ETMarkets Trade Talk: How this Delhi derivatives trader bounced back with a bang after Rs 4-cr loss

What is your educational background and what were you doing before entering the stock market?

I studied economics at the graduation level and then did MBA. My first job was in an advertising firm as a copy writer-cum-creative guy. I also studied Oracle DBA and got an H1B visa and a job in New Jersey but could not go there due to family compulsions. Later on, I started my own BPO in 2001-02.

One of my friends who used to work with a broker got me interested in trading. I thought I have cracked so many things and can crack this as well. I started trading in 2006 and since then it has been 16 years of being a trader.

How was your initial journey in the market? How did you manage to survive the speed bumps along the way?

I began with Rs 25 lakh and within 5-6 years, my whole loss was around Rs 4 crore. Then I took a break for sometime. I took a lot of time to discipline myself. In those days, there were no mentors who worked so much on psychology and discipline. I was very good at charts and very bad at execution because of psychology. A level of both greed and fear is required. Both have to work in tandem and in balance.

Initially, the process was very slow. I began afresh with a capital of Rs 50 lakh because I had other businesses to take care of my earnings.

My mistake was to do it part-time which created a vicious circle of losses. Discretionary trading should not be done with a job. Secondly, you should have at least one or one-and-a-half years worth of expenses saved separately so that even if you blow your account, your lifestyle doesn’t get affected to the extent that things go for a toss.

I strongly believe people who are in jobs should do more of investing. That is a much more peaceful and less riskier work if they study well rather than getting into trading.

Trading is a very risky business. Investing is a safer business where you buy a stock and hold it for a long period.

So how important is psychology in the business of trading?

Trading is 80% psychology – mindset and discipline. The strategy component is only 20% of the whole process in discretionary trading.

Discipline is required to ensure that profits are consistent. You have to understand the fact that it cannot be unlimited profits. You cannot hit every ball for six in every over. You have to choose the right ball. You have to wait for the right circumstances and you have to be ready with the process to hit a six. Otherwise you will keep on getting out, your account will keep on getting blown and you will be in losses.

A lot of system traders also lose it if they are not disciplined. At the end of the day, it is your mind which is playing those tricks and you have to work with the mind. So if the mind can create a stock market, the mind can create loss, it can also create profit. It is just that you should know how to use that mind and how to use discipline. If you are doing that, then money will always be the byproduct.

You trade both in the futures and options segments. When it comes to options, are you more into buying or selling?

I do both and I don’t take sides in trading. The call depends on the nature of the market, the strategy you are deploying, the time frame as well the objective of the trade.

A seller takes unlimited risk and a limited profit but theta is on his side because with time theta gives you an edge. A buyer takes limited risk and the profit is unlimited but then theta is against him and he has to work with momentum to give him results on it.

Tell me something about the principles you follow and the targets you have on a typical day.

I take a very holistic approach. You are here to make money. Why risk everyday? Take the side that gives you less risk and more returns.

I believe trading is supposed to give an income as a percentage of what capital you have deployed. Once you get that, you should not try to squeeze the extra large juice out of it because that increases your risk.

The whole idea is that you take out a certain percentage of your capital as trading income and invest in other assets. At the end of the day, all you want to do is make money. Money grows the best when it works for you.

Currently, I have an intraday account, a positional account and long-term investments.

In my positional trades, I try to make 4-5% in a month. If I make that in the first 15 days of the month, I will not trade in that account for the rest of the month. That is a golden rule.

My long-term investments are meant for my kids and I do not fiddle with them unnecessarily.