Why 95 percent of Indian Traders Lose Money! (2024)

As much as 95 per cent of day traders lose money in the market, it demands an investigation.

Intraday trading is the most popular, yet data suggests that most intraday traders lose money. A 70 percent don’t last beyond the first year, and 95 percent stop trading by the third year. The number seems pretty high, right? So, what’s going on? Why such a high percentage of traders lose money in day trading? Let’s investigate, alright?

Trading isn’t easy. It takes time and a lot of practice to perfect. And, in day trading, mistakes are costly and result in huge financial losses.

Intraday trading, also known as day trading, is a type of trading where investors buy and sell financial instruments within the same trading day. This means that all positions are closed out before the market closes for the day, and no positions are held overnight. Intraday traders seek to profit from short-term price movements in various financial markets, such as stocks, commodities, currencies, and derivatives.

**Pros of Intraday Trading:**

1. **Quick Profits:** Intraday trading allows for the potential to make quick profits due to the frequent buying and selling of positions within a single day.

2. **No Overnight Risk:** Since all positions are closed by the end of the trading day, traders are not exposed to the risks associated with overnight market movements or unexpected news.

3. **Leverage:** Some brokers offer leverage to intraday traders, allowing them to control larger positions with a relatively small amount of capital. This can amplify potential profits (as well as potential losses).

4. **Flexibility:** Intraday trading offers flexibility as traders can adapt to real-time market conditions and adjust their strategies accordingly.

5. **Elimination of Long-Term Trends:** Intraday trading focuses on short-term price movements, which can be beneficial in markets with volatile or uncertain long-term trends.

**Cons of Intraday Trading:**

1. **High Risk:** Intraday trading is inherently risky due to the fast-paced nature of the activity. Rapid price fluctuations can lead to significant losses if trades go against the trader's expectations.

2. **Stress and Emotional Pressure:** Constantly monitoring the market and making quick decisions can be stressful and emotionally taxing, potentially leading to impulsive decisions.

3. **High Transaction Costs:** Intraday trading involves frequent buying and selling, leading to higher transaction costs in terms of commissions, spreads, and other fees.

4. **Lack of Overnight Exposure:** While avoiding overnight risk can be an advantage, it also means missing out on potential profit opportunities that may occur after market hours.

5. **Market Volatility:** While volatility can be advantageous, it can also lead to unexpected and sharp price movements that can result in losses.

6. **Time-Intensive:** Intraday trading requires constant monitoring of the markets, which can be time-consuming and may not be suitable for individuals with other commitments.

7. **Skill and Knowledge Requirements:** Successful intraday trading requires a deep understanding of technical analysis, chart patterns, market indicators, and other trading strategies.

8. **Regulatory Restrictions:** Some regulators impose specific rules and restrictions on intraday trading, such as pattern day trading rules that require traders to maintain a certain minimum account balance.

Intraday trading can be potentially profitable for skilled and disciplined traders, but it comes with significant risks and challenges. It's important for individuals interested in intraday trading to thoroughly educate themselves, develop a robust trading strategy, and manage their risk effectively.

Research on the success and failure rates of intraday traders varies widely based on factors such as market conditions, individual strategies, trader skill levels, and the time period under consideration. It's important to note that trading success is highly individual and can't be solely determined by statistics. However, here are some general figures and findings from various studies and reports:

1.**SEBI Report:** 89% of the individual traders (i.e. 9 out of 10 individual traders) in equity F&O segment incurred losses, with an average loss of Rs. 1.1 lakh during FY22, whereas, 90% of the active traders incurred average losses of Rs. 1.25 lakh during the same period

2. **SEC Report:** The U.S. Securities and Exchange Commission (SEC) published a report titled "Day Trading: Your Dollars at Risk," which states that "most individual investors do not have the wealth, the time, or the temperament to make money and to sustain the devastating losses that day trading can bring."

3. **AMF Study:** The Autorité des marchés financiers (AMF) in Canada conducted a study on the profitability of day traders. The study found that, on average, day traders incurred losses and that the proportion of traders who were consistently profitable was very low.

4. **Brazilian Academy of Sciences:** A study published by the Brazilian Academy of Sciences indicated that only a small percentage of day traders consistently achieved profits. The study analyzed trading activity in the Brazilian stock market.

5. **Statistics from Brokers:** Some brokerage firms provide statistics on the success rates of their clients. These figures can vary widely. Some reports suggest that a significant percentage of day traders experience losses over time.

6. **Failure Rates:** Some estimates suggest that the failure rate for day traders is around 90%, meaning that approximately 90% of day traders end up losing money in the long run. However, these figures are often anecdotal and can't be universally applied.

7. **Short-Term Trading and Taxes:** One challenge faced by short-term traders, including intraday traders, is the impact of taxes. Frequent trading can lead to higher taxes due to the classification of gains as short-term capital gains, which are typically taxed at higher rates than long-term capital gains.

