Profits - Expectations vs achievements in Stock Markets

Received a call , " What is the monthly profit I can make by using strategies in futures & options ? "

"4  to 5 %  is doable. " we replied.

"Oh , its not attractive at all. I am looking for something like 25 to 30 % per month. "

Received Call 2 - " What is the monthly profit I can make by using strategies in futures & options ? "

"4  to 5 %  " we replied.

" Oh ,great. Even if  I get 2 to 3 % per month, that would be really great. "

SAME question , SAME answer , DIFFERENT reactions.

Why do we loose money in stock markets ?

Number one reason for this is highly unrealistic expectations. New people come to stock markets with  expectations which will shake  even a gambler. No logic, No practical experience. 

No doubt , they get lured by fraudulent operators in market space.

What should be a real ,  rational expectation ?

You analyse any business. Go through quarterly results of best of the companies. You will get your answers. Even best of the companies do not have more than 7% to 8% earnings in a quarter. And see the kind of infrastructure and manpower they have to deploy,  to generate these earnings. And risk is equally high. 

So if with so much of collaborative effort, these huge organisations are able to produce these kind of returns, how can we expect extraordinary , abnormal returns from an alternate business ( if you treat stock market trading as business) ?

Yes , anybody trading or planning to start trading in markets , must first rationalise his/ her expectations. With gambling mindset, you may get one or two good hits but misses will be much more in number. But if you come with a business mindset, with rationalised expectations , you know you are already ahead of at least 90% of retail traders in the market.

Trading in stock markets is also a mind game and market makers know this fact,  better than anybody else. They are fully aware of the fears and greeds of a small investor and hence this knowledge is very well used to take money out of investor's pocket. 

So , first step to avoid these losses is to make realistic expectations from the market . Once expectations are realistic, achievements will be much more closer. And we all know , when achievements meet expectations , there is no place for frustration.

Pradeep Singla

www.theoptionschool.in

(We conduct options trading workshops in following cities of India -  Bangalore,Hyderabad , Chennai, Mumbai, Delhi and Kolkata.  Online workshop is also available).

Why to invest in stock markets at all?

Many of my friends always ask - Why should we invest in stock markets at all ? You do not have any control on how things work and more often than not , you loose money , so we are better off with bank fixed deposit only.

Yes, Agreed that stock market is not an easy place to make money. But then , Nothing comes easily. Do you think doctor's job is easy ? Do you think Engineers's job is easy ?

We study for years. Spend lots of energy, money and time on our studies and land a job. And yes, No job is less than 12 hours a day. What after that ? Insecurities ! Boss ! Work - life Balance ! KRAs!

When it comes to stock markets , we say 

- I do not want to spend time
- I don't have much money to invest.
- I do not want to learn as nobody knows anything.
- I have never attended any training, but follow my neighbour's advice.
- I do not have patience.

BUT

I want extraordinary results.

HOW IS THIS POSSIBLE ?

Stock markets are no more part timers space.

You are happy with a bank fixed deposit which doesn't give you returns more than inflation. Plus you also pay taxes on that. In real sense, value of your money is depleting.

So , what to do. INVEST WISELY.

Investing in stock markets only can give you returns which will beat inflation plus taxes and in real sense , your money will make something for you. 

So, its not a matter of choice, but for any intelligent person with some financial acumen, its a compulsion.

Now , the question is not whether I should invest in stock markets but the question is how I should invest in stock markets. 
-What are the tools required ? 
-What are the instruments i should use ? 
-What kind of knowledge is required ? 
-What other inputs are required ?


Ok , we will talk about these details next time! 

Next blog :- Why to invest in stock markets at all ? - part 2


Pradeep Singla

www.theoptionschool.in


(We conduct options trading workshops in Bangalore,Hyderabad , Chennai, Mumbai, Delhi and Kolkata)