phne no


11:28-30 - "Come to me, all of you who are weary and over-burdened, and I will give you rest! Put on my yoke and learn from me. For I am gentle and humble in heart and you will find rest for your souls. For my yoke is easy and my burden is light."

3 Apr 2018

SHARE MARKET--Why do novice traders start trading intraday and end up taking losses?

 Intraday trading always looks attractive to new comers or to those who have less capital. Intraday trading is like T20 Cricket which is always favourite amongst traders. As we like T20 most and Test cricket least because of timing, same thing applies in market as well.

There are few common reason behind trading in intraday by novice traders:
·         Less Capital: New comers or novice traders have less capital mostly between 10k to 50k which is not sufficient to carry forward trades so they trade for intraday with broker exposures.

·        Intraday Margin: All brokers provides intraday exposures to clients for intraday which is most common reason for attraction. Suppose if you have 50,000 balance in your account, you will get 10 times to 20 times exposure for intraday which looks lucrative to traders because they don’t have to spend huge capital for a trade of 5 lac or 10 lac.

·         No Overnight Risk: This is another common reason because many traders thinks that I don’t want to take overnight risk. I don’t know what will happen tomorrow so whether profit or loss, I will clear my position today and I will do fresh trading tomorrow.

·         Instant results: Intraday trading is instant trading which gives results in short time only. You don’t have to wait for days or months which attracts everyone like T20 Cricket.

·         Lucrative profit without investment: Basically your money is free while you are trading in intraday so you can withdraw it anytime. You don’t have to block your investment and you are getting 5000 to 10000 profit in investment of 50,000 which seems to be lucrative for traders so they always prefer intraday.

·         MIS, Cover order and Bracket order facility: Brokers like Zerodha and others are giving facility to take trades with calculative which has high values but you can trade with small capital.

·         Intraday movement and volatility: Intraday traders get good volatility in stocks to play in low investment so it gives them greed and attraction to do more trading for intraday.

·         Lower brokerage: Traditional brokers who charge delivery brokerage upto 50 paise while they charge only 2 paise to 5 paise for intraday which is also another reason for intraday trading because you don’t have to pay high brokerages.

Now why they are making losses?
Stock market is bigger and riskier for new comers than they actually think. They are unaware about potential loss probability behind intraday trading. They don’t have proper knowledge of intraday trading. They either follow tips providers or brokers who provide them recommendations which are giving them losses most of the time.
When market is stable, they may earn few bucks which give them confidence but profit is not consistent for experience players also so it is loss amount will be always higher than profit amount for new comers and in this way they end up by loosing their initial capital.
Learning is a key for earning. I learnt many lessons in stock trading out of them I am mentioning few below:
·         Risk: Trading is 100% risky so if anyone tells you about Guarantee or Assured returns, never believe on them. Trading involves high risk and it can be controlled but can’t be avoided. Risk will always remain there.
·         Average: I learnt this thing from one of my past mistake which taught me that we should never average in trading. I bought a stock priced at 250 for intraday in 2009 and it fallen 5 rs from there. I purchased another lot to average thinking it will rise because I have confirm target. I bought it again at 240 and again at 235. My quantity became larger and stock price keep on falling which gave me huge loss in Intraday itself. From there I learnt that we should never average our loosing position.

·         Stoploss: Stoploss is like a shield for your capital. If you don’t wear shield in battlefield, you are taking risk of your life and you may loose your life. Same thing applies in trading because if you don’t apply Stoploss to your trade, you may loose your entire capital. So never hold loosing position without stoploss.

·         Profit/Loss are not Certain: Profit and loss are part of trading and nothing is certain so you have to be prepared for both. Every day is not same and nothing is permanent so you have to be habituated with little losses too.

·         Follow Market trend: I have seen people either buying or selling one side without knowing trend which gives losses everyday. You have to follow market trend. If market is falling or in bearish trend and you are keep on buying, you will get failure only. Same thing is on sell side. You have to trade with trend otherwise you won’t be able to gather profit.

·         Own Money: This is very critical problem with traders because many people takes loan to trade or borrow from someone. I strictly deny to take others money for trading because it’s completely risky. Always use your own money to trade.

·         Primary source of Income: Trading is not a primary source of income which everyone should understand. Many people leave their job or work to trade and regret after loosing. So one should never do like that and keep trading your alternate source of income only.

·         Free advise: Don’t buy if others are buying or others are telling you to buy. I lost by following others’ advise. You should always take advise of well experienced professional Research analyst or investment adviser only. Free advise and tips can vanish your capital.

·         Over trading: I used to do too much trading in my initial trading days which gave me losses only. I learnt that trading should be done sensibly not frequently. So do less trades which generates good profit rather than doing too many trades.

·         No emotions or sentiments: Never expect from market anything because market doesn’t have any emotions or sentiments. Though you are in deep trouble and you want money for someone’s operation, market will not understand your problem so never be sentimental while trading and control your emotions. Do trading like a robot who don’t have any emotions.

·         Spare Capital: Use your spare or extra capital only for trading. Never use your primary capital which you are going to use after few days in some emergency or other expenses. I have seen many people who use their emergency capital or that capital from which they have to pay certain fees of children or something.

·         Risk Reward: Always calculate risk before entering into any trade because if you are targeting to make 10 Rs profit, your stoploss should be also 3–5 rs as per your risk appetite. Never hold any loosing position without Stoploss.

No comments:

Post a comment