As you’d guess, F&O trading, or active trading in general, is a high-mortality business. As mentioned earlier, less than 1% make more than bank FD returns in the long run.
Many customers decide to trade risky products with leverage with the wrong expectations that money can be earned easily and quickly. This problem has been accentuated by many claiming to generate large amounts of trading profits on social media. We have used every opportunity to create awareness that in the long run (3-year period), less than 1% of those who actively trade equity futures and options generate returns higher than bank fixed deposits or 7% annually. We will start sharing more granular information in the next few weeks. Generating profits from active trading is as hard as generating profits while running a business, if not harder, given that anyone can start trading and not everyone can start a business. The odds of succeeding when actively trading are very low, similar to any other walk of life, which requires skill, hard work, and some luck to succeed. From running a business to playing sports or music for a living.
So what this means is that the majority of people who trade actively stop trading in 6 to 12 months. So unless new traders join the fold, the industry’s overall trading volumes and revenues can drop significantly. In bull markets, the number of new account openings is much higher, which leads to many of those opening accounts also trying out active trading. The account openings drop in bear markets, so the new traders joining also drop significantly. This is how it has played out historically, not just in India but across different exchanges and markets.