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.
Interesting facts about SALARY !!
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Hussain
Nice Explanation but what is the solution to earn in Stock Market…..
Basavaraj Tonagatti
Hussain-Holding for long term.
Nitesh sharma
HI Basavaraj ,
Good Post but i Came across the Same Very Late . I have Lost Few Lakhs because of the Same Greed to Become Rich Soon ,But Also would like to Say Our Eco System is Like That and that is not in the Favor of Investors . Ideally Speaking the Great Traders of the World Say that we should Trade with 25 % of the Capital but In India the Brokers Offer Multiple time Leverage just to Earn More Brokerage and they Never Teach A lesson on the Risk to there Clients , Secondly The Tipsters Half of Gujarat is Busy In making People Fool of the Tips , Many of then are Not Educated properly They Just Know Buy & Sell and once you Go in Losses There Phones will be switched off for Ever and they take again a new no to find a new victim of theirs. I Tried To Complain to SEBI but all in Futile Looks Like they are Busy with Sahara , But I would Like to Say in the Long RUN this all is hurting the sentiment of Retail Investors and theirs should be some check to such unsolicited Tipsters , Even Sebi Registered advisers don’t have a proper Track Record because there is no proper assessment for registration, sebi is just interested in the registration fees
Basavaraj Tonagatti
Nitesh-Thanks for sharing your experience with all of us. Yes sad part is regulator thinks in other way which common man neither benefit nor resolve his issues.
Nelson Christian
Thank you for such a nice and effective post. I too tried Intra-day trading for few days but realized that it is just not meant for me. I gave up before I could lose a lot of money. Hope people read it and take an informed decision to be an intra-day trader. One more thing I would like to point out is the greed that this doctor had in making lots of money in short time. I have yet to come across a qualified doctor who is poor. His profession is a very rewarding one. Also if he wanted, he could have taken help of fellow doctors and a CA and identified few good pharma companies which he would have better understood since he is in the same profession. He could have invested his hard earned money in Pharma companies after right research. I am sure this post will be a real eye opener for lot of people.
Basavaraj Tonagatti
Nelson-Thanks for your valuable sharing. I agree that greed is the major force in his action. But to be frank I have few clients who trade in F&O Segment not on daily base but once in a week or thrice. They are good at ending their trade around 95% of time. So looking at opportunity is the task rather trading daily. I got your point that doctors are good choice in choosing pharma companies. But I not agree that CAs are best choice. Because CA profession is meant for other things not for stock selection of financial planning.
chandra
I have been daily reader of your blog. Thanks for your time in bringing all the facts by putting your experience.
We APPRECIATE that.
Though i dont have much exposure to Shares i wanted to do enter. So i have choosen Angel Broking for trading + Demat account.But after reading some reviews in web i have cancelled appointment to open with them.
Can you suggest any DP whom i can rely???
Basavaraj Tonagatti
Chandra-I will not recommend any DP as account only meant for holding your investments in demat format. So you can choose according to your comfort with brand of company. I have account and regular trader with Sharekhan since 5 years and recently I opened the franchisee of the same. I felt it is best. But it is your wish to open the account.
Chandra
Thanks for Reply 🙂
I Recently have come across Zerodha. Any idea about it?
Basavaraj Tonagatti
Chandra-You can go ahead.
Aditi jain
Hello sir good job ……this is very helpful for beginners entering in stock markets…..simple and easy to understood…go on……
Basavaraj Tonagatti
Aditi-Pleasure 🙂
Pinaki
Great work basuraj……you are not here to get pulitzer or nobel in literature….main aim is to educate common people…..keep it up and thanks…..
Basavaraj Tonagatti
Pinaki-Thanks for your motivational words 🙂
Dr Ajit Dhake
Excellant article Mr basavaraj but the english is not good..need to improve on it..
Basavaraj Tonagatti
Dr Ajit-Thanks for your valuable tips. I will try to improve. But my only intention in writing is to make as much as simple without using the complicated words. Still I will try to work on your suggestion.