Pre-Trade Plan, Stress Test & Review

What this unit covers

Learn a pre-trade checklist: plan the trade, stress-test the worst case, and review it afterwards, bringing together every risk idea in this level.

By the end you will be able to

• Write a pre-trade plan that fixes entry, exit, stop-loss and size before a trade.
• Turn a vague worry into a specific worst-case rupee number using a stress test.
• Review a closed trade by judging the process, not just whether it won or lost.

How it starts: The Number You Have Not Written Down

1. You are ready to buy a futures contract at 50,000 rupees of capital.
2. If Nifty drops sharply against you tomorrow, how many rupees would you lose?
3. You realise you never wrote that number down before opening the position.

Words you will meet

Stress Test

Turning a worry about a trade going wrong into an exact rupee loss figure, worked out before entry.

Stop-loss

A price level set in advance at which you exit a losing position to limit further loss.

Position size

The amount of capital placed into one trade.

In this module: Risk Management in Derivatives

1. Margin and Liquidity
2. Position Sizing and Portfolio Heat
3. Gap and Tail Risk
4. Pre-Trade Plan, Stress Test & Review (this unit)