Zerodha Part 2

[Zerodha]

Re: Erroneous trade in my a/c with ZT

Law of averages doesn't catch up that easily on a smaller sample(in this case, 10)...what he is doing is like a tossing a coin with some Money Mgmt...you can easily get 15 heads or 15 tails in a row and hence, the account would be blown before he knows it.. but over 1000's of sample, the probability of getting a head or tail would be approx 50%...so, i am wondering what 'Law of averages' we are referring here with such a small sample size?

funny thing is that I do have personal experience on blowing my account and the fallacy on my thought was exactly the same 'law of averages' with almost negligible quantity sample..i figured it out in the hard way..

there are only two possible outcomes on your client's version of what he's doing..either he is not revealing his 'edge' in the market to you or he's just waiting to get blown up by his own money mgmt theory..

I hope your post is not giving wrong ideas to people who are just starting to tread in the treacherous waters of trading

Just to clarify, not 10 trades of Rs 5lks ... Trade only with 5lks though he has set aside 50lks as trading capital..

With this 5lks trade aggressively with high leverages, knowing that even if he goes wrong his drawdown will be only 10%. They say you can never make money with scared money..

By trading with only 10% of his cap, he is definitely not scared now, just improves the odds by quite a bit..

The most important thing which most of the traders can't do is to let the winners ride, I am sure most of us would have had bought puts or shorted futures before the fall, but just didn't have the patience.. The reason for that is because we are on scared money... But a person like this will let it ride..

But guys, you have to trade based on what you are comfortable doing, aping someone could be detrimental...

 

[futures]

Re: Erroneous trade in my a/c with ZT

Just to clarify, not 10 trades of Rs 5lks ... Trade only with 5lks though he has set aside 50lks as trading capital..

Thanks for replying...With this 5lks trade aggressively with high leverages, knowing that even if he goes wrong his drawdown will be only 10%. They say you can never make money with scared money..

By trading with only 10% of his cap, he is definitely not scared now, just improves the odds by quite a bit..

The most important thing which most of the traders can't do is to let the winners ride, I am sure most of us would have had bought puts or shorted futures before the fall, but just didn't have the patience.. The reason for that is because we are on scared money... But a person like this will let it ride..

But guys, you have to trade based on what you are comfortable doing, aping someone could be detrimental...

Oh..he is trading only with 10% of his surplus capital..that's good!! so, as smart_trade assumed, the return is based on 5lks and not 50 lks...got it!!

Scared money concept is ok but how do we know the bottom of the move(the shorting example here) if we don't have a way to gauge the market movement...as you rightly pointed, lot of traders would have shorted the market but depending on their timeframe, some would have covered in 10 points and others would have covered after 100 points...

nevertheless, I am still looking for the 'super trader' who could buy at the bottom/sell at top and short at top/cover at bottom...the client's way of trading - 'shorting and letting the winners ride' is giving the anecdotal evidence for that 'super trader' ..

 

[TraderRavi]

Re: Erroneous trade in my a/c with ZT

50 lk trading capital, but keeps only 5lk in the trading account which is also his SL. On this 5lk, he takes extreme leverage positions like OTM options knowing that even if he blows out this 5lk, he can take 9 similar chance sand the law of averages would just catch up.

Profits are continuously taken out to keep the trading capital at only 50L. No TA, no QA, FA or whatever, just betting with a brilliant money management strategy... Was up over 200% last year..

Food for thought, with markets tanking and people being in a pessimistic mode...

zerodha can you clarify, 200% on 5L or 50L.............

 

[Zerodha]

Re: Erroneous trade in my a/c with ZT

Oh..he is trading only with 10% of his surplus capital..that's good!! so, as smart_trade assumed, the return is based on 5lks and not 50 lks...got it!!

Scared money concept is ok but how do we know the bottom of the move(the shorting example here) if we don't have a way to gauge the market movement...as you rightly pointed, lot of traders would have shorted the market but depending on their timeframe, some would have covered in 10 points and others would have covered after 100 points...

nevertheless, I am still looking for the 'super trader' who could buy at the bottom/sell at top and short at top/cover at bottom...the client's way of trading - 'shorting and letting the winners ride' is giving the anecdotal evidence for that 'super trader' ..

The quest continues to find that guy,

But the return of 200% I was talking was on the entire 50lk and not on 5l.. He was up around 1cr last financial year, trading aggressively with only 5lks.. And this is not about a person who is faking it, he actually shared with us his trade details, but didn't want us to put his photo on the landing page we have for 60 day challenge..

There were trades where options were bought at 5 sold at 50, and also bought at 5 and expired worthless.. He has the basic principles right, but a money management strategy which works very well for him..

The crazy bit of it is that he is not even doing it full time, software engineer from Bangalore..

 

[Raghuveer]

Re: Erroneous trade in my a/c with ZT

The most important thing which most of the traders can't do is to let the winners ride, I am sure most of us would have had bought puts or shorted futures before the fall, but just didn't have the patience..

You just described me quite well here. Trying to overcome this "not letting winners ride".

 

[cinderblock]

Re: Erroneous trade in my a/c with ZT

Yes, let me join in too.

I know of 2 guys (both using identical strategies) who were up around 800% last calendar year. One of them converted 25L to about 2.2 crores and the other about 1cr to 9 crores! They hope to do a encore this year.

They were offered jobs by IBs but they turned it down because it wasn't lucrative enough!

 

[Zerodha]

same old challenge, same problems............

It is not the same old challenge ,

Ravi, after trading for a while and knowing many professional traders, other than strategy and money management, what actually matters is your trading capital.

A lot of talented people, start and stop trading because they didn't have enough capital to survive..

In the US most of the big brokers ask atleast 25000 dollars if you want to setup a trading account for options and leveraged products.. In india, 99.5% of the clients have lesser than 25k dollars in their trading accounts..

Today the cost of living has gone up so much in India, if you have 5lks and even if you make 50% after all costs at end of year, you are still up only 2.5lks, probably what a 1-3 year old experienced guy earns as a salary. So does it makes sense to take the effort and risk trading the markets??

What is different this year is the fact that over the last 3 months we have bounced this idea to hedge funds, prop desks(including zerodh prop desk) and HNI's who are sitting on a lot of funds, not having opportunities to deploy them. The divide in India is so big among the middle class and the rich, it is just not even funny. The guy who works as head at a software company makes 50lks a year, which is like a really good salary, but a rich guy spends that much on a audemars piguet watch without thinking twice. And this is not just a small bunch of rich guys, the real estate boom has created a crazy number of such rich people..

So we see an opportunity as we are connected to traders and these shops sitting with underutilized capital looking to deploy. If a trader is looking to go professional and he his displaying the skills, we intend to connect both the dots. Skills is not just if he is in the money or not, skills means if he is disciplined with the trades, is there a strategy or not, money management skills etc..

We see a huge business opportunity for us and the trader, if getting back 2k brokerage after trading for 30 days is important for a trader, would mean that he is just not ready for moving up the ladder...

Food for thought for this weekend: http://www.zerodha.com/z-connect/blog/view/moving-beyond-mediocrity

Best of luck guys...

 

[futures]

Food for thought for this weekend: http://www.zerodha.com/z-connect/bl...ht?..Would you mind sharing it here, Zerodha?

 

[gurmy.]

@zerodha

reinstalled window 7 yesterday

now unable to start "zerodha trader"

it is giving error "nest initialisation failed,OS error"

kindly help

 

[kumudhan]

@zerodha

reinstalled window 7 yesterday

now unable to start "zerodha trader"

it is giving error "nest initialisation failed,OS error"

kindly help

this error is common on market holidays....need not worry.....