Complete Guide to Position Sizing & Risk Management in MTF trading

After mynote on growing a small account, I’ve received many questions on riskmanagement and position sizing in MTF trading. So, here’s how I approachit.

The firstthing to understand is that there are two ways margin is provided:

• Margin provided on a     stock-by-stock basis
• Margin provided at the portfolio     level

The firstapproach is the most common and widely used in India, while the second is lessaccessible.

Here, we’llprimarily focus on the first one, as that’s what most traders use.

Most peopleask how to think about position sizing when using margin. The key point isthis: I don’t include the leverage amount in my base capital whilecalculating position size. This is a core principle at TradeTM where we emphasize that positionsizing must always be based on your actual portfolio risk, not the leveragedamount.

For me, MTFonly funds the capital requirement, not the risk. The position size remains thesame whether I use cash or MTF.

Understandit this way:

• Portfolio Value: ₹10L
• Portfolio Risk: 0.5% = ₹5,000
• Entry: ₹100
• Stop Loss: ₹98

Positionsize = 5000 ÷ (100 − 98) = 2,500 shares . Total position value = ₹2.5L (25% of portfolio)

Now comesthe MTF part: If I get 5× leverage, I only need to block ₹50K to take a₹2.5L position.

So:

• Risk is still calculated on ₹10L
• MTF is only funding the     capital, not changing the risk

In the givenexample, this allows me to deploy more positions beyond the ₹10L limit whilekeeping risk controlled.

Keypoints:

1. Always calculate position size     on base capital, not leveraged capital
2. Use MTF from the start, not     after your portfolio is already allocated
3. Risk remains the same     whether you use cash or MTF. The only real difference is the interest     cost
4. Used this way, leverage doesn’t     increase risk arbitrarily, it simply improves capital efficiency.

As I prefertaking larger position sizes, around 30–45%, it doesn’t take long to deploythe entire portfolio, even with leverage. Just 4–5 positions can take meclose to ~200% exposure.

However, thekey variable to control is Open Risk.

If youinitiate too many positions at once without allowing earlier trades tobecome risk-free, your open risk spikes. In such cases, even a minor marketpullback can trigger multiple stop losses together, leading to a significantportfolio drawdown. This risk is even higher when using tight SLs.

To managethis:

1. I avoid initiating more than 3–4     positions at a time (especially in velocity or hybrid trades with     tight SLs)
2. My typical risk per trade is     ~0.65%, so maximum open risk stays around 2–2.5% at any given time

As tradesmove in my favor and become risk-free, I free up room to add new positions.

Even at abroader portfolio level (including magnitude setups), I ensure that totalopen risk never exceeds ~4–5%.

Fromexperience, whenever open risk hits that upper limit, it usually signals amarket where setups are triggering but not following through. Trades failto become risk-free and instead hit SLs, causing compounding losses.

If youmanage open risk well, MTF becomes a powerful tool for capital efficiencywithout increasing actual risk. The key is discipline in execution, notjust access to leverage.

Follow thisframework, and you can use leverage to enhance returns without exposingyourself to unnecessary downside.

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