What is the full form of DLL in the Share Market?
The DLL full form in the share market is the Daily Loss Limit. The maximum amount of money a trader is willing or able to lose in a single trading day is known as a Daily Loss Limit. The DLL is regarded by many as one of the more important risk management instruments for assisting traders in limiting possible losses and safeguarding their trading funds.
How is DLL determined?
A DLL is usually determined by traders and professional risk managers using factors such as trading strategy, calculated risk tolerance, and the total size of each trading account. It is a great virtue to set up a comfortable loss limit for the individual trader so that it aligns with their risk management goals.
Importance of daily loss limits:
For efficient risk management in futures trading, a DLL is essential. Futures trading entail certain inherent risks, such as high losses that could have a detrimental impact on overall profitability, which an efficient DLL can help prevent. A daily loss cap incentivizes traders to thoroughly evaluate and optimize their trades’ risk-to-reward ratio. It encourages traders to weigh the possible gains against the possible losses before making a trade.