‘Trade Only What You Can Lose’: Nithin Kamath Flags Extreme Trading Risk As Metals Hit Lower Circuits In Commo

Zerodha CEO Nithin Kamath has cautioned traders about the dangers of extreme market volatility after a sharp and unusual crash in commodity markets. In a post on X, Kamath said there are rare trading days when risk management completely fails, leaving both traders and brokers exposed to heavy losses.

He explained that during such events, market movements are so violent that losses can exceed a trader's initial margin, with no option to exit positions.

Metals Hit Lower Circuits in Rare Market Move

According to Kamath, the previous trading day was one such rare instance. All major metal commodities hit their lower circuit limits, which is the maximum price movement allowed in a single session. Silver reportedly fell by nearly 30 per cent, while gold dropped around 15 per cent. Other metals followed the same trend.

At the same time, natural gas moved in the opposite direction and hit an upper circuit. Kamath noted that when markets behave this way, there is no margin call and no exit opportunity, making both traders and brokers helpless.

Comparable Only to COVID and 2008 Crises

Sharing insights from Zerodha's 16 years of operations, Kamath said such conditions have been witnessed only once before - during the COVID-19 period, when crude oil prices turned negative. However, that event affected just one commodity, and participation in commodity trading was much lower at the time.

He warned that what happened in commodities can also occur in equity markets. Drawing a parallel with the 2008 financial crisis, Kamath said similar sharp and sudden market moves are possible even in stocks.

Key Message for Traders

Kamath stressed that the most important lesson from such events is to trade only with money one can afford to lose. He warned that even traders with a decade of successful experience can lose everything in a single day if risks are not properly managed.

His post serves as a reminder that while markets may appear stable for long periods, extreme volatility can strike without warning, making disciplined risk management essential for survival.