First the bad news: best estimates suggest that 90% of individuals who trade futures lose money doing
so.
Now for the worse news: This estimate may be too low.The sad fact is that somewhere along the way the majority of traders make one or more critical mistakes in their trading, which cause their losses to exceed their winnings.The good news is that the mistakes that cause most losing
traders to fail are quite common and readily identified..The better news is that by being aware of the potential for making
these mistakes and by taking steps to avoid them, you can make a great leap towards becoming a more consistently profitable trader. Target to achieve is
to become a more successful trader – not
necessarily by trying to be a “good” trader, but trying how not to be a “bad” trader.
the high rate of failure among futures traders can be attributed
primarily to three factors:
• The lure of easy money
• The lure of excitement
• An utter lack of preparedness to deal with the potential downside
Unfortunately, it seems that many individuals are lured into
futures trading for a lot of the wrong reasons.
Let me try to explain with an example!!
Suppose someone offered anyone who shows up the
opportunity to drive an sleek Ferrari race car around the track
with the promise that the person with the fastest time will
receive a Rs 1crore prize. Will a lot of people show
up to take a shot? You bet(Many would be present just for the adrenaline rush).
Will most of them be truly
prepared for what they are about to do? Not likely. Will
someone win the Rs1crore? Of course. Will 90% of
the drivers fail to make it to the finish line?
Welcome to the exciting world of Future speculation!!!
If you are reading this article and trade futures too, Share your experience.
Regards
Rish.
Good article...
ReplyDeleteI am young... Chartered Accoutatant...
Started "learning" future & options since i was 21-22...
I thought i thoroghly understood it... started doing it when i was 25.
Lost my all income of my first year of CA practice in first few trades.
in total lost 3 Lacs at the age of 27... and decided to stop... after giving one last chance..
In, the last trade I made 1 Lacs..
so i determinatly quit F&O with 2 Lacs loss...
Rather than money, you loose much more stuff.. and more important stuff..
You loose your focus,,, you buy worries and tension which reduces your work capablities in other areas..
I am 27, just watching how future working in india and US...
only one word for F&O "DEADLY WEAPONS OF MASS DESTRUCTION"
Thanks for the small article..
god bless you.
S, Nice article. Would like to share my experience:
ReplyDeleteLike our young CA friend, I too lost a lot of money in Futures (more than 20 Lacs). But I did not want to give up until I found the secret of those 10% people who make money.
And finally I found the secret.
It is called the "Stop Loss"
It is of course an open secret, but seems very difficult to follow. Once I started following it, I gained back all the money lost and some more. (Rish's recommendations helped a lot)
So "Stop Loss" and "Trailing Stop Loss" are the only things we need to follow once we identify a good trade.
Easier said than done - that's why only 10% of them do.
Good one.
ReplyDeleteI am 32 now and used to trade Nifty about 3 years back.
I made money and lost it too! I am a very very small time trader and used to trade only one nifty lot. So, my losses didn't cost me a good nights' sleep.
I stopped trading futures then, but for a temporary reason. In the mean time I have kept in touch with the markets and am planning to get back to Nifty.
"Stop loss" is the key to any kind of trading, which I have also learnt a hard way :)
Hope I will be making decent money, if not minting it at all!!
Thanks and Happy trading!!!