I listened to @bhatiamanu interview with @iarjuntandon
on Groww.
To save you time, here's curated notes of key insights from this spectacular 49-min episode.
Here are 28 key takeaways from this interview π§΅:
Collaborated with @AdityaTodmal
on Groww.
To save you time, here's curated notes of key insights from this spectacular 49-min episode.
Here are 28 key takeaways from this interview π§΅:
Collaborated with @AdityaTodmal
1/ How engineering background helped him to be process driven:
β’ His engineer background helped him to backtest the data and analyze it.
β’ It took 7-8 years to find an edge and some grip on the markets.
β’ His engineer background helped him to backtest the data and analyze it.
β’ It took 7-8 years to find an edge and some grip on the markets.
2/ Always look for return to maximum draw-down:
β’ He started off with a small capital of Rs. 4lacs.
β’ Given the capital was small, he used to take draw- down (DD) of 30% and used to aim for 200-250% return.
β’ He started off with a small capital of Rs. 4lacs.
β’ Given the capital was small, he used to take draw- down (DD) of 30% and used to aim for 200-250% return.
3/ He considers himself as a conservative trader:
β’ With higher capital, now his threshold is 10% of DD.
β’ In the first 6 months of any FY, he prefers to play safe & if he manages to capture 70% return, then he would stake 20% of the profits + 10% of DD to aim higher returns.
β’ With higher capital, now his threshold is 10% of DD.
β’ In the first 6 months of any FY, he prefers to play safe & if he manages to capture 70% return, then he would stake 20% of the profits + 10% of DD to aim higher returns.
4/ Return expectations:
β’ He targets a 30% REAL RATE OF RETURN.
β’ Real rate of return = adjusted for costs, taxes and inflation.
β’ If one is able to do this, he/she can compound his/her capital to 14x at the end of 10 years.
β’ He targets a 30% REAL RATE OF RETURN.
β’ Real rate of return = adjusted for costs, taxes and inflation.
β’ If one is able to do this, he/she can compound his/her capital to 14x at the end of 10 years.
5/ Risk Management practices:
β’ He focus on Risk per trade (RPT):
β’RPT helps a trader to calculate correct position size.
β’Let's say you decided to not lose 1% of your capital on a single trade (10 lakh capital).
β’Hence, your RPT is Rs. 10,000.
β’ He focus on Risk per trade (RPT):
β’RPT helps a trader to calculate correct position size.
β’Let's say you decided to not lose 1% of your capital on a single trade (10 lakh capital).
β’Hence, your RPT is Rs. 10,000.
β’ Lets say your entry price is 400 & Stop loss is of 30 points.
β’ Maximum qty to trade = RPT divided by SL
- Max qty = 10000/30 = 333
β’ Capital to be deployed = max qty Γ entry price
- Cap to be deployed = 333*400 = Rs. 1,33,200
β’ He never likes to go over 2% RPT.
β’ Maximum qty to trade = RPT divided by SL
- Max qty = 10000/30 = 333
β’ Capital to be deployed = max qty Γ entry price
- Cap to be deployed = 333*400 = Rs. 1,33,200
β’ He never likes to go over 2% RPT.
6/ Overall Portfolio Level Risk:
β’ His predefined risk is 5% at portfolio level for positional trades.
β’ At the close of trading hours i.e. around 2.45 - 3pm he evaluates the potential risk of his total exposure assuming the market would open with a circuit the following day.
β’ His predefined risk is 5% at portfolio level for positional trades.
β’ At the close of trading hours i.e. around 2.45 - 3pm he evaluates the potential risk of his total exposure assuming the market would open with a circuit the following day.
7/ Maximum risk defined basis worst case scenario:
β’ If the portfolio wide risk is more than 5% he would either cut down some exposure or hedge a part to it so that at any given point in time his open risk is not greater than 5%.
β’ He is totally in control with his open risk.
β’ If the portfolio wide risk is more than 5% he would either cut down some exposure or hedge a part to it so that at any given point in time his open risk is not greater than 5%.
β’ He is totally in control with his open risk.
8/ Intraday vs. positional:
β’ Earlier due to intraday margin/leverage benefit, 80% of his profits came from intraday.
β’ However post the new margin rules the contribution from intraday is 60% and the balance 40% is from positional.
