Nithin Kamath, co-founder of Zerodha, India's biggest stock brokerage company in terms of volume of trade, shared two strategies to become a successful trader. Speaking at the Thrive 2021, Kamath said that the young traders should focus on two things — money management and bet size.
While discussing the mistakes traders do while investment, Kamath mentioned, "A lot of people focus on what stocks to buy, when to buy and when to sell. I have done it for 25 years. I know experts from around the world. I don't think anyone really knows what stocks to buy."
"What people need to know is how to manage money. If you manage money well, even if you have a really bad trading strategy, you will still be able to manage. But most people don't focus on that," he explained.
"The big difference between a good trader and bad trader is how he manages his money," he added.
"Traders must know what is the maximum loss they are ready to endure at any given point. Every single trader has to define it before getting into single trade," he advises.
"Everyone tries to hit a six on every ball. Trading does not work like that. It is mostly singles and when you find an opportunity, you go for it," Kamath said.
Second thing that people don't focus often is bet size, the ace trader said. "90% of your trade should be as small as possible. If you are taking 100 trades, 90 of them should be as little quantity as possible. In those 10 trades, where things are going right for you, you should probably increase the size of your bet," he shared.
"Trading is similar to playing poker," he quipped.
Thrive 2021 was a virtual summit organised by leading investment platform Groww to educate "young retail investors about the art of wealth creation". "Thrive is an effort by Groww to bring together India’s smartest minds to talk about money. In the days to come, we would be conducting many more such conversations to educate retail investors about the art of investing and growth," Lalit Keshre, chief executive officer and co-founder of Groww said.
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