On this interview with ETMarkets on the sidelines of the Merchants Carnival, Bangalore’s star dealer Sivakumar Jayachandran explains the important thing basic rules that assist him earn money inside a small window of simply 3-5 minutes as an possibility scalper.
Siva, as he’s popularly identified, shuts down his buying and selling terminal as soon as he has achieved his goal of creating a 1% revenue after which begins coaching different newcomers within the markets.
Edited excerpts from a chat:
What made you give up the consolation of a well-paid job within the healthcare trade and play together with the vagaries of the inventory market?
I used to be one of many 4 senior managers in a healthcare startup, which was rising quickly at that time of time in Bangalore, once I noticed my juniors being profitable out there throughout the bull run from 2006 to 2008. I used to be being profitable however needed some passive earnings to retire on the age of 40. I bought lured into the market at the moment, considering that if these guys, who have been working below me, may make a lot cash, then why can’t I?
However I didn’t have any primary data, and once I began investing, the market began falling. My Rs 10 lakh portfolio got here right down to Rs 1 lakh, and I offered it. As any novice dealer would do, when you lose cash in shares, you need to discover the F&O market. From 2013-14, I used to be constantly dropping cash until I began studying play the sport.
So what was the revelation that modified your buying and selling journey?
After understanding how choices work, I realised that scalping would work greatest for my buying and selling fashion. Scalping is all about taking a place and holding it for two-three minutes. We attempt to shut the place inside quarter-hour. You make fast cash and get out of it.
The one drawback is that as a scalper, you might not be capable to scale up. The reason being you must punch in your orders and get an exit additionally inside 3-5 minutes. You might not be capable to put in most portions because the sellers, who can maintain their positions for days and weeks collectively. That’s the solely drawback for a scalper, however your benefit is that each one your actions occur inside quarter-hour. All of your feelings will probably be accomplished, whether or not pleasure or sorrow, inside quarter-hour. There’s no danger of carrying in a single day positions. You possibly can spend the weekend with your loved ones with out worrying about how the market will open on Monday.
As soon as I decoded this, I began scalping from small capital and progressively elevated it. If I made a 1 per cent return in a day, I’d cease buying and selling.
What are the important thing rules that you simply observe as an choices dealer?
1) I exploit the day gone by’s revenue as a cease loss. Think about you made Rs 1 lakh yesterday, and at present your cease loss is at Rs 1 lakh, then you definitely received’t have any main danger whereas getting into the market at present. In case you lose your capital, it all the time hurts extra. However if you happen to lose your revenue, then you possibly can all the time make that cash once more. This precept has actually reworked me.
2) I additionally don’t put all eggs in a single basket. I cut up my capital in 5 totally different accounts. After being profitable in a single account, I shut it and transfer on to the subsequent one, considering that I’m beginning the day afresh. That approach, I shield my revenue, which I made within the different account. This has helped me construct my psychology to be a greater participant by way of how I can enhance my success fee. Now in comparison with the previous, most likely 90-95% of my trades are doing constructive, and the remaining 5% are in loss. However as a result of danger administration, which I’ve adopted, I can simply make 15% in a month.
3) I do know my limitations as an possibility purchaser. I can not preserve scaling it up. With a capital of Rs 1 crore, if I could make Rs 1 lakh in a day, I don’t require greater than that. The place will I spend a lot cash? We have to preserve telling ourselves the place to cease. Some folks simply need to preserve compounding after which lose every thing sooner or later. That makes a number of distinction.
So what do you do after these 3-5 minutes of buying and selling are over?
For the remainder of the day, I give attention to different parts like constructing my platform OI Pulse and conduct mentoring and coaching programmes.
How massive can your drawdowns be in choices?
It may be a most of 10% of the capital deployed. Usually, I don’t deploy over 30% of my capital in a single commerce, which implies that the general danger is round solely 3%.
Is it that simple to earn money in simply 3-5 minutes?
The problem is how rapidly you possibly can see all the info round you and execute it. It’s a sport of quickest finger first. It’s worthwhile to be good at understanding and analysing the info. F&O is all about hypothesis. It’s worthwhile to speculate earlier than somebody speculates that. You realize that solely 10% of the group makes cash, and the remaining 90% find yourself in a loss.
Why do you select to purchase choices and never promote?
It’s a delusion that possibility patrons don’t earn money. We are attempting to interrupt that delusion. Think about if there are solely sellers out there, do you suppose the market may survive? You possibly can’t preserve promoting the product if there is no such thing as a purchaser.
In case you are doing bare promoting, then you may have limitless danger. Even in case you are doing a unadorned shopping for, you may have a danger associated to the choice premium. Each patrons and sellers have equal alternatives, however sellers do have an edge.