β’ Earlier due to intraday margin/leverage benefit, 80% of his profits came from intraday.
β’ However post the new margin rules the contribution from intraday is 60% and the balance 40% is from positional.
9/ Diversification of the risk in positional:
β’ Within positional, he diversifies his total risk by taking exposure in weekly options, monthly options.
β’ Basically exposures are taken on different expiry days within the same instrument.
β’ Within positional, he diversifies his total risk by taking exposure in weekly options, monthly options.
β’ Basically exposures are taken on different expiry days within the same instrument.
10/ Discretionary or systematic trading:
β’ 60% of his trades is systematic/mechanical.
β’ 40% is discretionary trading.
β’ Systematic trading is a way of defining trade goals, risk controls and rules that can make trading decisions in a methodical way or process driven.
β’ 60% of his trades is systematic/mechanical.
β’ 40% is discretionary trading.
β’ Systematic trading is a way of defining trade goals, risk controls and rules that can make trading decisions in a methodical way or process driven.
11/ Benefits of systematic trading if built into algo:
β’ Reduces human error.
β’ Lesser screen time.
β’ However one needs to learn the edge and then built into the system.
β’ The edge comes with market experience and more screen time.
β’ Reduces human error.
β’ Lesser screen time.
β’ However one needs to learn the edge and then built into the system.
β’ The edge comes with market experience and more screen time.
12/ Best of both worlds:
β’ He has been a systematic trader for most part of his trading career.
β’ In the past 2 years he has started doing discretionary.
β’ He has been a systematic trader for most part of his trading career.
β’ In the past 2 years he has started doing discretionary.
β’ He strongly recommends that a new trader should start with systematic trading as it completely rule based & not dependent on gut/emotions.
β’ For a new trader, discretionary trading decisions may be influenced by emotions, isn't easily back tested, and has less risk control.
β’ For a new trader, discretionary trading decisions may be influenced by emotions, isn't easily back tested, and has less risk control.
13/ Shortcoming of systematic trading:
β’ Rule based trading would have limited variables, however over a period of time, you realize there are certain set ups/patterns which has higher probability of success however the same cannot be built into the system.
β’ Rule based trading would have limited variables, however over a period of time, you realize there are certain set ups/patterns which has higher probability of success however the same cannot be built into the system.
14/ Whatever you focus upon is the best for you:
β’ Manu Sir is a Price action trader as he has invested more time in learning the same.
β’ However he believes that anything works in the market if one properly focus on it and understand all the nuances.
β’ Manu Sir is a Price action trader as he has invested more time in learning the same.
β’ However he believes that anything works in the market if one properly focus on it and understand all the nuances.
β’ Market Wizards book amzn.to which deals with worlds top traders phenomenal success. These traders made money using different set ups and systems.
β’ So whatever one chooses i.e. PA or indicators one has to spend good amount of time to understand and apply it
β’ So whatever one chooses i.e. PA or indicators one has to spend good amount of time to understand and apply it
15/ Ever changing market dynamics:
β’ April 2022 onwards market has been a bit challenging.
β’ 2020-2021 has been very smooth for traders and in year 2022 they are witnessing a 5% DD which they are unable to accept or a new experience for new traders.
β’ April 2022 onwards market has been a bit challenging.
β’ 2020-2021 has been very smooth for traders and in year 2022 they are witnessing a 5% DD which they are unable to accept or a new experience for new traders.
16/ No clear follow through of the trend:
β’ These days there is no much follow through of the trend due to counter gap openings the following day.
β’ This is where discretionary trading has helped to build counter positions basis the system.
β’ These days there is no much follow through of the trend due to counter gap openings the following day.
β’ This is where discretionary trading has helped to build counter positions basis the system.
17/ Should one tweak the system rules?
β’ One shouldn't tamper the system unless it hits the max DD.
β’ Tampering with the system puts you into a bad habit of interfering with the system every now and then.
β’ One shouldn't tamper the system unless it hits the max DD.
β’ Tampering with the system puts you into a bad habit of interfering with the system every now and then.
18/ Going into the loop of bad habit:
β’ One or twice interfering would help you to either maximize your return or reduce your losses, however in the long run interfering with the system every now and then would decline the returns.
β’ One or twice interfering would help you to either maximize your return or reduce your losses, however in the long run interfering with the system every now and then would decline the returns.
