For traders riding the highs and lows of volatile markets, success often looks like luck. But as Zerodha co-founder Nithin Kamath reminds us, it's not luck — it's discipline.
Reflecting on lessons learned from years of trading and broking, Kamath took to X to say, "The one common element to (successful traders) success and longevity is risk management."
And in times when fear clouds judgment, Kamath stresses, managing risk isn’t just important, it's everything.
Kamath highlighted takeaways from a podcast with Jerry Parker, a legendary "Turtle" trader trained under the famed Richard Dennis and Bill Eckhardt.
Parker’s words offer a sharp reminder of why risk management remains a trader’s most powerful tool — especially when markets get unpredictable.
One of Parker’s most crucial lessons is knowing when to scale back and survive for another day. "This is a Turtle Rule. That when you have a drawdown, you reduce your positions twice as fast as the drawdown. So, if you’re down 10%, you should reduce your positions by 20% and so on," Parker explains.
He notes that while this rule comes from a time of large trades and short-term bets, "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."
Parker also underlines a fundamental psychological hurdle every trader faces: the instinct to act opposite to what the situation demands. "I used to say, 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," he says.
Conversely, "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."
But even seasoned traders slip. Parker admits, "Most of that has come from, honestly, from over-trading and not following my systems to a T, as a 100%, as much as I could have. Yeah. So, most of that was all self-induced anxiety."
Sharing a lesson from his mentor, he adds, "I asked him, like, one day, what’s the two biggest mistakes we make? Or what are the biggest mistakes we’re going to make? And he’s like, oh, over trading and not following your system."