The lifecycle of a new Trader !!

Today I am going to share a story about a new trader who made an entry into the stock market very recently. Ironically, this might be the story of every new trader who makes an entry into the stock market and the life cycle he goes through during this period.

This is a common knowledge that 95% of people who enter the stock market quit within the first 2 years itself to never return. Of the emaining 5%, 60% more quit within the next 2-3 years. Only the 2% people remain in the market. However when we see the market related articles and books we see that 100% of the data is full of the stories of only those 2% people (Ofcourse everyone likes to talk about the rising sun and everyone is optimistic in nature). We however never find any discussion about the remaining 95% or rather say the 98% people who never go onto make big money into the market. Today we are going to talk about one such person who has been a part of that 98% or rather the majority part of the market participant. His name is Waquar. Came across hi thorough a social media site and after having long conversations with him came to know many of the scams which are running in the market.

Waquar was introduced to the markets by one of such inspiring stories of the market of the 2% people who had made it big into the stock markets. He had everything as per him which he thought would make him successful in the market. He was young, so time was on his side. Trust me friends if you have time in your side then nothing can beat you in the markets. So he had the biggest factor which was running on his side. He had a consistent source of income from his Business which was running very well and he was able to save some part of his income which he thought could be well invested to generate a "Passive Income". He had saved some 3 lakh Rs which was an ample capital to start in the markets and by normal standards if he could gain an appreciation of 15-20% annually on his capital he would be very happy. Plus the regular add on investments that he would be making would help him increase his corpus to a huge amount by the time he would reach 40-50 years of age. All in all his plans were right in place and his direction was also clear. To anyone who is getting particular about the name, must know that Waquar is just a notional name and it can be anyone from amongst us. So with 3 lakh Rs in his kitty he started out on his journey in the stock markets. He bought in a few shares and held for a few days and the price rose and he made a handsome profit.

Now when we come to the basic structure of the markets they have everything that a youngster can be attracted to. Dreams of easy money, a job profile in which you just sit in front of a computer and place a buy order and then after sometime place a sell order and pocket a cool profit. An option to work from anywhere in the world. No boss to report to. Weekends are proper weekends with no one to disturb you. So all these are obvious to pull those 95% of the people to the markets.

So waquar had tasted early success, a rookie getting success in first attempt can be the worst thing that can happen to him. Suddenly his confidence overgrows by leaps and bounds and the thoughts of "this is my lifes real calling" can easily take a toll on all the rookie investors. The mindset can very easily change to, "I have been successfully able to catch the market behaviour or decipher the market". The same thing happened with waquar. All of a sudden his confidence had grown by leaps and bounds. He now started talking more trades, or rather say trading more often in desire to generate returns, "As he had already figured out that he had very successfully deciphered the markets". Suddenly after few trades he started to lose money in the trades and by the time he realised, leave alone the profits, he had already lost 20% of the capital. Now he was left with only 2.5 lakhs. 'Not a problem though, 50k is not a big amount and he can easily get back that amount easily'.

Thats when he started to increase his trading frequency to get back the amount he had lost in the market. But irony had different plans for him. He started taking more trades and lost another 20% from his capital and thate when all his confidence came crashing downwards. That was the time he started getting calls from brokers and advisory services and he was introduced to Options trading who promised returns of more than 100% in a few months with meagre charges of 5000 Rs per month. Within a month of thinking himself to be a pro trader, reality had stuck him hard that he did not know how to trade. These calls had been able to convince him that he needed some professional help. The advisory company gave him a few calls and within 3 weeks his capital swlled back to 2.6 lakh. He was on cloud 9 now. He seemed to have suddenly figured out how to get maximum returns once again. But this respite was short lived. Next week there was sudden sell off in the market and because of high exposure in the options segment suddenly his capital came down to 1.4 lakh.

The advisory company just stopped to to respond to his calls. There he was helpless sitting and losing more than 50% of his capital already. He just sat down and started contemplating and thinking of quitting the markets forever. Just then he was introduced to the term Technical analysis. After some research he realised that he indeed needed to learn. He read some articles on internet, some continuation and reversal patterns like Head and shoulders, and cup and handle and all. He started trading with renewed vigour. He tasted some initial success but then again he started dabbling in options for faster returns and by the time he realised he was left with only 50 thousand Rs in his account. He was again introduced to a new super trend indicator in the market which was giving accurate buy and sell signals. He started trading based on that. He once again lost another 30 thousand from his capital. Now he was only left with 20k in his account.

He has now lost all hope in the market losing all of his money. He is now sitting clueless as what to do with the 20k left in his account. He is now ready to join the 95% of people who leave the markets within 2 years of joining the markets.

This story is not the story of Waquar alone. Rather this is the story of millions of such youngsters who come to the markets only to make an alternative source of income, but they are just a new Product in the market for Thousands of brokers and Advisory companies who are ready to loot him of his lifes savings and take away his money. They know that every generation has such flood of youngsters coming in and are ready to follow the same pattern and lose money and leave the markets. There is a serious lack of approach and infrastructure where such youngsters can be taught about the markets and made to learn.

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Kumar Abhijeet