Is it possible to make money consistently from stock market?

Estimated reading time: 6 minutes, 39 seconds

Yes, it is possible and not

This article talks mainly from the perspective below

  • Novice Trader
  • Day Trading

This COVID has brought many people in to stock market for multiple reasons like job loss etc. Most of those new traders entered in to market are drawn by illusions of day trading, this article aims to blow up those illusions

From outside, Day Trading may seem like Paradise, but actually it is not, and in fact it is more than Hell if you are not properly versed.

Day Trading is not any academic qualification, that you study for three years, and start making money consistently.

Day Trading is a unique skill that you will gain with experience, it may take few months to few years OR may be decades of hard work to acquire such skill.

Day Trading involves multiple fields from psychology to statistics and mathematics to data analysis.

If you are new to stock market, then the first thing you should do is ‘Learn Basics’. A basic understanding in stock market is must for getting success. Luckily you don’t need to search here and there OR read multiple books, there is a wonderful place where you can learn all the basics of stock market.

Thanks to Karthik Rangappa for Zerodha’s varsity

Zerodha Varsity will lay down a strong foundation in your trading career.

Zerodha’s Nithin has written an article on Trading Wins and Success Ratio of traders.

What does it take to win at trading?
Percentage of Profitable Traders

Let's blow up your illusions on Stock Trading

1. Automation and Programming

Novice trader thinks that buying a piece of software or program from ‘x’ company will make money from stock market. If that’s the case then all those IT engineers would be trading in stock market and everyone will be joining IT colleges.

Your profitability depends on where you Buy and Sell, and where you Buy and Sell depends on your Buy and Sell logic.

Software helps you to analyze your logic, speed up your execution and scale up your strategy.

If you have very good logic, then you still make money without using any sophisticated software.

But if you don’t have any good logic, then you lose even if you use super computer.

To understand the role of software:

Take a sample task

  • Track Nifty 100 symbols
  • At 0930AM, rank those 100 stocks on % change, pick top 3 and bottom 3 stocks
  • Calculate quantity for each selected stocks using the formula RiskPerStock/(High – Low)
  • Place Buy order if upside break and Sell order if downside break

It’s practically impossible to do the above task manually. (using excel is partial automation only)

Here comes the help of software, with a little piece of program, you can do the above task in a fraction of second.

So using a program or software adds edge to your trading success, but software alone can’t bring success.

2. Twitter Guru

Novice trader thinks that Buying and Selling stocks recommended by his twitter guru will help to make money consistently. Yes, of course you make money one or two times.

But, Buying and Selling a stock without knowing the underlying facts that led to the trade decision will never make you as a successful trader.

You always glued to your Twitter guru (I hope that’s what your Guru wants)

There is a difference between sharing knowledge and sharing information. (I bought this vs Why I bought this)

Apart from this, your guru might have additional funds, risk management and access to modern software that help him to manage his positions better than you.

For you, it is like kicking you in some direction without knowing how far you will go and where you end up.

I don’t mean everyone, twitter is a great place to learn things and many people helping novice traders by sharing their knowledge.

3. Trading Workshops

Novice trader thinks that by attending Trading Workshops will help to make money from stock market. Novice traders plans to get some holy grail strategy by shelling out some bucks for trading workshops.

Yes of course, most of the trading workshops will provide you a strategy, but not any holy grail. Because there is nothing called holy grail strategy in stock market.

Trading workshops gained momentum in the last couple of years, starting from few thousands to few lakhs and venue ranges from star hotels to cruise ships.

Everyone at some point in their life needs guidance from someone to go ahead, the someone may be his family member, friend, Google or any person. So our trading life also needs guidance at some point, Novice trader can use workshops as guidance.

Of the all workshops I heard and seen, Madan’s workshop is good. Those who expects holy grail will surely dislike his workshop. But those who working hard to get success in trading career, will sure appraise him.

If you attend workshop to get some holy grail strategy or the workshop focuses on holy grail strategy, then you may never have a successful career in trading.

4. Monthly Income

So after some research (in Twitter and Facebook), Novice trader convinced that it is easy to make money from stock market and sets a plan to earn monthly income from trading.

But the reality is its very hard to be consistent month on month. Draw downs are inevitable and part of the game. There is no guarantee that you will make money every month.

Take COVID example, lots of people lost so much of money from Mar to Jun 20. No one ever thought of COVID like situation.

Stock trading should not be treated as an alternate to monthly income (at least in the initial period and when you are under capitalized).

Say you have some Rs 35000/- monthly dues and another Rs 15000/- to run your family, and you put all your capital (Gold Loans, Savings, PFs etc) in stock market in the hope to earn Rs 50000/- per month.

If you didn’t get profit in a month, how would you manage the month?

Withdraw Rs 50000/- from trading account or take loan from friend?

If the same continues for next 3 months (believe me, its sure possibility not just 3 months, for n-months), you will end up with enormous financial pressure that may collapse your family.

P.S. If you don’t have any good logic , forgot monthly income, you will never get your capital back.

5. Little Capital

After seeing MTM screenshots with 5 digit profits in Twitter, Novice trader sets a plan to make 5 digit profit by bringing his 1L capital in to stock market and chooses a broker who can allow him to buy 1Lot NIFTY for just Rs 5000/- and does a calculation in Excel.

Capital: 100000
Margin/lot: 5000
Lots To Trade: 100000/5000 = 20
Target: 100 Points
Total Profit: 100 * 20 * 75 = 150000

Hooray, got 5 digit profit (of course in paper) and starts punching live trades, and rest of the story everyone knows (If you don’t know the rest of the story, then you may be the one punching the live trade).

If you plan to earn 1L with 1L capital (in short term), then you are not trading, you are just gambling.

If someone posts 5 digit profit, then he might be having capital of at least 1 crore (+ additional leverages).

MTM screenshots are the best way to lure novice traders, though no one knows the purpose of sharing MTM screenshots. But the problem with MTM screenshots are,

  • Most will not post capital deployed, leverage taken and holding time
  • Most will not post on loss days

The Most ignored, but yet the most important thing in Stock Trading

‘Risk Managemant’

Even you have good logic and software to execute the logic, if you don’t apply proper risk management then you may blow out your capital soon.

What does it mean?

It means, you should risk such amount per day so that you are in the game for longer period.

Yes, it is possible to make money consistently from stock market if you put your best efforts, dedication and lot of hard work.

But not if you treat stock trading as an easy and no effort career

Stock Trading is the toughest career