Thinking of an Amateur Trader

India Stock market are going through a Bull phase and is up more than 50% from March Lows and due to COVID Lock down  lot of new traders have entered market. 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.

4 thoughts on “Thinking of an Amateur Trader”

  1. Sir, how i can save my money, i have taken 500 units pe of banknifty on last friday. now everybody telling that market still is in bullish.

  2. My Ten commandments for Financial Management

    1. Early on, Only invest money which you can write off in stocks markets

    2. Loss of more profits is better than actual loss itself

    3. Set your target which you want to make per month or per annum and stick to it, don’t become greedy.

    4. Do stock trading only for your secondary income till you are extremely experienced.

    5. Never invest more than 5% in a single stock and spread investment across sectors.

    6. Have an objective to retire early and build your financial managements based on this. This will help you save early on and invest rightly to help achieve your targets.

    7. Do short term Trade on trend based stocks.

    8. Have two demat accounts one for long term investments and one for short term trading.

    9. Keep learning and be aware of your emotions and temperaments as this will determine your financial management. Form habits as it will be difficult to break.

    10. Spread investments in stocks, MF’s, real estate, FD’s, FCNR and Gold. Depending on your age the ratio will be more in some over others.

    As warren buffet says “If you don’t find a way to make money while you are asleep, you will work until you die”

Leave a Reply