Intra-day trading is buying and selling stocks on the same day. Many traders do this type of day trading in order to earn quick money. Day traders exit positions before the market close to avoid unmanageable risks and negative price gaps between one dayʹs close and the next dayʹs price at the open. Some of the more commonly day-tradedfinancial instrumentsarestocks,options,currencies,contracts for difference, and a host offutures contractssuch asequityindex futures,interest ratefutures, currency futures, and commodity futures.
Because of the nature offinancial leverageand the rapid returns that are possible, day trading results can range from extremely profitable to extremely unprofitable, and high-risk profiletraderscan generate either huge percentage returns or huge percentage losses. Here, financial leverage which is also known asleverageortrading on equityrefers to the use of debt to acquire additional assets.
Do you wish to know who can become a millionaire by carrying out day-trading? The answer to this is the Stock Broker! After years of detailed analysis, we have come to the conclusion that the one who consistently makes money through intra-day trading is not the trader, nor the investor, nor others but the stockbroker.
In the year 2016, CNBC had organized a competition for all SEBI Registered Investment Advisors where-in our company’s founder Mr. Bhuushan Godbole had also participated. The parameters of the competition were that all the participating Investment Advisors had to give their advice in the live market and earn 50 or more points. Be it Intra-day trading or Positional trading, the Investment Advisors had to prove themselves by showing how much returns do they earn with the help of their advice.
Here, both Intra-day trading and Positional trading competitions were treated as 2 different competition and their results were also to be declared separately. Intra-day trading meant buying and selling the shares on the same day itself. Whereas, Positional trading meant buying the shares and holding them until you get the right value for it along with target and stop-loss.
Both these competitions saw many SEBI Registered Investment Advisors along with people from the Research wing of well-known Stock broking houses participating in it. After the competition was held, the results declared were shocking for everyone. The Advisors who by earning more than 50 points had made it to the Intra-day Trading Top Ten List failed to make it to the Positional Trading Top Ten List and the ones who had made it to the Positional Trading Top Ten List failed to make it to the Intra-day Trading Top Ten List.
Out of entire India, there were only 2 such Advisors who had made it to the Top Ten Rankings by earning 50 or more points in both Intra-day as well as Positional trading competitions and out of which, one is our very own Mr. Bhuushan Godbole.
Ok, so am I telling this to praise thy own self? No, this is my attempt to tell all that despite the fact that I made it to the Top Ten of the Intra-day competition, out of my years & years of experience in this field that Intra-day trading is injurious to health and wealth both.
Understand that be it share market or commodity market or currency market if you wish to carry out Day trading here, it means you’ll have to buy and sell shares on the same day. This requires you to put in a lot of your time, as you’ll be required to be present in front of the screen all the time to catch the momentum.
Day trading is all about catching the right momentum. Hence, it’s also known as momentum trading. Momentum is the key to success in Intra-day trading. But finding and catching the right momentum is not everyone’s cup of tea. If you are not able to catch the right momentum to trade, you may lose it all. Hence, intra-day trading is said to be risky. Also, if you look at the success ratio here, you’ll find that 95% of the time people mess up and lose all their capital. There are various reasons why Aryaamoney doesn’t recommend intra-day trading. A few reasons being while trading what if the screen blacks out, what if the internet connection goes away, or for that matter what if the electricity goes away, etc. In all such cases, losses are bound to happen.
So if you have enough time to carry out Intra-day trading, we would suggest you utilize this time of yours for some other productive activity.
Let me share an incident related to this which happened to take place with me a few years back. Once, I met a retired person. So he said to me that I am now retired from my service/ profession so I now have a lot of free time. I said ok. He then replied I want to indulge in Day trading so as to pass my free time. I advised him saying that Day trading is a risky affair, kindly refrain yourself from doing that. Despite me suggesting him not to, he insisted upon carrying out intra-day trading and he did.
So, we met again after a period of almost 2 years and out of curiosity I happened to ask him how is your day trading going? How much are you earning from it? To this, he instantly replied, I am not sure about the profits that I’ve earned, but it has been a great time-pass.
Does that mean we come to the share market for passing our time? So if we come into the share market with such thoughts, I guarantee you that not will your time pass but your money will pass too and you will be left with empty pockets and no-where to go. Therefore, I would suggest again that invest your precious time into some productive activity.
Nicolas Darvas who earned millions from trading said that initially when he was short on capital, he earned good profits by wisely carrying out positional trading and when he had a lot of money he blindly carried out intra-day trading and made huge losses in the market, thus realizing the fact that one should not indulge in to day-trading. Meaning to invest your time wisely and avoid intra-day trading.
While conducting our Smart Trader’s Workshop, Super Trader’s Workshop or even Professional Trader’s Workshop, we always advise that Intra-day trading is injurious to health as well as wealth. And, by carrying out positional short-term trading or medium-term trading you can earn excellent returns but that doesn’t mean you can earn great returns every time, all the time.
When the market valuation is not expensive and the market trend seems to be in a strong uptrend, then at that time if you invest in such shares that are in an uptrend in a step by step manner, you’ll be able to earn excellent returns there. This is the only key to successful investing. It’s not only us who believe it but Nicolas Darvas as well as Rakesh Jhunjhunwala, India’s most well-known investor and billionaire, also believe and preach the same. Not just this, Rakesh J also admits that there have years in the past where he didn’t actually make quite enough money through trading. And I meet such people who want to make loads of money every day, all the time.
It’s important to understand that if you wish to earn good returns you need to analyze the market valuation as well as the market trend and then act accordingly. Grabbing the opportunity at the right moment is important.
I have also seen too many people going out and learning various intra-day trading methods. When they actually start applying those methods while trading, they seem to face the actual hurdles like sometimes the internet network goes away, mobile phones switch off, electricity goes away. So they feel that they are making mistakes while the intra-day system is in the right place. Understand, if you are facing these many hurdles while following a particular system then we can say that there is an issue with the system. So we suggest not following the day-trading system. Instead, invest your time into things that will help you polish your skills better.
When the data from the leading broking houses were analyzed through open trade it was found that the ones who used to make money consistently previously, can others too make money by following them? The answer said no, it does not seem possible to make money by following them. Also, the ones who were making money consistently previously were not able to maintain their positions intact.
Thus, what we learn from this is; Intra-day trading is all about hard-work with no actual guarantee of profit. So if you want to earn great returns then you will have to establish such a business wherein you’ll have a good income source or you can buy shares of such businesses that are already successful or are going to be successful in the near future. In this way, you can become a part of such businesses.
Even Mr. Warren Buffet suggests the same thing. When in an interview Mr. Buffet was asked where and how does this money flows in the share market? To this, he replied “The stock market is a device for transferring money from the Impatient to the Patient.”
Thus, the founder of Aryaamoney, Mr. Bhuushan advises the common investors that “Share market mein roj aaoge to rote hue jaoge, kam aoge to kamate hue jaoge.”
Happy Trading, Happy Investing!!!
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