It's important to approach these figures with caution and recognize that trading success depends on a combination of factors including market knowledge, strategy, risk management, emotional discipline, and adaptability. Day trading is known for its challenges, and the high level of risk is a significant factor contributing to the relatively high failure rates reported in some studies. Traders who are considering day trading should thoroughly educate themselves, practice with a demo account, start with a small amount of capital, and be prepared to continually learn and adapt their strategies.

Why 95 percent of Indian Traders Lose Money! (2024)

FAQs

Why are 95% people lost in trading? ›

Relying On External Tips. Lastly, a significant reason for the high rate of losses among Indian traders is an overreliance on external tips and advice. Many traders base their trading decisions entirely on trading tips from friends, TV experts or unverified online sources.

Why do 90% of traders lose money? ›

Trading is a skill that requires education, practice, and experience. Most traders fail because they do not invest enough time and effort in learning about the markets and trading strategies. They enter the market without a proper plan or strategy, which leads them to make poor decisions and lose money.

How many percent of traders lose money in India? ›

As much as 95 per cent of day traders lose money in the market, it demands an investigation. Intraday trading is the most popular, yet data suggests that most intraday traders lose money. A 70 percent don't last beyond the first year, and 95 percent stop trading by the third year.

What is the 90% rule in trading? ›

It is a high-stakes game where many are lured by the promise of quick riches but ultimately face harsh realities. One of the harsh realities of trading is the “Rule of 90,” which suggests that 90% of new traders lose 90% of their starting capital within 90 days of their first trade.

Why do 99% traders fail? ›

The ones that try to squeeze the market for disproportionate returns only end up loosing money and in turn creating those very inefficiencies. This is one of the most important reasons why most people fail to make money in the markets. Unrealistic expectations. First of all, you're misquoting Zerodha (Nithin).

Why do 95 of forex traders lose money? ›

Insufficient Education and Knowledge: Many traders plunge into the market without a solid grasp of its nuances. This lack of understanding leads to impulsive decision-making and substantial financial losses. Comprehensive education is the bedrock upon which successful trading stands.

Who is a successful trader in India? ›

Top 10 Traders in India
PositionTop Traders in India
1Premji and Associates
2Radhakrishnan Damani
3Rakesh Jhunjhunwala
4Raamdeo Agrawal
6 more rows
Feb 16, 2024

How much do traders earn in India per month? ›

Average salary for a Trader in India is 7.9 Lakhs per year (₹65.9k per month).

Is trading profitable in India? ›

Conclusion. Forex trading can be profitable in India, but it requires a combination of skill, knowledge, and discipline. While the forex market offers opportunities for high returns, it also carries significant risks that traders must be aware of and manage effectively.

Which state in India has the most traders? ›

With a 17.4% share, Maharashtra continues to hold the top position in terms of registered investors
  • India witnessed a massive surge in stock market investors since FY15.
  • The country had 8.7 crore investors as of January 31, 2024 against 1.79 crore at the end of March 2015.
Mar 4, 2024

Which trading is most profitable? ›

One of the ways beginners can implement the most profitable trading strategies effectively is by embracing the buy-and-hold strategy. This involves researching companies with solid fundamentals and stable earnings, then holding their stocks for a long time without being swayed by short-term market fluctuations.

How many traders are profitable in the USA? ›

Approximately 1–20% of day traders actually profit from their endeavors. Exceptionally few day traders ever generate returns that are even close to worthwhile. This means that between 80 and 99 percent of them fail.

What is the 5 3 1 rule in trading? ›

The numbers five, three, and one stand for: Five currency pairs to learn and trade. Three strategies to become an expert on and use with your trades. One time to trade, the same time every day.

What is the 3 5 7 rule in trading? ›

The 3–5–7 rule in trading is a risk management principle that suggests allocating a certain percentage of your trading capital to different trades based on their risk levels. Here's how it typically works: 3% Rule: This suggests risking no more than 3% of your trading capital on any single trade.

What is the 70/20/10 rule for trading? ›

Part one of the rule said that in the next 12 months, the return you got on a stock was 70% determined by what the U.S. stock market did, 20% was determined by how the industry group did and 10% was based on how undervalued and successful the individual company was.

Do 90% of people lose money in the stock market? ›

About 90% of investors lose money trading stocks. That's 9 out of every 10 people — both newbies and seasoned professionals — losing their hard earned dollars by trying to outsmart an unpredictable and extremely volatile machine.

Why do so many people lose money in the stock market? ›

The overconfidence bias causes investors to take unnecessary risks in trading or predicting outcomes because they believe they are more capable than they actually are. There is a risk that investors will put too much faith in their own expertise, control, and ability to predict how the market will behave.

Why do so many people fail at day trading? ›

One of the main reasons that very short-term trades fail isn't because their strategies or stock picks are bad but because the time frame is too short. Stocks move very erratically and randomly in the short term, and using five-minute charts gives a false illusion of precision.

Do 97 percent of traders lose money? ›

Day trading has long been touted as a way for people to make a quick buck, with the allure of being your own boss and setting your own schedule. However, the harsh reality is that the vast majority of day traders lose money. In fact, studies have shown that a staggering 97% of day traders end up in the red.

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