Mandsaur’s Nikhil Zelawat chose a different path by first turning into a trader and then a fintech entrepreneur by selling two of his most frequently used tools to other traders – trade journals and emoji-based stock screeners.
The Bank Nifty options trader opens up about his journey, ups and downs as well as his trading tools. Edited excerpts from a chat with Zelawat:
We see a lot of software engineers getting into options trading. How did it all begin for you?
After finishing my BTech from a college in Indore, I worked in Bengaluru for a couple of years and then decided to quit my job and turn into a full-time trader with support from my mentors whom I met at workshops.
Since I was a coder by heart, I started building systems for my trading. I wanted it fully automated, where everything is predefined – my entry, exit and stop loss. For example, if Nifty opens higher by 100 points, then there will be a specific trade. If the market opens with a gap-up or gap-down of more than 1%, then we may not run a sideways system.
Tell us more about the strategies that you run on a given day.
Now I run 3-4 different types of strategies suited for sideways or trending markets. Overall, it has been profitable with limited drawdowns.
In the options segment, I run 3-4 strategies, and there are also another 3-4 BTST systems that run in the cash market.Now I spend a maximum of one hour in the morning and also spend some time later in the evening for markets. The biggest advantage has been that over-trading has reduced since I have started relying on my systems. Earlier, I used to override the system, but now I have stopped doing that. It also saves time and allows me to focus on other ventures.
Since you appear to be obsessed with following rules, building systems and automation, share some experiences about the tools that helped you in your journey.
Ever since I started trading, I have maintained a habit of journaling the logic behind each and every trade I make. The journal helps me in recalling why I made that trade in the first place. It helped me to figure out a trend of what worked for me and what didn’t. Earlier, I used to do that in excel sheets. But now, using our platform called TraderSync, other traders can also log their trades directly using API integration with various brokers.
The second tool has been that of emojis. Earlier in my trading career, when I used to trade stocks I found it difficult to scan through the entire universe of listed stocks in India. I had all the technical data with me but needed to simplify it. Gradually, I built an emoji-based system to simplify that data. For example, I have a screener based on four technical parameters around directions, trends, breakouts and momentum. Now my problem is how do I decipher that data in the simplest possible way. Then I thought of emojis.
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Now I have to look at the emojis – whether the face is angry, sad, happy, elated, etc. If I want I can deep dive into all the technical parameters, but otherwise, the emojis make it simpler to understand and take a call accordingly. I also use fundamental screeners and so if that screener shows an angry emoji, then I may not take a trade or keep a strict stop loss or reduce position sizing.
Trading, more so in derivatives, is never a one-sided match. You lose some and win some. How have you learnt to manage drawdowns?
That happened after a series of hits and trials. In the past, my portfolio went negative at least two times. But gradually, as I started relying more on my systems, the drawdowns have now reduced to 5-10%.
In FY23, I made good returns from my options account, but the cash market trades weren’t very encouraging.
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