One of my Friends send me this image and asked me. "Why should one trade in options when 90% of traders lose money?" seeing this data for a moment I also thought- Is it worth trading in F&O? Should I focus only on long-term investment to make money? Or does this data show only one side of the coin?
If we consider the above-said data is correct. Then, the first data point is the total no of Active individual traders. This means all corporates and big money have been excluded to come to this number so one gets the perfect understanding of how small traders are doing in F&O trading. As you can see in FY2019 there were only 6,17,652 Vs. 39,76,419 in FY2022. In three years’ time, no traders in F&O went up by 6.4 times. I wonder what motivated those F&O traders to go on suicide missions when only 87% of trades lost money in FY 2019. The answer lies in the growth of the traders only.
Let me explain it, in FY22 only 10% of traders were making money i.e. approx. 397,642 traders made money in FY2022 and in FY19 there were 6,17,652 active traders. That turned out to be 64.5% of traders who were active in FY19 which is a good number. This data put forward one possibility, there might be some relation between time spent in the market and profitability, like a long-term investment longer you stay invested higher the possibility of positive returns irrespective of the market levels one entered or like other professionals like doctors, lawyers, or architects, who get better with time and experience. In simple words “What if a trader who lost money in 2019 but has not given up trading, and learned from their own mistakes now after three years profitable in 2022?” I tried to get more data and crunch the given numbers in order to decode this question. Unfortunately, with the given information it’s not likely to get a perfect answer to this hypothesis.
However, l also like to believe that, every professional trader is just like other professionals like doctors, lawyers, or architects, who get better with time and experience. If we believe above mentioned hypothesis to be true, then one should focus more on survival in the market for a longer period in order to enter in 10% winners club. Most traders focus on the wrong things like making quick money or searching for the one ultimate trade which can give them 300%-400% returns or revenge trade to recover losses instead of developing their own money & risk management and trading frameworks.
As per my understanding, Investors and traders are more or less the same as they both have to spend a substantial time to make sustainable & consistent profits from the market. Successful Investors don’t panic and don’t sell their holdings while the market is falling. But, the majority of traders stop trading or forgo discipline if they face consecutive losses. In conclusion, one needs to maintain discipline while trading as trading is a gradual process and not a one-time thing.
One can Start Early to spend a substantial time in order to learn more about the market and try to inculcate the Psychology of a Trader or Investor based on their investing/trading style.
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