Monday, 22 June 2015

Why Do 98% of Traders Fail in Trading Business

For those who are not yet aware of the statistics, the title itself is an informative piece. Yes, it is a fact that 98% of the people who start out in trading end up losing!! Losing means they never come to a state where they can earn consistently from the markets or they lose a large part in trying to succeed at stock market and eventually call it quits!!

The great percentage of losers in this business is due to obvious reasons which are ignored by most! If you are yet to start out trading or already been there and trying to cover up your losses, make sure you have the right skill set, experience and proper mentorship support. Lack of these leads to more failure than success stories in trading arena.

I have met many people during my mentorship courses who want to jump start trading from day one of their introduction to what trading as a business is. Similarly, as soon as they meet someone who is doing superb in trading business, people start copying them, but they fail to realize that it is not so wise to copy someone’s chapter 20 to your chapter 1!!

Experts who are winning in this arena, have years of experience throughout which they slogged enough gathering all required knowledge. Now when they are up to that 2% , a newcomer with minuscule experience is all set to grab a seat against him/her and thereby making an invisible deal wherein the newbie is all  set to lose out their precious capital to the skilled one. To make it simpler,this is how it looks like-

Whenever you take a position in any Futures/ Options contract, there are two parties involved: A buyer and a Seller and for that matter a winner and a loser and its a ZERO SUM game. Whatever one loses is another party’s gain , its a battle between two parties who have contradictory opinions about the underlying asset/stock. One opines that prices of the stock will go down and the other party opines that it will go up.

For Example:

Newbie Trader (A) buys a future contract of ITC (1000 qty) at 325/- for 40,000/- believing that the prices will go up.
The other party (B) is the pro-trader from a fund house who has done his/her homework on the underlying and opines that the prices of the underlying will go down in short term. He is most likely to be on right side as he has placed his bet based on his research.
The trader (B) sells the contract to (A) at 325 to be bought at a later stage when his targets are achieved.

What happens now: Price of the underlying slides to 310/- and seller (B) makes a profit of 15,000/- and the loser lose the SAME amount which is debited from loser’s (A’s) account to be credited in winner’s (B’s) account.

Bottom-line: Since every trade is a battle with more skilled or may be less skilled than you, it is imperative to do proper research of your every position so that a precious part of your capital is not taken away by anybody else!!

Wish you all a great trading day. If you have any query or want to learn the art of trading, you may join our technical analysis courses.

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