Risk Management and Trading Psychology

  • 1. Orientation note

    1.1 – A unique opportunity I’m excited about this brand new module on Varsity, wherein we will be discussing two important and closely related market topics – ‘Risk Management and Trading Psyc ..

  • 2. Risk (Part 1)

    2.1 – Warming up to risk For every rupee of profit made by a trader, there must be a trader losing that rupee. As an extension of this, if a group of traders consistently make money, then there must ..

  • 3. Risk (Part 2) – Variance & Covariance

    3.1 – Variance In the previous chapter, we touched upon the topic of expected return, continuing on it, we will understand the concept of ‘Portfolio variance’. Portfolio Variance helps us unders ..

  • 4. Risk (Part 3) – Variance & Covariance Matrix

    4.1 – A quick recap Let us begin this chapter with a quick recap of our discussion so far. We started this module with a discussion on the two kinds of risk a market participant is exposed to, when ..

  • 5. Risk (Part 4) – Correlation Matrix & Portfolio Variance

    5.1 – Correlation Matrix In the previous chapter, we successfully calculated the variance-covariance matrix. As we discussed, these numbers are too small for us to make any sense. Hence, as a practi ..

  • 6. Equity Curve

    6.1 – Overview This is off topic – but a little digression hurts no one, I guess. Of all the chapters I have written in Varsity, I guess this one will be a very special one for me. Not because of ..

  • 7. Expected Returns

    7.1 – Expected returns The next two chapter will be very insightful, especially for people who have never been familiar with portfolio techniques. We will venture into the realms of expected return ..

  • 8. Portfolio Optimization (Part 1)

    8.1 – A tale of 2 stocks We have spent a great deal of time and efforts towards understanding risk associated with a portfolio. Our discussion has brought us to a very important stage – it’s tim ..

  • 9. Portfolio Optimization (Part 2)

    9.1 – Working with the weights In the previous chapter we introduced the concept of portfolio optimization using excel’s solver tool. We will build on the same concept in this chapter and proceed ..

  • 10. Value at Risk

    10.1 – Black Monday Let’s start this chapter with a flashback. For many of us, when we think of the 70’s, we can mostly relate to all the great rock and roll music being produced from across the ..

  • 11. Position Sizing for active trader

    11.1 – Poker face Last month I got an opportunity to play poker with a few good friends. I was playing poker after a gap of 6 years and I was quite excited about it. The buy-in for this friendly gam ..

  • 12. Position Sizing for active traders (Part 2)

    12.1 –Defining Equity Capital The last chapter we laid down few key thoughts on position sizing and with that, I guess it is amply clear as to why one has to incorporate position sizing at the core ..

  • 13. Position Sizing for active traders (Part 3)

    13.1 – Choose your path We addressed a very crucial concept in the previous chapter. We looked at how one can determine equity based on 3 different models. Each of these three models on its own meri ..

  • 14. Kelly’s Criterion

    14.1 – Percentage Risk Last chapter we looked at three important position sizing techniques, all of them were unique in their own merit. The three techniques were – Unit per fixed amount Percentag ..

  • 15. Trading Biases

    15.1 – Mind games If you are a part of any WhatsApp group related to stock markets, then chances are that you may have watched this video – If you are in no mood to watch it, then let me give you ..

  • 16. Trading Biases (Part 2)

    16.1 – Anchoring Bias I’ve spent close to about 13 years participating in the stock markets. I’ve spent these years in various capacities – as a trader, investor, broker, money manager, analys ..