This is the real life story of my client who lost few lakhs in a month in stock market. So stock market is so bad? Is stock market so risky that one can loose all his money in a single trade? No….it is not the problem of stock market but the problem of trader who think of getting rich in short stint.
Let me disclose the reasons behind my client’s loss in stock market. He is doctor by profession. But what prompted him is to earn extra huge income in short stint. Below are the reasons for his loss and I hope his experience matches with many more 🙂
1) NO TIME TO TRACK-As I said earlier, he is doctor by profession. He is unable to give time to other activities. But he killer instinct prompted him to take risk by investing in stocks. Hence the lesson for all of us is DON’T INVEST IN DIRECT STOCK MARKET IF YOU DON’T HAVE TIME.
2) OPTED SERVICE OF HOT TIPS PROVIDER-So he does not have time and hence no time to do analysis on each stock or trade he takes. Hence the easy way he found was to take the service of some expert by paying the fee. Hence he paid Rs.30,000 to two service providers who offer to be 80% success stock tips.
Once he opted their service, they started to send him the tips daily during market hours. He executed the trades accordingly. All went under huge loss…..when he called them for what action he need to do, then no one is picking the calls. After his try from another number they advised him to stay invested until they send the message when to exit. All trades are of OPTION which involves value of money. So as time passes, eventhough underlying asset is favoring his holding but values no going up.
Finally on expiry day all got squared off at the closing price. Lesson we can learn from this fault is NEVER EVER DEPEND ON HOT TIPS PROVIDER. BECAUSE THEIR RISK IS DIFFERENT THAN YOUR’S. If they loose around Rs.1,00,000 in a single day then that may not matter a most to them. But will they providing tips after analyzing your risk taking ability? No…then how to follow those providers??
3) NOT FOLLOWING A STRICT STOP LOSS-In each trade one must have target and stop loss. If you not prepared to loss then don’t ever think of to be at profitable side also. Hence one must have both target for profit as well as for loss. This client not set any such target for himself. So ultimately he lost everything.
4) NOT UNDERSTANDING THE PRODUCT-Option trading involves lot of things to learn like underlying asset, time value, strike price you have chosen or any other technical aspects related to the product he is buying called OPTION. Simply assuming that “I buy CALL OPTION and market goes up then if I will get profit” or “I buy PUT OPTION and if market goes down then I will get profit” will not work in reality.
SO UNDERSTAND THE PRODUCT YOU ARE TRYING TO INVEST. IF UNABLE TO UNDERSTAND THEN STAY AWAY.
5) NOT READY TO LOOSE-In stock market especially for intraday trading, one must have guts to loose the money in a same passion as to en-cash huge profit. So few people are so adamant that they never ever ready to loose in any trade instead they need a winning spree on each trade they execute. This will not be the case with intraday trader. HENCE IF YOU ARE NOT READY LOOSE THEN DON’T ENTER INTO THE STOCK MARKET INTRADAY TRADING.
6) LEARNING IS TEDIOUS JOB-Yes it is tedious job as it consumes lot of your time. But this is the solution to any of mistakes. Hence one must have time and willingness to learn new things in the field where he want to put his hard earned money. Otherwise whether it is stock market, mutual fund, insurance or any other product, be ready to be get cheated by someone.
So by committing such blunders he lost few lakhs in stock market. Now think of yourself whether this is the fault of market or an individual and decide yourself.