Zerodha founder and CEO Nithin Kamath shares how a trader can turn profitable by generating this much return yearly.
On Monday, he shared that an active trader should generate a minimum return of over 20% to break even yearly on their portfolio. He specified that the the return suggested is to offset the capital and the impact costs.
He termed the suggested return in his tweet as ‘high and tough’ for active traders. He added that traders fail to realise that they pay a good chunk of their capital as costs.
At Zerodha the statutory costs incurred are more than trading costs
~20% of active traders incur ~80% of total costs. This must be similar to most brokerage firms
Trivia: STT + Stamp paid by our customers is more than the Income tax paid by the 25th largest company in India. 4/4— Nithin Kamath (@Nithin0dha) June 28, 2021
“At Zerodha the statutory costs incurred are more than trading costs
~20% of active traders incur ~80% of total costs. This must be similar to most brokerage firms
Trivia: STT + Stamp paid by our customers is more than the Income tax paid by the 25th largest company in India. 4/4,” Nithin said in a tweet.
This breakeven % is a high hurdle as most traders take largest possible positions every trade with their capital without considering costs
The way to reduce the impact of costs & increasing the odds of winning is by reducing the trading size (% of capital deployed per trade) 3/4— Nithin Kamath (@Nithin0dha) June 28, 2021
Nithin further shares that the break-even percent is a huge hurdle as as most traders take largest possible positions in every trade with their capital without considering costs. Nithin further added the method to reduce the impact of costs & increasing the odds of winning- by reducing the trading size (% of capital deployed per trade).
What most traders don't realize is that they pay a good chunk of their capital as costs. If you add impact costs, the minimum return an active trader should generate to break even yearly on their portfolio is usually well above 20%. Yep, that high and that tough.
1/4— Nithin Kamath (@Nithin0dha) June 28, 2021
He added in another tweet, “What most traders don’t realize is that they pay a good chunk of their capital as costs. If you add impact costs, the minimum return an active trader should generate to break even yearly on their portfolio is usually well above 20%. Yep, that high and that tough.”
