Thank You @nithin Sir, For Replying to our querries. Its your sweet gesture and all of you guys that we all are here and are doing something impactful in our lives.
Thank you all 
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@Karthik
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hi - for a small time and risk averse investor who is into the stock market for the long term to reap the benefits, a basic question. if i have 1o stocks that over a period of time have given me good returns due to averaging out and the market, how do i retain my initial investment and take out the profits for further investment or others? because any positions taken out will only entail me entry at a higher level 
so are newer stocks the way to go to build a corpus?
What’s the difference between investing in the same stock on bse and nse? If I buy units on both exchanges will they be listed separately on zerodha? And do they have to be sold separately.
This is my noobest of noob question.
I had written about stoploss hunting sometime back.
Stop-loss hunting
This is one of those seemingly technical terms that is thrown around a lot but has no substance. This particular conspiracy theory was discussed on the TV panel mentioned earlier.
I have been in the business of trading and dealing with retail traders for two decades now. I’ve personally interacted with tens of thousands of traders in person, over e-mail, on online communities, and on our very active forums like TradingQ&A, Z-Connect, and Varsity. I can say with great certainty that the single biggest reason why retail traders lose money is by trading actively with no stop-loss to the trading strategy. Many claim to make a mental note of the stop-loss, but only a few actually place stop-loss orders. And the majority of those few who do, cancel or modify as the price starts closing in on the stop-loss. So, in reality, the significant majority never really have a real stop in place when trading. So if there is no stop, what can someone really “hunt”?
Secondly, over 80% of all trades today are on extremely liquid Nifty and Banknifty contracts. Assume Nifty is at 11010, and you get to know that at 10990 there are a lot of stop-loss orders. What can you do about it? Somehow magically take the market down by 20 points, fill those orders, and then take it back up? Even if someone did have deep enough pockets to move the price to a stop, how could this possibly be a profitable trading strategy in a market where there are lakhs of traders with different views, big and small, where no one person can control the direction of the market?
The only place where “stop-loss hunting” or forcing clients out of positions is profitable is again on a CFD / Binary trading platform, where the platform is the counterparty to every client position. The platform can potentially hit any manual stop in place or push the price to the extent where the risk management system auto squares off positions for insufficient margins. This is the reason why most of these platforms give extreme 100 to 200 times leverage to trade.
On a regulated exchange platform, this isn’t possible. Exchanges also have alert mechanisms that trigger anytime the buyer and seller on both entry and exit trades are the same clients. This immediately gets escalated and the broker is required to provide an explanation. There are severe penalties and regulatory ramifications for such activities.
Tick by Tick (TBT) feeds: Finally, stock exchanges provide what is called tick by tick (TBT) data feed where you can track every single order, trade, any modification happening on the exchange. This data contains details of trades and pending orders at the exchange level, across all brokers. So if someone did have a strategy like “stop-loss hunting”, trying to figure out retail orders, etc, the best option would be to subscribe to exchange TBT data feed. It’s quite complex and expensive, but available to anyone, and is offered by almost all Indian and global exchanges.
But there are frauds that happen in the market:
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hmm… I don’t think that is the right way to look at this. You should look at an average price of your overall acquisition and think of that average price as your real price if you are exiting a portion of the stocks you bought. Yes the buy price that shows on the platform will be based on FIFO and it will show the buy price of the most recently bought stock. But that is just for reference and taxation purposes, you would know that you have booked profits on this particular stock bought at cheaper prices.
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There is no difference. It is like buying Tata motors car from two different showrooms, makes no difference.
When you buy stock from either of the exchange, it will show up in your demat account with no exchange tagged to it. You can then sell it on whichever exchange you want.
Dear @nithin
How capital gain calculated on physical settlement of stock. I got different opinion on different platforms and experts. So I just little bit confused. Please brief:
For e.g.:
I sold 1 lot of SBIN PE @ strike price of Rs 500 at Rs 20 and the same is deep in the money and the position is physically settled(Closing price of SBIN on expiry day is Rs 430).
Now my question is acquisition cost( for capital gain purpose) of SBIN would be Rs 500(i.e. strike price)
Or Rs 480( Rs 500- premium received)
Or Rs 430 (closing price of underlying).
Thanks
Have you ever done Intraday Trading yourself? If yes, what trading strategy worked for you the best? @nithin
(the strategy may or may not work currently, but just curious)
Can billionaire manipulate the market heavily and make profits as if he buy any stock futures heavily due to which its price shoot up then he immediately sell it and make profit ?
Hi @nithin
you have mentioned below statement in a blog
“Probably among the best careers on this planet, but as I said earlier it also requires some inborn skills and it is best to stop if you don’t see it in you.”
I would like to know when should one stop trading…? if a person stays with his initial capital without blowing account after 2 to 3 years(but not earning profits) do he need to stop trading…? any ideal time zone with correlating to capital and profit/losses…?
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- Selling a put: You have an obligation to buy the security at a predetermined price from the option buyer if they exercise the option.
This predetermined price is the strike price. Your acquisition cost = strike price. You can use this for calculating capital gains. This is straightforward.
The tricky part now is what P&L do you consider for your short option trade. Since the option got exercised, I think you should consider the entire premium received as a profit.
