Live To Trade Another Day: Zerodha's Nithin Kamath On Risk Management Trait Of Successful Traders

All successful traders share one skill in common i.e. strong risk management. Zerodha Co-founder Nithin Kamath recently shared insights from legendary trader Jerry Parker on managing market volatility, minimising losses, and maintaining discipline. Kamath has spent years studying market trends. He shared the importance of risk management especially during volatile market conditions. In a turbulent market condition, fear usually takes over. "This has become all the more important in markets like these when fear takes over and having an objective mindset becomes harder," he said, in the social media post.

Through a post on X, Kamath talked about key lessons from a podcast featuring Jerry Parker, one of the original Turtle Traders, a group trained under Richard Dennis’ trading experiment.

'Live to Play Another Day'

Parker stresses the importance of protecting capital during downturns. "When you have a drawdown, you reduce your positions twice as fast as the drawdown," he explains. If a portfolio drops by 10 per cent, traders should cut their positions by 20 per cent. "That one rule always works," he says. "It keeps you from losing too much and lets you live to play another day."

'Cut Losers, Let Winners Ride'

One of the most common mistakes traders make is holding onto losing positions for too long while exiting profitable trades too early. Parker explains this psychological trap: "When you have a loss, you’re hopeful it will turn into a winner, but you should be fearful it will get bigger. And when you have a big profit, you’re fearful it will shrink, but you should be hopeful it turns into a huge winner."

The Biggest Pitfalls: Over-Trading and Ignoring the System

According to Parker, traders often derail their own success by failing to stick to a disciplined approach. "Over-trading and not following your system," he says, recalling a conversation with Richard Dennis, who identified these as the most common mistakes. Dennis had a direct response when asked about trader missteps: "Oh, over-trading and not following your system."

Kamath echoes this principle, emphasizing that discipline is the differentiating factor in an unpredictable market. "Markets are unpredictable, but discipline is in our control. The best traders know when to step back, stick to their rules, and not let emotions dictate their trades."For both new and experienced traders, the message is clear—risk management is the foundation of longevity in the markets. Trust the system, control risk, and, above all, "live to trade another day."