Like most outcomes in Capitalism, the likelihood of making money trading increases with the size of your account. (Certeris Paribus). The rich here again get richer. Trading Opportunities, and strategies that do not exist for someone with a smaller account, are easy pickings and no brainers when you have a lot of margins to spare.
This is even more true post leverage reductions across the board. Where many strategies are impossible to set up for the small fish. Thus the userbase which is in the most need of risk management is also the most devoid of it. They have to set up strategies with very close strikes and very questionable risk-reward ratios.
Being a Theta lover, I would feel very constrained and exposed trading smaller accounts. But then again capital is relative, and a trader with an even bigger account would find whatever I am doing to be ridiculous and “very risky”.
So what’s your account size like, was it always like this to begin with ? or did you grow it with patience and love. Do share your account sizing mistakes and stories
For my current nifty naked option buying strategy I started with 1.9 Lakhs in 2017. Reinvested the profits back and moved to 17.1 Lakhs capital till Nov, 2021. Now added some extra capital and moved to 28.5 lakhs capital.
Stock market is not a get rich quick market. Think of this as a business for which you need capital. Have a business plan and manage risk. Even at 20-25% CAGR the capital can grow pretty fast.
Yes. My trading style remains the same. I have a trend following system. Also note I added capital this nov end. So part of the capital growth is inorganic.
The size of your account for you is a relative term. For someone with 25k, 2.5lks is big, and for 2.5lks it is 25lks, for 25lks 2.5 crores, and so on. There is no end to this.
So the size of your account increasing the odds of making money is probably not true. But what definitely is true in terms of those who have a higher odds of winning when trading:
Those who are not forcing themselves to earn a certain percentage return from their account every month or not relying on the trading income to make a living.
Those who trade with other people’s money, and hence not affected by greed or fear as much as when it is their own money.
So more than the size of the account, I guess it is about the state of mind. Being able to trade without fear significantly improves the odds of making money trading. This is why I guess the rich get richer because trading is only a portion of the rich person’s networth. Btw rich folks who aggressively keep taking large bets (as % of networth) also tend to have nasty collapses.
Also, the belief that many traders have in terms of I have Rs 1lk so I will do option buying, but once I have Rs 10lks I will do option strategies is false. People seldom change their trading behavior even when the account sizes go up.
So yeah, life & trading is a grind. It is about doing what is right even when the account size is small and continuously be at it hoping that you get lucky to quickly grow the size of your account. Good behavior when account size is smaller also means that you will stick to the same behavior when account size grows and have high chances of retaining the gains you make, otherwise most times people lose all that they make in quick time. For those trying to make a living from trading with just a few lakh rupees in the account (requiring you to make upwards of 10% returns monthly), I think you have to make peace with the fact that it is impossible. Find a part-time job to cover your living expenses and think of trading income as supplementary and not primary income.
Again it is relative I guess. If the monthly expense for a family is Rs 1lk, Rs 15lk for sure is not enough.
But if it is a bachelor who is surviving on say 20k a month, then maybe yeah. The best way to play this situation out would be to take out one 1year of living expenses and keep it in the bank and then trade with the remaining Rs 12lks without having to worry about how will to cover for expenses.
Most people spend their time figuring what is the next stock or trade that will make me money. But the trick to being a good trader doesn’t lie in the next stock/trade you pick. It lies in how you manage your money and in turn your mental state as well.
I used to auto trade Nifty futures a while back without any hedging. While money was made, when I look back the risk with futures is pretty large. If market for whatever reason makes a really big move against my position I can loose a lot of money. This is why I love buying options. I will never loose more than the money I paid to buy the option, my max risk. The transaction cost is much less compared to futures. Also there is no leverage and am trading only with the money I have.
I trade with a 47% accurate trend following system. The time value I loose when market moves in my direction is offset by the reduced intrinsic value loss when market moves against me due to the time value effect / market gap. Since I loose more than I win the balance gets tilted in my favour. If I compare the backtester (futures mode) vs live results the trade slippage is around 6 points (including time value loss) per order only which is not much for a trend following system.
So if I were you I wouldn’t trade nifty futures without any hedging.
Many thanks nitin sir for your reply
Really admire your work
well 15l i said for a normal middle class family.
Expenses depends on individul so 1 has to decide if he has that ability to enter in market or not…
And capital or taking leverage in day trade is just not a solution…
Practice,planning and all other skill is very impt no matter hw much u invest…
without all this 1000 cr capital is also waist
I am a trend follower. I trade with Nifty daily charts. I spend 15 minutes a day setting up my system for the day. This sort of sits in well with the tech job I have. When I was auto trading it was a 5 min Nifty trend following system. So all my significant trades are using trend following strategies only.
When I started trading I did play around with few scalping trades. But the physical effort needed was way too much for my comfort. Also the market moved very fast and the trade slippages and transaction costs submerged the small profits I used to make. In short I figured out that I cannot be a scalper long time ago.
.For those trying to make a living from trading with just a few lakh rupees in the account (requiring you to make upwards of 10% returns monthly), I think you have to make peace with the fact that it is impossible.
Very true.
But it has more to do with the “need” to make a living, and may have less to do with the size of the account.
Many don’t realise that NEED is as bad for the trader as GREED, if not worse. You can get away with greed once in a while, but with need you are in trouble almost every time.
Trading, if you have a tried-and-tested winning system–and the patience of a sniper in hiding–should be reserved as a tool for wealth creation.
And for that to happen, it is essential that your survival (read living expenses) is not dependent on the trading income. If it is, then your greatest strength (a rational mind which takes system-based, unemotional decisions) is compromised.
Trading is probably one of the few fields where you cannot easily grow your capital at the same pace as when it was smaller. The rich get richer if they trade well, not solely due to the fact that they have money.
Ex. It is easier to make returns 15 to 25% per year on a smaller capital but gets difficult with larger capital.
Fair. But this was nowhere implied. It just says that all others thing equal, a trader with much deeper pockets would have opportunities to manage positions (both risk management and legging in trades that a small account trader wouldn’t have) Sitting on a lot of margins can make losing trades into breakeven trades. And helps to double-triple down on your winning trades.
Safe level premiums in a rangebound to bearish market which would be unviable for someone with only 1-2 lots, when multiplied by 5-10-20 Lots become good expiry day collections. The need to work with super tight strikes and taking on hopium-based uncovered calls naturally goes away.
For me with a larger capital base, I can have a larger position size. This means red and green on screen will be larger. This is one difference. Also net profit in rupee terms will be larger as y% of x would be larger if x is larger in absolute rupee terms.
Absolute profits/losses will be greater for a trader with 1 crore capital compared to a trader with 10 or 20 lakhs. Percentage profit/loss would be the same. Yes, even safe expiry profits will be larger for someone with larger capital.
I am sure this makes perfect sense for those who know what you are talking about, but as a total noob who has no idea what, say, “buying options” means: I can’t even … .