So in your case,
SBIN stock, acquisition price = Rs 500
SBIN PE, short at Rs 20 & buyback at 0 = Rs 20 profit
The current price of SBIN is Rs 430. Unrealized loss of Rs 70 on your holding and Rs 20 realized profit on options. So your current loss (realized + unrealized) = Rs 50 which is correct.
I think this is the right stance to take. I hadn’t really thought about this since physical delivery is such a new concept.
@Nakul how are we handling this on Console P&L?
I have done intraday trading for a decade+ before Zerodha. I stopped once Zerodha started. @Nik continued trading and has now set a hedge fund. He is a phenomenal trader and I have had it on my list of things to do to interview him and ask about his trading style. Will try to get this done soon.
Btw, this is a post from 2013.
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It isn’t that easy to get in and out of large positions. Most large traders lose tons of money just trying to buy and sell. When someone is trying to buy or sell large quantities markets automatically starts moving up or down. In an illiquid mid cap stock, you can sometimes lose 10 to 20% trying to buy just Rs 10 crore worth of stocks. So typically when large traders take positions, they do it slowly and over many days. So it isn’t easy to suddenly just sell and make a profit, even exiting has to happen slowly. But markets are smart, when someone large is exiting a position, markets tend to fall much quicker as well.
Of course in a liquid stock, the impact cost isn’t as much. But you can’t just move the price up of a very liquid stock easily.
But pump and dump scheme is very common in penny stocks. I had written about this here. Do check it out.
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Trading is very addictive and requires you to be brutally honest with yourself to determine the stoploss. Firstly if you aren’t enjoying trading and it is adversely affecting your personal/professional life, you should stop it immediately or reduce your trading size to where outcomes have very little effect. Most people end up continuing trading after a loss just to recover the losses (revenge trading) and that is like being in quicksand, the harder you try the worse the situation becomes.
I think giving yourself 3 years is a fair time. If you aren’t able to consistently make a profit even after 3 years, I think you should stop active trading.
I think the most important aspect of trading is the ability to make peace with worst case outcomes. So knowing that you can potentially blow up all the money in your trading account and only keeping as much money there losing which won’t affect you personally is the optimal way to trade.
Do read through some of these posts that I have linked in this comment.
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I know it is a way for fewer people to lose lesser money, but I believed having leverage and trading with securities approximately 2x-5x more than your capital was one of the stock markets’ greatest plus points.
So Considering how few Indians are actively involved in the capital markets, Don’t you think the new SEBI Rule of 100% margin required for intraday trades, is very discouraging for (aspiring and active) traders? Curious to know your thoughts on this. -
Why does the quantity freeze for Nifty/BNF options keep changing/decreasing? For ex.: It was 5000 for Nifty options a few months back and now it is at 1800.
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Also - If you do not mind sharing, how much was the capital with which Zerodha was started? And how long did it take to breakeven?
There is still leverage available right? You can trade stock at 5x and all F&O anyways have leverage built into it. What SEBI isn’t allowing is leveraging over and above this. I think before this rule kicked in, it was the wild wild west with brokers giving unlimited amounts of leverage to attract customers. Leverage is like WMD (weapons of mass destruction), a systemic risk that could bring the entire system down.
Let me give you an example of a close shave the industry had. Last year crude on one of the expiry days settled at a negative price. Thankfully for us, SEBI had asked MCX to shut down exchanges by 5.30 pm and not the otherwise 11.30 pm when international markets close. So all intraday positions on that day were closed by 5.30 pm. That day with the 15% margin for crude, the industry had bad debts of over Rs 300 crores when the end of the day positions was settled at a negative price. If the markets were open and brokers were giving additional intraday leverage on Crude oil contracts, that loss could have been Rs 3000 crores. Many brokers would have gone bankrupt and that loss could have been more than the money available with the MCX settlement guarantee fund, which means that it could have taken down MCX clearing corp along with it.
So yeah, it was prudent for SEBI to have preemptively done something about this.
Customers who trade using excessive leverage, eat like ants and shit like elephants. By this what I mean is that since the leverage is high, traders are fearful and exit with small profits. And every once in a while there is a big move against the trader where the losses are quite huge.
I personally think it is a good move for the industry and the trader. By the way, this isn’t really good for the brokerage industry and us as a business in terms of revenue. Leverage leads to more trades and hence higher revenue for the brokerage business. But that said, what is not right for the customer can’t be right for the brokerage business in the long run.
I think exchange has been tweaking with this to reduce the instances of freak trades. Essentially market orders that move the price up and down quickly. Check this
~Rs 1.5 crores. We used Rs 90lks to pay as a deposit to get a membership on the exchange, Rs 20lks to do up our office and set up our websites, and Rs 30lks was really what was left on the table to run the business on day 1. We got super lucky to get here without having to raise any more capital after that. I don’t think it is possible to do this today.
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Why @zerodha Not Developing Charting Platform-like trading view.
Because trading view (TV) charting is available as a commoditized product. It is available on Kite as well. Check this article on how to switch between ChartIQ and TV
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If the futures is trading at premium does it signifies to go long and if it’s trading at discount to go short.
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