Thinking of an amateur trader

India Stock market are going through a Bull phase and is the best performing market for 2014. As market keep rising every day many traders are getting attracted towards it making fast bucks. Today we are discussing the thought process of new trader and the corrective steps which traders should start implementing before their trading account goes for a toss.

  • I have a few thousand , I will turn it into a lakhs quickly by trading Options”

The bigger the attempted return the higher the probability of going to zero, Options is a “ZERO” Sum game. Compounding capital over the long term is what it takes to be successful taking big risks eventually takes your account down to where it breaks you financially, emotionally, or mentally.

  • I am “THE BEST” I can figure trading out all by myself.

New traders must find educational resources that shorten their learning time frame and saves them thousands of hours by not having to learn everything the hard way themselves.

  • I expect to be profitable from the very beginning.

Like any other professional endeavor you have to pay our tuition for eduction and pay your dues. The odds that you will be profitable right from the start is minimal to zero, not blowing up your account as a new trader is an accomplishment to be proud of.

  •   I expect to make huge profits my first year trading.

Think practically if it was so easy to make money why people are doing other business, there is no easy money laying around on the street for us to just go pick up.

  • I can trade huge position sizes and never blow out my account or suffer a huge draw down.

The math disagrees agrees with you, big trades eventually lead to big losses and big enough trades eventually lead to ruin.

  • I want to trade for a living, it will be great.

Trading for a living is very stressful if not planned very carefully with huge savings and safety nets. For most people it would take multiple six figure trading accounts or even up to a million to even consider such a thing with their current lifestyle expenses. Very few traders live off trading alone almost all have other sources of income and trade for capital appreciation not their monthly bills.

  • I will just trade with all my savings and salary and take it out when needed to pay monthly expenses.

Trading capital has to be separate from living expenses and only taken from at times that will not effect your need to pay bills or play catch up with returns.

6 thoughts on “Thinking of an amateur trader”

  1. My experience- Small trader never books the profit quickly , especially in the morning first 30 mnts. Reason, generally he plays in one lot and has no idea of how much he needs as profit. Resultantly, all his book profit evaporates soon….Better have minimum 3lots,ist lot with profit of 5-10 k,sl moved to entry price and then keep on raising sL AND BOOKING PROFITS. Try it, it works and improves your returns

  2. Trading for a living in India – Who are all trying to attempt this from a middle-class level ?
    (Let us leave HNIs, and top level managment professionals here)

    1. Those who have retired from government services and few private sectors , they try and if they fail to become a trader then they change themselves into positional trader on short to medium term . For this , They have entered into the market at least 10-15 years before retirement as an investor. These people make some money, but they don’t depend on market money for living.

    2. People who have served in armed forces(defence) and returned back to home after service, only a few try this trading professsion and 60% of the people make success- it is a plain judgement only. They also don’t depend much on trading income for living

    3.I have seen there are people who have returned from employment in overseas mainly in Gulf countries , they work there for a few years and come to India and try this trading mainly in commodities market first . These people think they can make money and compare with their previous employment income and make their attempts, but failures only.
    Again go back to employment or open some retails shops like mobile store,departmental store, footwear,apparels and settle their life. These people have lost a handful of money.

    4.Next is the astrologers, these astrologers have performed very well in their profession in the past and made good money over a decade . These people somehow get linked to Nifty futures and commodities. I have heard from an astrologer saying ” I have done 200 lots of nifty in year 2010 and opened own sub-brokerage “. Loss for these astrologers is near to a crore casually, This is right . Now he is telling every client “the market is operated” as if the client is unaware of this. The astrologers get trapped only if they have outside huge loans as they can make their living continuing their astrology profession.

    5.Retired teachers – loss made by the teacher in 2-3 years is 10-15 lakhs – These people find tough situation since it happens after their retirement. If they have pension income , they can survive even then family commitments have to be met.

    6. The only person who have survived in trade market is one who had patience and passion in investment (and very little bit of trading rarely) without mixing trading and investing .

    7. A little bit of cautious people in this are bank employees, insurance agents . They also loose little bit in their early stages and become alert.

    8. Some traders even after having learnt technical analysis, loose mainly because of improper money management and over confident in doing options (after making 3-4 success in options) taking single side overnight positions(one day only,” Tomorrow I will get it “). Rarely, a few traders are wrongly directed by Sub-brokers making the traders take excess positions. For 1 Lakh account size 1 lot nifty is advisable, brokers suggest 2 lots for overnight and 4 lots for intraday disturbing the traders’ mindset – For this retail trader has to be very careful and close the account with that broker first

  3. Dear Sunny,

    Its my personal decision, You are free to use the instrument you feel comfortable to trade. In past 20 years how many “Such”big gap down have occurred ?

    If making 20-30% return per day was so easy I think you are going to be richer than Mr Ambani in next 5 years.


  4. Sir, i am a big fan of your trading ideas and read your articles on a daily basis. But i don’t know why you consider options to be a losing trade! I am an options buyer and I can easily make 20-30 % returns in a single day through options- ( Rs 1 lakh on a capital of Rs 5 lakhs or Rs 20-30 thousand on a capital of Rs 1 lakh) and Sir i am not bragging but sharing a simple truth with you! What if some unfortunate event happens overnight? Is there a guarantee that our capital will be protected if there is a big gap down tomorrow with there being no hedging in our portfolio?

  5. I was in handsome profit today but over enthussims of a forced free SMS trial call of option wipe out twice of my earned profit. I read every post of yours much disciplined this month but a single deviation , I lost much more … Haha a practical example
    Please keep your post uploaded , may b one day I shall learn.

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