19/ Splitting of trading accounts basis trading style:
β’To measure performance and to ensure you don't take counter trades, its better to have two separate accounts for systematic trading and other for discretionary.
β’To measure performance and to ensure you don't take counter trades, its better to have two separate accounts for systematic trading and other for discretionary.
20/ Markets have started changing on structural basis?
β’ Whenever there are fundamental changes in the markets systems doesn't work very well.
β’ Currently its too early to conclude that the markets have changed fundamentally.
β’ Whenever there are fundamental changes in the markets systems doesn't work very well.
β’ Currently its too early to conclude that the markets have changed fundamentally.
21/ How do we conclude that a system has lost its edge an doesn't work anymore?
β’ Max no. of loosing trades historically : If that number has breached.
OR
β’ Max no. of loosing trades historically : If that number has breached.
OR
β’ Max drawdown for given RPT : If this gets breached then he reduces RPT & checks if the system works if it doesn't then he'll trim down RPT even further.
β’However, if the system fails to recover despite being given sufficient time to recover only then he will discontinue it.
β’However, if the system fails to recover despite being given sufficient time to recover only then he will discontinue it.
22/ Choosing uncertain markets over certainty of salary:
β’ In year 2011-12, he took a sabbatical of 1 year to pursue trading.
β’ Things didn't turn out well for him
β’ He realized he is still not fully prepared to be a full time trader and hence he resumed his job.
β’ In year 2011-12, he took a sabbatical of 1 year to pursue trading.
β’ Things didn't turn out well for him
β’ He realized he is still not fully prepared to be a full time trader and hence he resumed his job.
23/ Never give up, keep hustling:
β’ But he was trying to learn while he was working.
β’ He decided that he will quit his job when me makes 2x of his salary in a year.
β’The moment he reached his goal he quit his job to become a full time trader.
β’ But he was trying to learn while he was working.
β’ He decided that he will quit his job when me makes 2x of his salary in a year.
β’The moment he reached his goal he quit his job to become a full time trader.
24/ Advice to traders:
β’ Traders who wish to quit their job & become full time trader should follow:
- For a year your trading income should be atleast 1.5x of your annual package
- Share your progress with your near and dear ones and keep them updated with your achievements.
β’ Traders who wish to quit their job & become full time trader should follow:
- For a year your trading income should be atleast 1.5x of your annual package
- Share your progress with your near and dear ones and keep them updated with your achievements.
25/ An empty mind is a devil's workshop:
β’ When you turn into full time trading you have plenty of time available with you.
β’ Its important to know how to utilize the time 3.30pm.
β’ Know how to channelize your mind in the right direction by focusing & doing positive things.
β’ When you turn into full time trading you have plenty of time available with you.
β’ Its important to know how to utilize the time 3.30pm.
β’ Know how to channelize your mind in the right direction by focusing & doing positive things.
26/ Manu Sir's daily routine:
β’ 9am-3.30pm markets
β’ He goes for a walk post 4pm
β’ He then spends his time with his daughter
β’ He loves to cook and eat and hence experiments new stuff in the kitchen
β’ 9am-3.30pm markets
β’ He goes for a walk post 4pm
β’ He then spends his time with his daughter
β’ He loves to cook and eat and hence experiments new stuff in the kitchen
β’ 3-4 months every year, he likes to research on the market or his set up which he does late in the night when there is not much disturbance
27/ Manu Sir's take on Social Media (SM):
β’ If utilized in a proper way SM could be a very powerful tool to speed up the learning curve.
β’ Research on the specific handles/channels and try to learn.
β’ Stay away from useless debates or topics which doesn't help you to grow.
β’ If utilized in a proper way SM could be a very powerful tool to speed up the learning curve.
β’ Research on the specific handles/channels and try to learn.
β’ Stay away from useless debates or topics which doesn't help you to grow.
28/ Advice to new traders:
1. Start with systematic trading.
2. Get a system in place before placing your order.
3. Be ready for setbacks and failures. Consider trading as a marathon and not as a sprint.
1. Start with systematic trading.
2. Get a system in place before placing your order.
3. Be ready for setbacks and failures. Consider trading as a marathon and not as a sprint.
Here's the link to the interview in case you wanted to watch it.
I hope this breakdown was helpful to you.
youtube.com
I hope this breakdown was helpful to you.
youtube.com
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