Nithin Kamath shares tips for success inspired by legendary trader Jerry Parker: 'When fear takes over...'

Nithin Kamath also had some advice on cutting losers and letting winners ride. He said that being fearful of a loss getting bigger would prevent traders from making a bigger mistake.

Zerodha co-founder and CEO Nithin Kamath believes that risk management is a common factor that helps traders and brokers with success and longevity in the unpredictable and risky world of stock market trading. The billionaire took to social media to share a few hard-learned lessons and learnings he drew from an old podcast with legendary US trader Jerry Parker, to underline how managing risk ensures wins in the long run.

"In all my time as a trader and a broker, I've interacted with hundreds of successful traders, both large and small. The one common element to their success and longevity is risk management," Kamath shared. "This has become all the more important in markets like these when fear takes over and having an objective mindset becomes harder."

Referring to his learnings from Parker, Kamath highlighted the “Turtle Rule,” a strategy that advises reducing positions at double the rate of a portfolio’s losses. The Zerodha CEO called it "living to play another day".

"If you’re down 10 percent, you should reduce your positions by 20 percent and so on. And that’s a different day when we were trading really large, very few markets, very short-term," he wrote. "But I think it still kind of applies that you want to have that one rule that always works. It’s always going to work. It’s going to keep you from losing too much. And that is just to reduce your positions and live to play another day."

Kamath also had some advice on cutting losers and letting winners ride. He said that being fearful of a loss getting bigger would prevent traders from making a bigger mistake.

"And then the biggest mistake is when we have big profits, we’re very fearful. We’re fearful it’s going to turn into a smaller profit, but that’s when we should be very hopeful that it’s going to be a big, huge winner. So, I think that, you know, we’re always going against the way we’re wired," he quoted Parker from the podcast.

These insights from the CEO of the country's largest online trading platform come amid a period of prolonged market uncertainty. In February, Kamath estimated that if the trend continues, there would be a steep decline in the Centre's securities transaction tax (STT) collections. It could fall below Rs 40,000 crore as opposed to the originally projected collection of Rs 80,000 crore in the financial year 2025-26.