Trading and Investing

Trading: Is it meant for you?

Trading is one of the most exciting, thrilling, glamorous thing right? Wrong.
Trading is one of the toughest professions in the world!

Trading is something which retail investors should stay away from. They should focus on their jobs and business and use long term investing to grow their capital. Your broker won't tell you this because his main source of income is you trading in and out like a machine daily! Read this:

Assume your trading capital is Rs. 100,000 and your success ratio is 50%, that is half of your trades are profitable. Also, your risk reward ratio is 2:1, that is you profit Rs. 1000 or lose Rs. 500.

Ideally on paper it should be, considering 50 trades:

25 profitable, gain: 25,000
25 in loss, loss: 12,500

Net Gain: Rs. 12,500

Include brokerage and taxes now.

When profitable:

Gain: 1000
(-) Brokerage and taxes: (300)

Net Gain: 700

When in loss:

Loss: 500
(+) Brokerage and taxes: 300

Net Loss: 800

In case of 50 trades with 50% profitable trades you are losing a net of Rs. 2,500 despite being profitable! This part of trading is always ignored. The only way out of this is to reduce your trades and increase the timeframe to make your profits bigger and losses smaller.

With a few exceptions, it is not possible for everyone to do both trading and investing successfully and consistently. The tip providers won't tell you this.

We at DalalStreetBulls have always tried our best to spread awareness about the unspoken charges in trading. We are not against trading, but we want to say that trading is not everyone's cup of tea! So stop looking at the screen for every price movement and invest in good stocks and see your capital grow!

We are pleased to launch our investment advisory services at a nominal charge of Rs. 250 per month (Minimum subscription - Rs. 1500 for 6 months). You can read more here.

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