceptable, reduce position size.
// 04 Lock Profit — Trail Your Stop as Profits Build
Lock profit (trailing stop) is a powerful feature that locks in gains once a trade reaches a certain profit level. Instead of giving all profits back if the trade reverses, the stop moves up to protect a portion of the gain.
Example: You enter RELIANCE at ₹3,000. Target is ₹3,060 (₹60 profit per share). Lock profit at 50% = ₹30 profit per share. Once price hits ₹3,030, the stop moves up to ₹3,030 — you are now guaranteed at least break-even on the trade regardless of what happens next.
MyAlgoKart supports Lock Profit in both rupee amount and percentage modes — configurable per backtest so you can test the impact of different lock levels on your strategy results.
// 05 Daily Max Loss — Know When to Stop
A daily maximum loss rule stops the algo after a predetermined level of losses in a single day. This prevents a bad day from turning into a catastrophic one.
Recommended daily max loss: 2–3% of total capital. For a ₹5,00,000 account, that is ₹10,000–₹15,000. Once this is hit, the algo stops trading for the day.
MyAlgoKart's Max Trades per Day parameter is one implementation of this — limiting the number of trades automatically limits daily loss exposure.
// 06 Risk Management Checklist for Indian Algo Traders
- ✅ Every trade has a hardcoded stop loss — no exceptions
- ✅ Position size calculated using the 1-2% risk rule
- ✅ Maximum drawdown checked in backtest — sized to ≤20% of capital
- ✅ Lock profit configured to protect gains on winning trades
- ✅ Daily max loss limit set in the algo
- ✅ Strategy backtested on 60–90 days of NSE data
- ✅ Forward tested for 30 days before live deployment
- ✅ Starting capital small — scale up after 3 months of consistent results