Risks with short term trading

Risks

  • LotusFunds offers short term trading and investment advice in the Stock, Currency  and Commodity markets.

  • Short term means those recommendations that are either intraday or for a maximum of 180 days.

  • Investments means those recommendations that are above 180 days and more holding days.

  • Short term trading and investment has several risks associated and is not suitable for all types of traders.

  • Trading/Investing in the Cash market is risky as the recommendations provided by LotusFunds are short term in nature.

  • Since this is a high-risk service, customers are advised to proceed with caution after understanding all the associated risks.

Short term Trading Risks

Be prepared to suffer severe financial losses

Intraday traders typically suffer severe financial losses in their first months of trading, and many never graduate to profit-making status. Given these outcomes, it’s clear: intraday traders should only risk money they can afford to lose. They should never use money they will need for daily living expenses, retirement, take out a second mortgage, or use their student loan money for day trading.

Intraday traders do not “invest”

Intraday traders sit in front of computer screens and look for a stock that is either moving up or down in value. They want to ride the momentum of the stock and get out of the stock before it changes course. They do not know for certain how the stock will move, they are hoping that it will move in one direction, either up or down in value. True intraday traders do not own any stocks overnight because of the extreme risk that prices will change radically from one day to the next, leading to large losses.

Intraday trading is an extremely stressful and expensive full-time job

Intraday traders must watch the market continuously during the day at their computer terminals. It’s extremely difficult and demands great concentration to watch dozens of ticker quotes and price fluctuations to spot market trends. Day traders also have high expenses, paying their firms large amounts in commissions, for training, and for computers. Any intraday trader should know up front how much they need to make to cover expenses and break even.

Intraday traders depend heavily on borrowing money or buying stocks on margin

Borrowing money to trade in stocks is always a risky business. Intraday trading strategies demand using the leverage of borrowed money to make profits. This is why many day traders lose all their money and may end up in debt as well. Intraday traders should understand how margin works, how much time they’ll have to meet a margin call, and the potential for getting in over their heads.

DISCLAIMER

LotusFunds – is a SEBI registered Research Analyst with SEBI Registration No. INH000001238. LotusFunds – Research Analyst does not provide any execution based/PMS based services. We only provide investment advice to customers on a pre-paid subscription basis. LotusFunds – Research Analyst does not have affiliations with any intermediary and hence does receive any remuneration or compensation of any form from any other intermediary.

Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

SEBI study dated January 25, 2023 on ‘Analysis of Profit & Loss of Individual Traders dealing in equity Futures and Options (F&O) Segment’ wherein Aggregate Level findings are based on annual Profit/Loss incurred by individual traders in equity F&O during FY 2021-22.

 RISK DISCLOSURES ON DERIVATIVES:

# 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
# On an average, loss makers registered net trading loss close to 50,000.
# Over and above the net trading losses incurred, loss makers expended an additional 28%of net trading losses as transaction costs.
# Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.

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This does not construe to be an investment advice. Stock market investments are subject to market risks. All information is a point of view, and is for educational and informational use only. The author accepts no liability for any interpretation of articles or comments on this platform being used for actual investments.