What are the odds of becoming rich by trading? Many of you trade all sorts of derivatives on a regular basis, hoping to make some money. But have you ever thought of your probability of success?
Before we get there, what are the odds of successfully calling a coin toss? 50-50 right, that one is simple. Now imagine you believe a stock is going to go up, and decide to make a bet on it. You have to remember there is someone else who is taking the other side of that trade. She is making the exact opposite bet: that the stock is going to go down. If you assume that both you and the person on the other side of the bet have similar intelligence, then it becomes even more likely that the odds of you winning the trade are the same as the odds of you correctly calling the coin toss – 50:50.
If you consider the fact that the intraday market is primarily made up of people who are doing this fulltime, and have invested a lot of time and effort in learning this stuff, then you are trading against a much smarter person than yourself. Which would make the odds more like 60-40 against you.
It is possible that if you put in a lot of time and effort in learning the skills of trading, you too could increase your odds and become a successful trader. But remember, trading is not a get-rich-quick scheme. Almost nothing is.
And finally this is what most of us tend to forget: regardless of the outcome of your trade, there is one person who is guaranteed to make money, and that is your broker. So the trade is already stacked against you, because you first need to beat the broker’s fees before you can make a profit.
And finally consider the list of the five richest people in India right now:
1) Mukesh Ambani (Reliance, Jio)
2) Gautam Adani (Ports, electricity distribution)
3) Shiv Nadar (HCL Technologies)
4) R Damani (Investor, founder of DMart)
5) Uday Kotak (Kotak bank)
No. 4 Mr. R Damani is an interesting one – even though he started out as a trader, (you may remember his role in the Harshad Mehta scam) he made his billions from D-Mart and other long term stock investments.
The broader point is this: None of these people got their wealth by trading, by getting in and out of positions in a few days. They stayed there, built real businesses, sold real goods and services, made real investments in infrastructure and people.
That is the only way to get rich.
Do you want help in becoming rich? Reach out to me!
Anees Rao (Financial advisor)
Mob: 9975516959 / email: aneesrao1988@gmail.com
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