Intraday stock trader par excellence
G. Bharadwaj is one of our oldest clients and has been consistently profitable. If I had to talk about percentage returns in terms of capital in his trading account over the last 3 years, it will be an obscene number, mainly because of his trading style. He has requested us to not disclose his first name and share only the photo given below. Bharadwaj, apart from being a winner in the Zerodha 60-Day Challenge, has also been up consistently over the 3 years he has been trading with us.
Name: G. Bharadwaj
Profession: Trader by the week and civil engineer on the weekends
Hobbies: Movie buff, in a theatre almost every alternate day.
Find following an interaction with him on August 24, 2013:
How did it start?
My father used to invest in stocks and I got exposed to the world of financial markets pretty early in my life. I started trading in 2001, a bear market which ran until mid-2003. This was also a time when there was a lot of trial and error, making less and losing more, actually losing my entire trading capital multiple times. The good thing was that at any point of time I would not have more than Rs. 10,000 in my account, so I could come back to trading again.
What happened next?
I realized that there is no point randomly betting on stocks, it was more gambling than trading. My enthusiasm for the markets was growing higher by the day; I started attending seminars, workshops and reading books on the markets. This is also when I realized that there is an interconnection between exchanges, sectors, stocks, news and global markets. I realized that my strength was to recognize an opportunity in a stock when there was a movement in any of the other factors mentioned above. I also knew now that such an opportunity would only be available for probably a few minutes, hence ended up being an intraday trader. What I also like about intraday trading is that you don’t carry any baggage or overnight risk. The preference for intraday trading was also probably because of quite a few hits I took on my long/buy overnight positions when I started.
So you are essentially a scalper? For everyone reading, a scalper is essentially a trader who is in and out of a trade within a couple of minutes or so.
Yes, I am. Today I take over a hundred trades in a week and only equity trades.
But why equity and why not futures or options? Why not the Nifty which is the most active or why not individual stock futures and options?
This is my personal view, when trading the Nifty, it reacts to every good and bad news that is out immediately whereas a stock might take a couple of moments to do so, just enough time for a scalper like me to get out if I feel I am wrong or get in if I see an opportunity.
Why not stock futures, is basically because it won’t give me the flexibility to vary the size of my trades.
I have tried my hand at futures and options a few times, but wasn’t successful at it and hence stick to only intraday equity trading now.
Can you share insights on your strategy?
I am usually tracking stocks that the tipsters, research desks and media are talking about. Usually these would be the ones which will be the most liquid and also giving you the highest volatility intraday. I typically would look for any divergence these stocks which are stronger/weaker display when the index moves.
Assume that Tata Steel is among the liquid stocks today and has been showing strength. To determine strength and the trend, I follow very basic technical analysis. During the day, if I see Nifty suddenly spurt up, I would get into Tata Steel knowing that it has the highest probability of moving up since it is among the strongest stocks today. Similarly on a bearish day for Nifty, I will look at the weakest stocks and look for opportunities to short.
I also sometimes take counter trend trades, when a stock comes down to its support I would buy expecting a quick bounce and when it comes to its resistance I would sell expecting a small dip. Again, this would be all on the most active stocks for the day.
What is the backbone of my strategy is watching the market depth window. Once I have narrowed down on the stock I want to trade, I open the market depth window and look at the Nifty chart to identify opportunities. No method for this, it is based on how I feel.
That is basically just reading the tape or gut based trades, has it worked for you till now?
Yep, you could say that the final decision to take my trade or not is gut, but there is a method that goes into choosing the stock I want to track and then trade. In between 2004 and 2010, though I was gross profitable, I ended up paying a lot of brokerage (more than Rs. 50 lakhs in this period) which ate into my trading account and didn’t allow me to pull out any serious net profits.
The profitability has gone up considerably since starting at Zerodha because of the extremely low costs. I typically would have only around Rs. 50,000 in my account at any point of time, but have managed to consistently withdraw trading profits of between Rs. 1 lakh to Rs. 2 lakh every month from when starting with you guys.
What is the reason for keeping only Rs 50,000, part of money management?
Typically, some of the rules I follow on my intraday trades is to exit as soon as there is Rs. 1000 loss and exit profits at Rs. 2000 or more. Usually when a position of mine is in profit, I ensure that it never runs into a loss by constantly moving up the stop loss.
At the end of every trading day any profit over and above Rs 50,000 is withdrawn to my bank account. The reason for Rs. 50,000 is because this is the size I am comfortable with and also ensures that I don’t lose more than Rs. 50,000 in a day since I am a very aggressive trader. At one time I am tracking just one stock and usually buying/selling the maximum possible with the Rs 50,000 in my account.
How will you scale your trading if you can’t increase your trading capital?
Yes, that is a problem, something that I have to personally work on.
Which stocks would you typically trade on?
Over all the years of trading, I have a list of my favourite stocks, but on a particular day I might end up trading a stock out of this list. I prefer stocks which are in the price range of between Rs 50 to Rs 500 like DLF, SAIL, RCOM, Tata Steel, etc.
What percentage of your trades are successful?
If you are talking about trades which meet my objective of getting profits of Rs. 2000 at least per trade, I guess around 40%, but since I don’t let my profitable position ever turn into a loss, I am usually right between 60 to 70% of the times.
I tend to keep it very simple: trade 1 stock at a time with maximum leverage allowed on my trading account. I can take such a risk knowing that there is only Rs. 50,000 in my account and I can’t lose more than that.
Your favourite books?
Reminiscences of a Stock Operator by Edwin Lefèvre
You Can Still Make it in the Market by Nicolas Darvas
Advice for others?
Take inputs from books. If you are lucky enough to interact with profitable traders like in the Winners section of this blog, analysts, etc., it’s good for you, but never copy. I guess it has to be a self-discovery on what works best for you as mentioned on Nithin’s feature.
My challenge is to be able to feel comfortable with a bigger trading capital in my account, only then will I be able to grow as a trader. Getting over this road block is the plan for now.
Reading the tape is how people used to trade when the business of stock exchanges started. Today it is an arm’s race with traders subscribing to fancy charting tools, trading platforms, etc. For all those who say that gut based trades don’t work, I guess Bharadwaj’s track record should break the myth.
Though the final decision of triggering a trade is gut feel, he has a very good money management strategy, keeping only that much in his trading account losing which won’t affect him much. He is also very aggressive but has a method to it by having rules to identify the stock and when to trade.
We wish he is able to break that 50k mental barrier and continue winning the Zerodha 60-day challenges in future.
Do check out the other Winners