Algo Trading in India |
  • September 29, 2020
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First and blunt mistake that I did was, thinking I know all about markets, this happens with every beginner, I read some books, watch some videos, take few trades and make some profits, viola! Now am a profitable trader. This is what I thought, but it took years to realize that there are lot more to learn.

Following stock recommendations from Ashwani Gujral to SP Tulsian from CNBC Tv experts. These people just provide stock tips with stop loss and targets, and with each week they come with different stock names.

But once I started tracking their recommendations in Excel, I realized most of them doesn’t work, even if some work, before even we take the trade, target would be hit. Above all, it did not help me in my learning curve. I need to learn

  1. How stock selection can be done?
  2. What are the rules for entry, exit?
  3. How much is too much, what should be no of quantity i should buy?
  4. Where do i keep the stop loss?
  5. How many stocks one should be able track practically?

I was not able to learn any of these, since i was bluntly following stock recommendations from TV experts.

Not knowing Transaction cost involved in a trade. This was another blunder, when I started trading I use to trade with Share khan, back then in 2008 there was no discount brokers like Zerodha.

So when I trade with options segment, I use to pay Rs.100 per lot as brokerage cost. I didn’t know this for many months, only after checking the contract notes later realized, I not only pay brokerage, I had to pay

  1. Stamp Duty
  2. Securities Transaction cost
  3. SEBI fee
  4. Exchange transaction charges
  5. Service tax on brokerage (back then no GST)

Only after all these cost, my net profits are calculated, to realize this it took months. Later from 2010 I started trading with Zerodha.

Trading based on News, this is yet another blunder, by now I realized there is no use in watching in TV experts, let me become my own expert, so i decided to watch breaking news or scan for all important news in Economic times to check for hot stocks/sectors that are on the news. I short list such stocks, if i see quarterly results of any stocks and if the news is bad, by default my mind thinks, i should short it, as soon as market opens, I just short

And burn the fingers, because most of the time, stocks with bad quarterly results after big gap down, tend to move up. Similarly after good quarterly results, stocks that open with big gap up, tend to move down. Learnt this only after losing money.

Of all, the biggest mistake that I later in my career was thinking Algo Trading is money making machine, all i need to do is crack the code and find that winning algorithm that would keep making profits day in and day out. So during early 2014, back then there was no API, no automated trading facility, I need to shell out almost 1.5 lacs to set up my own auto trading system. I did most extensive data analysis, and tried creating a wonderful strategy(which i thought, but it was just a curve fitting system) that worked for few months and then nose divided.

Later realized the best trading system out there are the most simplest one, without any complicated indicators. We just have to be disciplined enough to take each and every trade without thinking about the outcome and that really helped a lot. After all, its in our own hands, its the trader who trades that trading system makes money, not just the trading system alone.

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