Why only a small percentage of traders consistently make money?

Once you have a trading idea or logic that is converted to a code / script. This code / script is then used to generate trade signals (Long / Short with appropriate exits like profit / stop loss) by running it over historical data. The generated signals are then evaluated to generate system performance metrics. An allied activity is optimization of the system by adjusting the parameters to achieve the desired system performance. The whole process is data driven and aided by a computer software.

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I have dipped my hands in intra day trading and I can say with fair bit of certainly, that this is a job which required more mind work than brain work. Anybody can read and analyse charts but sticking or exiting the trades is the most important part. If trading was so easy, then everybody would have been minting money.

It boils down to this - Do you have a trading plan ? If you do can you follow that plan ?

As much as luck matters, it tends to favour the prepared mind that is willing to persist.

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The whole trading mantra to stay in the game for longer duration can be summarized in one simple 2x2 matrix strategy :

Small Big
Win Win
Lose Lose

If we can avoid the 4th box, we are through.

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Why only trading, isn’t that the case with every sphere of activity?

A simple rule of thumb for long term success in any field may be spelt thus:

less than 1% may be spectacularly successful;

another 10-15% will be moderately successful;

of the remaining 85%, nearly 25% will be just about successful (like tired swimmers just about managing to keep their head above the water);

and the balance 60% will be losers.

Note: The most interesting point is at least one third of these 60% losers will have hard luck stories to tell, some real, some imaginary. In a speculative activity like trading, however, over 80% of those 60% (that’s close to half of the total population) will genuinely believe they could have won but for the hard luck . :stuck_out_tongue:

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Yes I agree…Success ratio in any field will roughly match to success in trading. For me success in any field is often a product of passion, patience and persistence along with luck, fate, karma whatever you call that pushes one to the right place at the right time.

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For me success in any field means passion,dedication and how much effort we can give …

Investment is just not a solution …

thanks for sharing your view
for more understanding, can u share approx how much money u make and with how much capital

not seeking excat values, just approx to understnad how much money can be made in trading with how much capital

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. Am in the 30% tax bracket and 30% of my trading profits go as taxes. So extra capital is added to boost my trading income. From 1 lot in 2017 to 15 lots now the journey has been nothing but a persistant discplined execution of my trading system.

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This is inspiring stuff man @t7support Keep sharing your insights. You are a gem in this forum.

@t7support

great job …really inspiring

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@t7support

profit made by using leverage or without leverage ?

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I only buy nifty weekly options by paying the full premium. This means I trade with the liquid cash I have. So no leverage.

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Wow. Congrats.
How much do you risk per day/per trade?

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I have a postional system so I hold my position for an average of 4 days. At a time around Rs.7k - 14k per lot is in the market depending on option premium. I won’t loose more than this amount no matter what market does and so this is my worst case risk per trade per lot. The largest win recorded thus far is Rs.64950 per lot per trade. But the avg lose is around Rs.6K per lot per trade and avg win per trade is around 13K per lot per trade.

The advantage of a naked option buying is limited risk and unlimited profit with lower transaction cost. This sits well with my trend following strategy on Nifty Index. The conventional wisdom is to avoid such option buying. I say it is all about knowing what you are doing that matters.

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Isn’t it the options itself intrinsically leveraged? In my strong opinion for someone who enters the market they should consider trading only in equity market (without any leverage) till they become profitable (atleast not losing much) in bull, bear and sideways cycle. The equity is the only instrument that will help you last longer in the market so that you will able to learn and become consistent trader.

Yes there is intrinsic leverage. But if you want to make a Rs.50 rupee profit everytime Nifty goes up by 1 point, the risk one is taking via equity route is way way more than the risk an option buyer is taking. Also an option buyer pays the full amount from his capital. You can’t even pledge your holdings and hope to buy an option.

With equity there is always some one who knows more than you do and can play with the stock.

With equity liquidity can be an issue unless you are pretty selective.

With equity if you are technical trader like me believing backtested data, it is far more difficult to backtest equity because of split/bonus events and consequent data adjustment issues.

There is a reason why index derivatives (near 80%) contribute significantly more volume than equities in exchanges.

Having said these, if you feel comfortable with equity that is where you should start. Try out different things. Never loose a big sum in any of the trials. Persist and you are likely to find what works for you.

Bro you are asking what everyone want to ask :handshake::handshake:. you might have read nithin’s tweet and everyone knows that its not the new thing to know. we knew that very less people make money and people with more capital, knowledge, a healthy mindset and more important experience make profits. I always have this doubt, if institutions are trading then they can not loose money because its others money ( Institutions like MF) so they always (most of the times) win is it like market is controlled as per their positions? ( we dont see institutions making big loss in FnO )

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I assume that mutual funds cannot take positions in Futures and options except as hedge to their portfolio.

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Trading is tough as you need to be better than your counterparty. Not just that, trading is an exhausting job and also depends on the psychology of the person who is trading.

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