Why a beginner should not indulge in F&O trading — Vijay Kedia explains

Market


Ace investor Vijay Kedia has pointed out the pros and cons of future & option or F&O trading, especially for a beginner who is nascent in stock market investing. The market mogul said that a beginner looking forward to mint fast money from the stock market enters F&O trading and finally end up losing money. Then the traders starts chasing the money he or she has lost in previous trade and finally end up losing their other assets.

Speaking on trading vs investment, Vijay Kedia said, “Trading is nothing less than a drug. You will sell your house to buy drugs and trade to recover your losses. One must remember that investing is like milking a cow whereas trading is like investing a bull.” So, making money via F&O trading is like milking money from a bull. Thus, it’s better to stick with the basics and remain an investor with strong belief in ‘buy, hold and forget’ strategy.

By making this comparison between a stock market investor and an F&O trader, Vijay Kedia has basically tried to attract attention of stock market investors towards the latest SEBI data where the market regulator has revealed that 89 per cent of the F&O traders have lost money in FY22. And the average loss incurred by these F&O traders come at around 1.10 lakh per loser in FY22. This means average loss incurred by F&O traders in FY22 is 1.10 lakh per head.

Interestingly, SEBI data goes on to reveal that out of those 11 per cent F&O traders who made money in FY22, their average income per head comes at 1.50 lakh only because 51 per cent of the net profit incurred by F&O traders went into the pocket of one per cent traders.

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Looking at the active F&O traders, in FY19, total percentage of active traders was at 87 per cent that grew by one per cent to 88 per cent in FY22. Out of these active F&O traders, 90 per cent fall in the group of losers whereas rest 10 per cent managed to made a cut in the group of money makers.

As per SEBI data, total number of F&O traders in FY19 was at 7,06,757 that went up by near 540 per cent to 45,24,841 in FY22. In FY19, total number of active F&O traders was at 6,17,652, which shot up by around 544 per cent to 39,76,419 active traders.


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