Amateur retail traders tend to think that the professional trader or Institutional investor have some sort of secret knowledge/system that enables them to make huge profit in trading. However, the difference between a retail traders trying to make consistent profit and a professional traders zeros down to the trading mindset and trading psychology.The difference between success and failure for a trader is wafer thin, Lets elaborate with an example
Let us give you an example of what we mean. A relatively new retail trader is given a profitable trading system having a trading strategy with proper stop loss and target and the trading system delivers an average success rate of 60%. The retail trader is exited that he has finally found something that will ensure his success. Over the course of 10 potential trades using the trading system it gives a perfect 60% strike rate. However, the mindset of the retail trader can hamper his individual performance.
In this example, the strategy starts out with 2 winners, then 3 losers, then 1 winner, followed by 1 loser and then finally 3 winners so overall, it gives a good success rate.
The problem is that the retail trader doesn’t achieve these results for the following reasons.
- After the first 2 winners, he is very pleased with trading system performance and is on the top of the world thinking finally i can earn profit in stock market.
- But this happiness does not remains long as after 2 profitable trade he has string of 3 losing trades. These losses jolts his confidence and makes him hesitant of taking any more trades but has not lost hope on the system. Till now he has only 2 winners and 3 losers.
- On the 6th trade, which we know in advance is going to be a winner, the new trader gets nervous and decides to ‘just watch this one to see how it gets on’. When he sees it is a winner, he kicks himself for not taking the trade.
- He takes the 7th trade which is a loser and so his mind starts playing games with him again. At this stage, he has had just 2 winners and 4 losers.
- On the 8th trade, he couldn’t bring himself to hit the button and buy the shares even though he knew deep down that he should strictly follow the strategy. Again, this one becomes a winner and again the new trader kicks himself for not trading this time.
- The 9th trade he takes and wins on but he loses on the 10th trade because he placed his stop in the wrong place (despite where he had been taught to place them).
So although we know the strategy delivered a 60% win rate over the course of 10 potential trades, the individual only managed 30% because he was trying to second guess the strategy (if you just look at his percentage win rate from the actual trades he took then his success rate was still only 38%). Having personally coached a number of new traders with our trading courses, we see this type of error over and over again. It is usually the mindset of the retail trader that limits their level of success. Once they understand the psychological aspects of trading and are able to be disciplined, trading becomes that much easier and consistent profitability is now attained.
If you see an opportunity that meets your criteria for buying or selling a share, do not hesitate as this type of trading is not the path to success. Constant monitoring of trades and learning from any past mistakes is what professional traders do and hence why they make it look so easy. So First Learn the tricks of trade than earn. Educating oneself is the best investment one can do.
How much returns one can expect at the end of the year by day trading which can be considered as good returns considering our investment in money, time & mentally hard work?
Differ from person to person. First think about getting expertise on your strategy that think about making money.
i believe in every profession or business one has to be disciplined in whatever he does. you cannot blame or be disappointed in failure or except the fact that the other person is gifted. I am in a profession and everyday i meet same people one who are exceptionally well read and others who are not well read but majority of lawyers who are making money are those who are not well read but they know the trick to make money, similarly in stock market you need to read and analyse you work before you start trading. If you are not disciplined you can never make constant money in the market.
Thanks for sharing the inputs Appreciated
Rgds,
Bramesh
From what i have experienced till now day trading is a losers game in stock market whether you believe it or not; unless you are a gifted trader or exceptionally good. Money cannot be made in stock market consistently by day trading.
Never generalize, if you cannot do does not mean others also cannot do.
Rgds,
Bramesh
hi,
i am also working on systematic trading system. and its amazing. how ever i also watch fii activity when ever its bit confuse market. you have always done a great job by giving all research details here. can you please guide me how can i check fii activity on my own from nse website. can you please provide me a link for it.
in advance thanking you for your suppore
http://www.moneycontrol.com/stocks/marketstats/fii_dii_activity/
Thank you ji
that was a nice explanation on how physocology matters in trading …
I don’t believe in trading system.. Markets are very volatile that poor retail traders lose money. Only insiders, corporates, FIIs make money in India. News arrive fater to them than to retailors.
Dear Vamsi..This is what this article was meant to make us all understand. Trading is game of fear and greed and fear aspect was very well explained in this article. Unfortunately without a trading system, we can’t make money here. Big players move do impact retailers emotion which can be overcome by trading system
PERFECT COMBINATION OF TRADING SYSTEM + TRADING METHODOLOGY + TRADING PSYCHOLOGY — THESE ARE “MUST” TO MAKE MONEY IN STOCK MARKET
THIS ARTICLE IS FOR PSYCHOLOGY IMPROVEMENT.
RARE TO SEE SUCCESSFUL TRADER WHO MAKES CONSISTENT INCOME REVEALS HIS TECHNIQUE.
5% & ABOVE REGULAR INCOME PER MONTH IS EASY IN TRADING
Thanks for sharing your thoughts sir
Rgds,
Bramesh