Nithin Kamath recalls Jerry Parker’s trading wisdom: Cut losses, let winners ride

Zerodha co-founder and CEO Nithin Kamath

In the high-stakes world of trading, survival isn’t about making the perfect call—it’s about managing risk well enough to keep playing. Nithin Kamath, co-founder of Zerodha, has spent years observing traders, from small-time hustlers to market giants. And if there’s one common thread among those who last, it’s their approach to risk.

Reflecting on an old podcast featuring legendary trader Jerry Parker, Kamath shared a set of timeless principles that separate seasoned market players from those who get wiped out.

Live to trade another day

Markets are brutal, and when fear takes over, logic often takes a backseat. Parker’s rule? Cut your positions twice as fast as your losses. If your portfolio is down 10 percent, slash your exposure by 20 percent. It’s a simple, unwavering rule that ensures traders don’t dig themselves into a hole too deep to climb out of.

Flip your instincts

Parker points out a cruel irony—traders tend to hope their losses will recover while fearing their winners will shrink. But it should be the other way around. When a trade is losing, fear should prompt action before the damage worsens. And when profits are soaring, hope should push for patience, letting them ride to their full potential. As Kamath puts it: "When you have a loss, you’re thinking, I’m hopeful that it’s going to come back and turn into a winner, but that’s when you should be fearful that the loss is going to get bigger."

The real enemy: yourself

Most trading mistakes, Parker admits, aren’t about misreading the market—they’re self-inflicted. Over-trading and failing to stick to a system are the biggest pitfalls. Discipline, he learned from his mentor Richard Dennis, is the ultimate edge.

Last month, Nithin Kamath through a post on X (formerly Twitter) highlighted a significant drop in trading activity, with volumes across brokers plunging over 30 percent. The 45-year-old Zerodha boss pointed out that the slump could have wider implications, including a potential shortfall in the government’s securities transaction tax (STT) collections. If the trend persists, he estimates STT revenues for FY25/26 could fall below Rs 40,000 crore—not even 50 percent of the Rs 80,000 crore estimated.

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