As the stock market continues to make new highs, the interest of retail investors is also increasing in it. Discount broking firm Zerodha has advised retail investors to avoid greed. Nitin Kamat, CEO of Zerodha has clarified some of the assumptions about algorithmic trading.
In algorithmic trading, automated pre-programmed instructions are provided for certain variables such as time, price and volume. In this, an attempt is made to take advantage of using the speed and power of calculations of computers as compared to manual trading.
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In a tweet, Kamat said, “I keep hearing that algo traders make huge profits. This is not true. Algo trading doesn’t have emotions and it’s as good as the person writing it or controlling it. He is the one who faces fear and greed.”
He told that like any other trader, there are profits and losses in algo trading too.
Kamat said, “The unsophisticated traders try to fix their entry and exit timings and often they enter late and exit early. This happens with algo traders as well.”
Advising retail investors, Kamat said that there is no easy way to make sustained profits. No trading method guarantees this. It is important to control fear and greed to increase your chances of making profits.
He said retail investors should trade with only the amount they can afford to lose.
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