It is an old expression that in a gold rush, the miners
might or might not make money in Stock
trading online, but those who sell them the picks and spades get
loaded. This is definitely true of parts of the stock markets, particularly
short term trading by people.
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| Making Money Online Stock Trading |
The other day , while reading the narrative of Nitin Kamath,
the guy who has set up Zerodha, India's first and biggest discount stock
broker, I was struck by the fact he's one of those who has gone over from truly
being a gold digger to a seller of picks and spades. Since he was 17 years old
as narrated by Kamath himself, he was trading on the markets. Yet, after
receiving the second in 2009, one during the dotcom crash and two large jolts
on the marketplaces, he apparently decided to change from digging to supplying
others with scoops.
There is more than a small sarcasm in this story - a guy
determines to get out of trading and creates and loses large on the marketplaces
a company that will help others do the same. Nevertheless, it totally
encompasses the experience of nearly a great proportion of individual dealers
on the Indian equity markets, the negative impact being especially amplified by
the fact that their action of choice is highly leveraged derivative trading.
Usually, they then make all amplified by the aged nature of
their trading, big losses and make gains for short jogs.
Actually, it's fascinating to see there is a contest called
'The 60-day challenge' on the Zerodha site, which customers can participate in.
Is to not make a loss over 60 days. That is it.
If you come out lucrative (any gain at all) at the end of
the 60 days, then you definitely've done it you have cracked the challenge.
To the uninitiated like me, this is apparently an astonishingly low qualifying
amount for an action whose only aim is assumed to be to make money, but I guess
that it must be n accomplishment that is uncommon. enough to be an
accomplishment.
Sebi is apparently attempting to restrict derivative trading
among individual dealers as it occurs. A couple of days back, there was a
report in this paper about the Sebi intending to raise the contract size in
options trading and futures on the stock exchanges. For the last 15 years, the
contract size has been Rs 2 lakh. Apparently, Sebi now needs it raised to Rs 10
lakh.
The contract size regulates the minimum ticket size that a
futures contract or options (F&O) commerce has to be. Sebi would like to
ensure that, just more affluent dealers would trade in F&O sections. by
raising the contract size
And why would Sebi need to do that? Certainly, an
overwhelming variety of person dealers are often losing their tops in
derivatives trading. As the sense of attempting to restrict trading to those
who can afford commerce with bigger sums, I am convinced it'sn't because
they're better at making money. Rather, it's the conventional notion if more
affluent individuals lose money on the markets that it is OK, but the modest
investor must be kept away from actions that are high-risk. Perhaps there
actually is something to this line of thinking.
Though their official argument to speak about marketplace
liquidity etc. clearly, agents and stock exchanges are firmly opposed to what
Sebi has proposed as it means lower sales and gains or them Needless to say,
derivatives which are usually called deffendo in India, making them seem like a
magic spell from the Harry Potter novels) have no built-in link to discount
broking.
Discount agents like Zerodha (and now others also) bill Rs
20 per commerce rather than the conventional percentage brokerage. Then that is
good, if someone is offering lower price for the service.
Then dealers must be finding their barebones services to be
great value if the discounters are doing nicely. It is the bigger question of
what function derivatives are playing in the Indian markets, that is the actual
concern.
