Who Should Avoid Trading? Is That You? Ask Yourself

May 29

There is no doubt that trading is the simplest business in the world. You just need to do a small paperwork which is online these days, need a laptop or PC and an internet connection. Besides that, all you need is time. But here the simplest should not be confused with the Easy. Although you just need a mouse click for execution yet the decision-making process in the background confuses you and leads to hasty or delayed mouse clicks most of the time.

Perhaps anybody can start trading at will but in my opinion, followings are a few cases where short term trading should be avoided.


If you are not Rich then avoid...

Yes, you read it correct. It is rich people’s game. If you don’t have huge money to back you up, you have less probability of success in this business. A small example. I know these days index option trading is in trend. You can buy an option in under 10,000 rupees but the darker reality is that most people starting with small capital are losing money. All brokers in India warns you about this when you open your trading terminal and that is for a reason.

Options are hedging instruments, if you are buying them naked with a small capital then you are going to lose because of Greeks- Theta to be more precise.

If you don’t have 5 to 10 lakh spares that you are willing to lose without a strain on head, then don’t do this business. Depositing small capital again and again in your trading account is not going to work.


If you want to get rich quick then avoid...

Everybody choosing short term trading wants to be rich overnight- dreaming of buying a tradable instrument at 10 rupees and selling at 1000. Sadly, most of those thinkers are getting poor and poor day by day. Trading is not a ‘get rich quick’ business, it is all about slow and gradual learning and execution with discipline. This is not lottery or casino, you need to build your capital gradually. This way you learn at each and every step.

Even if you make huge money in a few trades or a few days, there are higher chances that you will lose it in lesser number of trades or days. Money earned in haste leads to hasty decisions. Excitement and lack of experience kills. Experience is not about -how many trades you made in a year, it’s about - on how many mistakes you worked in a year.


If you are stubborn to change your mindset then avoid...

Mindset matters the most in trading. If the following runs in your mind while trading, then you have a lot of work to do on your mindset.

I am always correct, I can never be wrong, this trade must work, this strategy must work…

I can never be correct, I am always wrong, this trade is going to lose, this strategy is not going to work…

In reality, market does not care what you think. It keeps doing what it has to. You just need an Edge and a focus on its execution. This is all what you have in your hands. Neither the market is not going to trend because you are riding that trend, nor it is going to reverse because you think it is going to reverse. It's all about trades going Right and trades going Wrong. Thinking about those in terms of probability might work.

If you are new, start working on your mindset right away but if you are in this business for a decent amount of time and still losing then you are stubborn to change.


If you do not have a side income then avoid...

This business demands money. Initially you are bound to lose. It’s a learning process or fee that you need to pay to the market. You can’t pay your bills from trading, at least in your initial phase. I am not talking about those with the beginner’s luck.

These losses can go for even for months and you need a backup which could be any side business or support that can feed your monthly expenditures and refill your trading account as well. Paper trading could be a solution, but real trading is truly different. Emotions play their role when real money is involved and that often lead to unwanted results.

Also, always have a Plan B. Give some stipulated time to trading and if it does not work in that much time, move to your side business.


If you are not willing to lose then avoid...

Aspiring for short term trading and not willing to lose? Then sorry my friend, don’t even give it a try.

As I said in the above paragraphs, you will lose money when you trade for short term because trades will go against you several times. If you keep on holding those losing trades in hope, you will lose more by the end of day or week. A simple stop loss could be a solution. Calculate how much you can risk on a trade and identify your SL and position size according to that. Put a hard SL in the system and that’s it.

If you have 'don’t want to lose' attitude, then short term trading is not for you.

I just hope this article would help some aspiring buds in their trading journy.
Do like and comment to motivate for more writeups in future.
Regards

Jun 6

Note

Do not take this article negatively. This is not to discourage you from trading but to acquaint you with some of its bitter realities.

New traders also must understand that-

Trading is not about right or wrong- right all the time, 90% or so win rates are just misnomers or hypes.
Trading is about- when you are right, make big money and when you are wrong, lose small. That's it.