Thread by @theBuoyantMan

NSE went batshit crazy today. My hands are itching for a thread of the week. NSE gave an opening.

What are the lessons we can learn from today's exchange fiasco?

Time for a thread. 👇👇👇

1/ If you're going towards full automation, factor in data feeds.

Have multiple data feeds.

If for a set amount of time, different datafeeds don't update, work out the code in such a way that you'll exit all open positions upon quote refresh, based on how the market is.

2/ Have redundant brokers. I have been stressing on this for quite a while now. It's important to have reliable brokers you can call and manage your positions with, properly.

Or you should have a functional broker who will let you put on/close trades.

3/ The market will have a knee jerk reaction in such instances, it's important to stick to your strategy.

In my case, I am stuck in a long call on Banknifty, and I couldn't close my position with IBKR. So, I am just going to have to exit tomorrow at open.

4/ On a backup broker, you can create an opposing position and lock your profit or loss. Later you can exit both positions and get out with defined profit/loss.

This may not be applicable to every trade. But generally, this should work.

5/ The brokers will always look out for themselves. You and only you should look out for yourself.

And, in looking out for yourself, build redundancies wherever possible, while still keeping your costs controlled.

6/ This means checking for data feed refresh multiple times, and having cash ready in backup brokerage accounts to create hedging positions, etc.

Nobody expects exchange related glitches, but these have to be factored in. There have been few instances in NSE in last 2 years.

7/ Go through this thread by Sibi.

https://twitter.com/sibichaks/status/1364508406107807744?s=20

He works with a firm that serves hedge funds with top notch execution algorithms and order management (the order slicing, getting better fills and so on - high volume management), so he knows his stuff.

8/ There's no point in complaining. Coz you or I don't have any power over brokers, market makers, or the exchange.

So, always factor that in and know the risks you're taking.

9/ Neither broker nor exchange will compensate you for your losses.

The sooner you accept that, the better for you.

Those who are trading with crores, don't complain. The only people making noise are those trading smaller capital.

10/ And yes, you can sue your broker, but the process is usually not swift and you'll just lose all hope in the process even if you get your money.

Many have sued Zerodha and won monetary settlement - just an FYI.

11/ Technical glitches are inevitable.

Whether these glitches are natural occurrence or MANUFACTURED - is debatable.

That said, today's event at NSE is not due to their 2 telecom partners going offline or whatever. Definitely not.
Definitely a much more serious issue.

12/ Automation is not the solution to everything. But there will always be surprise cases you haven't handled in your code that will wreak havoc in trades for you.

Automating your trading system, with the ability to take control whenever you want is the best thing to do.

13/ Never automate without testing different corner cases and simulations.

The better shielded your execution system is from all these overhangs and exceptional cases that could happen, the better you will be covered during days like these.

14/ Don't panic at the first sign of trouble.

Panicking is never the solution.

As a trader, you must learn to eat risk like you'd eat rusk.

And when you panic, you can't think straight. You freeze - which is usually not what you want when you need to make decisions.

15/ Finally, the markets are usually rigged against you.

I mean, apart from the regular psychological hurdles, there's hurdle after hurdle stacked against you every step of the way.

The sooner you face that fact, the better it is for your career as a trader in the markets.