Trading intraday or futures and options is an extremely volatile business. When in a major drawdown, usually the smartest thing to do is take a break for few days. This is what I would advise any friend or client who would ask me what to do in such a situation.
The chances of blowing up is much much higher when in a drawdown. The tendency to take much bigger risks to make up for the loss. The smart thing is to take a break for a few days. But saying and doing are two different things. When having those losses, the mind constantly is hoping to hit a lottery and recover. So people end up trading compulsively.
So @Abid_Hassan from Sensibull and I were having this conversation yesterday. How about if there was an option on Kite to take a break from trading.
So you click on take a break from trading, end of day all MIS and F&O products get disabled (no intraday or F&O trading). If after a few days break, you intend to start trading again, we restore the access. But this would be again done overnight, giving the trader enough time to think if he really wants to get back trading immediately. Take away the option to just compulsively trade. Only equity delivery trades will be allowed on the account during that period.
I know you all would think it’s crazy to offer this utility as a brokerage firm, and would cause us a revenue hit. But if we can help our clients to take the right decisions in life, we will hopefully make up for it in some other way.
What do you all traders think? Would it make sense to launch such a feature on Kite? Do you think you would ever use it?
It should be in q-back office/crux with a condition (Once the client uses the break button and takes break from trading. he should be blocked for that particular day and he can not change it again on the same day. If he plans to trade again he can resume it on the next day.)
Regardless of what comes out of this poll @nithin it is very ballsy of you to start this discussion. And yes, this is something which could mean less brokerage for Zerodha, it is the so called “right thing”
My 2 cents would be this:
When we play poker as a short stack, there is a high probability of taking reckless risks. People often do an all in on the small stack left and lose it all on marginal hands. Similarly on drawdowns, we have a tendency to do all-in trades
If traders are having drawdowns, it could mean they are having a bad form/ bad day/ temporary glitch.
a. Like you didnt get sleep last night,
b. or are in illness,
c. or have personal issues (NEVER trade when you are going through tricky stuff in life).
It is best to stay away at those times when you are having a bad time, or in bad form. I have personally noticed that taking a break and coming back drastically improves P&L.
Sometimes it is best not to trade because of the market itself. Like highly choppy weeks, events, or low volume illiquid times like Christmas week. I remember I lost my good sleep trying to trade EURUSD during the Greek crisis in 2011-2012. Perhaps I should have just stayed out for a month or two then.
There is more to life than trading. Catch a sunset, smell the roses, ok wait I am getting too poetic here. But generally it is a stressful activity as any trader would agree. So reduce the stress?
How about the account come with a built-in questionnaire for all, answer a set of 10 questions, these questions will be related to knowledge on options, let the account holder answer these, based on the score suggest him:
Not to trade as his knowledge is not up to the minimum expected mark, he can continue to trade after clicking on a condition that he understands the risk.
Or you could allow the user to set a maximum loss amount after which his account gets automatically disabled for trading for rest of the day (or few days).
Stoploss is for one trade. What I am suggesting is for combined losses from multiple trades. Stoploss hits when unrealized profit goes below certain amount, my suggestion is for realized profits only. So it’s entirely different.
Exceptionally good idea, having this option in Intraday! but considerably there should be an option
allowing a trader to take a positionaly trade (in prespective of recovering revenue partially)
So its again a traders call, what if he/she gets a chance to exploit on a particular day and mint some money!?
I think the idea is good but there is no evidence or stats that it will work. I think those who want to lose the money by overtrading will lose it eventually no matter what.
Client will select this option only when he makes huge loss. At that point he will be stressed and may take wrong decision and loose again. Some cases where they will never ever trade again.
Hi Nithin
Nice idea. I also want to add one idea to this concept- we should be able to put a MAX LOSS per trading day and if it breaches trading should be blocked for the day…
Your comments on this
