Most traders lose money by overtrading. Zerodha's Nithin Kamath explains how (2024)

FAQs

Most traders lose money by overtrading. Zerodha's Nithin Kamath explains how? ›

A simple bet- sizing strategy is to trade with as little quantity as possible most of the time. Increase it only when you have conviction and are trading well," Kamath said in a series of tweets. In such a scenario, even if one is overtrading, the risk, and the trading and impact costs don't compound quickly.

This is one of the most important reasons why most people fail to make money in the markets. Unrealistic expectations. First of all, you're misquoting Zerodha (Nithin). The actual stat was - 99% traders on Zerodha (mostly retail traders) fail to earn more than the risk free rate of return (FD returns used as proxy).

One of the primary reasons traders lose money is the absence of a clear trading strategy. According to research by Bloomberg, over 80% of day traders quit within the first two years, often due to insufficient strategies. One of the primary reasons traders lose money is the absence of a clear trading strategy.

The emotional aspect of trading often leads to irrational decisions like panic selling. When the market moves unfavourably, many traders, especially those who are inexperienced, tend to panic and exit their positions hastily. This panic selling often occurs at the worst possible time, leading to significant losses.

As an entrepreneur, stockbroker, and columnist for Financial Express, Nithin has made significant contributions to the financial industry. He is particularly known for his pioneering work in discount broking, which has been instrumental in Zerodha's success.

95% sounds like a pretty high number and sometimes people don't believe it. So here, read this.. the CEO of Zerodha, Nitin Kamath, has publicly shared that over 1 year, over 99% of the traders lose money, 0.99!!

Insufficient Education and Knowledge: Many traders plunge into the market without a solid grasp of its nuances. This lack of understanding leads to impulsive decision-making and substantial financial losses. Comprehensive education is the bedrock upon which successful trading stands.

Rakesh Jhunjhunwala, arguably, is one of the most famous traders in India of the current times, often regarded as the no 1 trader in India. He started his career as a trader while he was still in college.

According to this rule, 90% of novice traders will experience significant losses within their first 90 days of trading, ultimately wiping out 90% of their initial capital.

How is Zerodha so profitable? ›

And traders were introduced to a smart trading platform at a low cost, which made their trading journey easier. Also, Zerodha's business model was based on low margins and high volume. This model, coupled with zero brokerage, led to good revenue generation.

Nithin bootstrapped and founded Zerodha in 2010 to overcome the hurdles he faced during his decade long stint as a trader. Today, Zerodha has changed the landscape of the Indian broking industry.

Founders of Zerodha, Nikhil and Nithin Kamath, earned Rs 72 crore each as salary for the financial year 2022-23. The latter's wife, Seema Patil, earned Rs 36 crore, in the role of director.

Why Do Investors Often Lose Money in Futures and Options Trading? There are several reasons why investors may suffer losses when trading futures and options: Time decay (Theta): Options contracts have a limited lifespan, and as they approach expiration, their time value erodes rapidly.

However, the harsh reality is that the vast majority of day traders lose money. In fact, studies have shown that a staggering 97% of day traders end up in the red. This statistic is not only staggering, but it's also incredibly disheartening for those who are considering day trading as a means of making a living.

Is Zerodha Demat Account safe? Yes, your Zerodha demat account is safe. The demat account is opened with CDSL (Central Depository Services Limited), one of the 2 central depositories in India. Zerodha's role in the demat account is limited to acting as an intermediary between the customer and the central depository.

It's often hard to accept the kind of uncertainty in the market. Traders can be reckless. They may forego market analysis, dodge setting Stop Loss orders, and the risk management rules. All of this leads to mistakes and bad trades.