Zerodha co-founder and CEO Nithin Kamath has advised traders to critically apply risk management for sustained trading success, drawing from his experience as both a trader and broker.
In a post on X on Mar. 17, Kamath acknowledged the current period of market fear and said that it is hard to maintain an objective mindset in such turbulent times. In a bid to help the investors, Kamath also shared several tips including the ‘Turtle Rule' followed by legendary trader Jerry Parker by quoting his words from an old interview.
As part of the rule, Parker advised traders to reduce positions twice as fast as the drawdown to protect against larger losses. “This is a Turtle Rule. That when you have a drawdown, you reduce your positions twice as fast as the drawdown. So, if you're down 10%, you should reduce your positions by 20% and so on,” Kamath quoted Parker.
In all my time as a trader and a broker, I've interacted with hundreds of successful traders, both large and small. The one common element to their success and longevity is risk management. This has become all the more important in markets like these when fear takes over and…
March 17, 2025Labelling it as a ‘living to play another day' technique, Parker highlighted that while this strategy was developed for large-scale, short-term trading, it remains relevant for maintaining longevity in the market.
Further, Kamath emphasised the importance of cutting losses early and letting winners ride. Another Parker's wisdom shared by Kamath explains that traders often hope losses will reverse but should instead fear them over growing larger than they already are. “The biggest mistake is when we have big profits, we're fearful it'll turn into a smaller profit, but that's when we should be hopeful it'll be a huge winner. We're always going against the way we're wired,” the investor added.
Sharing his own “anxiety-induced” experience, Parker said his mistakes could be attributed to over-trading and not following his system consistently.
Kamath quoted Parker's advice to the traders that they should avoid these two “biggest” mistakes in trading.
“And I got that from Rich. I asked him, like, one day, what's the two biggest mistakes we make? Or what are the biggest mistakes we're going to make? And he's like, oh, over trading and not following your system,” he added.
Kamath also shared the link to the old interview, where Parker is seen speaking about the 2020 market crash triggered by the COVID-19 pandemic. Noting that stocks, currencies, commodities, and bonds were correlated during this period, Parker emphasised how unexpected market events can still disrupt tested strategies. He also advised traders that such rough patches will occur every few years and they must adjust their positions to manage risk.
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