Key Points
- Nithin Kamath highlights how managing risk leads to trading success.
- He shares Tom Basso’s tips on position sizing and risk exposure.
- Staying aware and disciplined helps traders stick to their plans.
- Common trading mistakes include giving in to greed and revenge trading.
Looma News
Nithin Kamath, the founder and CEO of Zerodha, spoke about the importance of risk management for a long-lasting trading career. After over 20 years in the industry, he hasn’t seen anyone keep their profits without a solid risk management strategy. Many traders lose money quickly because they don’t have a plan in place.
In a recent social media post, Kamath shared insights from market veteran Tom Basso, focusing on what it takes to succeed in trading over the long haul. Basso points out that understanding how much risk each trade and the entire portfolio carries is key. He mentioned that traders need to find a balance: taking no risks leads to no returns, while taking too much risk can be uncomfortable. This balance helps traders decide on the right size for their positions, which affects their profits or losses as a whole.
Kamath went on to say that once traders figure out effective position sizing and risk management, they need to develop awareness and discipline. Awareness helps traders notice when they stray from their plans, while discipline helps them get back on track. He warned against common mental traps like greed, hurrying to close trades, or trying to recover losses by increasing their positions. These behaviors can create serious problems over time, making awareness and discipline vital for long-term success in trading.
