I had bookmarked this question and got some time today to answer this. Here you go …..
Loosing capital in intraday is fine the question is how much can you afford to lose in an intraday trade.
More than 90% intraday traders trade with a capital less than 1 lakh also termed as retail traders.
Unrealistic expectations and greed is the biggest reason for people making losses in intraday. I will try to explain the mindset, but before that try to understand this.
Please ask this question to yourself why do you trade ?
Is it for some side income that will cover some expenses?
Is it to for building long term wealth ?
Is it your business that you want to survive on?
Now that you know why you trade, you should set some realistic goals. 1 lakh kept in bank or some good debt fund/bond can give maximum 10–12% returns in a year this is maximum safe returns you can get.
A realistic goal here would be to make 10% per month ( yes its achievable) but will you be profitable every month The answer is big NO
The biggest problem of intraday traders
The problem is if you make 2k you target for 5k when you make 5k you target 10k and so on this is human nature to be greedy and not stop once target is met.
What happens is now after making 15–20k your profit starts reducing say it comes down to 9k you start thinking that you are already in profits so lets try to recover meanwhile 9k becomes 5k and suddenly you become red !!!
Transition from red to deep red
From green you slowly turn red and now from being in profit you are not ready to accept that you overtraded and have turned red. Thumb rule the more you trade the more are the chances of loss. Now after turning red you will not stop you will try hard to recover and take even more riskier trades and thats when problem starts and you may not stop till entire capital is eroded.
The cycle repeats you keep adding funds and keep loosing this continues and you will soon realise that you are in a debt trap. This is serious and needs immediate help you cannot just keep loading money and loosing there is a problem in your trading style and you lack self discipline.
My suggestions/rules of trading
- Do not use more than 1.5 lakhs for intraday trading.
- Do not follow anyone blindly including me.
- Position Sizing, Risk Management and Capital Management are more important than analysis.
How to build wealth
There is a simple formula 80 - age ( percentage of money should go in stock markets)
My age is 30 only (80–30) i.e 50% of my money goes in equity rest goes in gold, debt funds and real estate investments.
All great traders build fortune in positional stocks by moving profits from intraday to positional portfolio.
Focus on timely withdrawal of funds and use fall like today (3% fall on Budget day 2020) to add quality stocks. Nobody can find top or bottom of the market so if you want to buy 100 stocks just buy 20 stocks in a fall and wait for next 5% fall to accumulate another 20.
Stay humble and Never forget how hard earned your money is. Seek professional help when you have money and not when you have lost it all. This will help you avoid the common pitfalls and make your learning curve faster.
Before I end one more thing, stock market is not everything focus on your health, family and loved one’s. They do not know anything about your profit/losses so showing your anger to them will not help you or them in any way.
Traders are warriors… heal yourself… build the confidence and trade with right psychology and mindset…. Glory awaits you !!!
Thank you for reading 🙏☺️
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