This should deter retail investors and instead gambling with leverage on account of smaller margin amounts has become a game. What was supposed to be a hedging tool has become a pure speculation one based on YT/WA/TG advice. Derivatives trading is 400 times that of cash trading which alone is ridiculous. It will end badly unless SEBI acutally comes down hard on NSE/BSE who themselves are encouraging it because of how much they are earning through such trades. The government in turn is mum on account of the taxation revenues. Not sure if anyone will break the vicious circles before it breaks itself to the detriment of a lot of investors.
Indian Stock Market and Mutual Funds
- Thread starter anmolbhard004
- Start date
TinTinSnowy
Adept
Honestly, I don't see any problem with it. Those with an edge will make money, and those who gamble will do so here, at a casino, on alcohol, or on cricket betting.
Believe he said buy before 4th as stock market will boom. Guess this was when there was a market dip. Cherry pick and we will get a scenario of what ELI5 said.
On the other hand, many retailers couldnt offload when market was riding high on 3rd due to the fiasco of zerodha and others. On 4th the market crashed on extremely low volumes. Which meant the offloading suckers were again retailers.
That's a very wrong way of thinking. There is a thing called "preying on insecurities/exploiting human nature". The ppl who don't gamble in casinos/alcohol/betting would otherwise invest in F&O because they are led to believe that it is just a more complicated math problem solving which will get you lots of money & there are online tutorials available to learn tips & tricks to solve this math problem.
Tracer_Bullet
Disciple
Cash trading has much higher STT charges. Major pain. Leverage is useful if used with care. Buffet uses leverage i think.
I trade actively with Zerodha. Did not have any issue. People always have reason to complain in hindsight and blame others.
And wrong - Volumes were much higher that normal on 4th.
No one is forcing 'retail' to offload and retail are not all doing the same thing.
Most people don't know what they are doing and fear and greed and lack of skill means they lose money to markets.
Now, every time we login, we even get a warning that most people lose. Zerodha ceo himself has said that only 1%-2% of active traders make more than FD and most lose.
Why is 'Risk disclosures on derivatives' displayed on every login?
Why is 'Risk disclosures on derivatives' displayed on every login?
support.zerodha.com
For whatever reason, many people tend to think that they are special and some small course or technique will magically make them money quickly.
People study for many years to get a degree but dont have same patience in markets. How about testing and waiting before deploying ? Always in a hurry, eager to believe what they want to believe.
Some of them are just completely reckless, losing lakhs and lakhs and taking loans and not stopping. Whose fault is this ? Largely their own. Even if you are misled its on you to verify.
Another reason is that markets dont give good feedback in short term. Right or wrong is only visible in longer term. Hence, even more there is need to wait in initial years.
Same thing happens in investing also in name of multibaggers, but yes can't lose more than what you invest.
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Actually, some blame is to be shared by market/exchange & the reason why SEBI is mulling new rules to reduce such behaviour. As of now, all it takes is uploading of a bank statement of few months showing decent amt & a self declaration of income to be eligible to trade in F&O segment. I think rules should be made that person need to upload their ITR summary showing non-zero tax paid & total leverage in the entire FY can't be more than annual income in the uploaded ITR summary.
Zerodha rarely has issue with cash segment trading, it is derivative based trading of theirs which is known to have issues on severe volatility days & that is expected because of them being discount broker. The major difference between large & discount brokers is their expenditure on infra which is what keeps the platform issue free on severe volatility days.
Tracer_Bullet
Disciple
Draconian !
So what happens if a trader who knows what he is doing gets a losing year. Its perfectly possible even for the best of traders. Markets are uncertain and competitive and ever shifting.
So he pays no tax and cannot trade anymore ?
2nd part is even worse. Just because stupid people cannot control themselves, professionals should be punished ? What if my net worth is much more than my annual income ? Not every one is getting salary.
And why should i not have access to reasonable leverage? Leverage has already been reduced drastically by SEBI, one reason why greedy people have shifted to options ( and also professionals ofc).
I get what you are saying but these are pretty terrible rules. SEBI has been thinking about this for a long time i think. Eventually something will come.
I think some sort of brakes for first year or so is justified and everyone should be made aware of how tough it is - which the prompt after login does and could be emphasized more.
If after all of that someone wants to be stupid, its his mistake alone.
Zerodha is one of the most stable brokers for execution these days. Right up with Interactive brokers. That is why i trade with them ( via api ). I trade cash and also index futures. I have taken almost 10k trades in last few years through stable and volatile periods. Instability is very rare and usually short lived.
Not sure of GUI, it seems stable to me but might have some minor niggling issues from time to time.
'Large brokers' are now smaller than Zerodha in users and profitability.
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That is broadly true across markets. On top of that, a vast majority of profit making traders do not survive through downcycles. It was so fascinating and generally ignored that I attended a program in real world risk taking by Nassim Taleb. The following link has some broad perspectives from Taleb.To further add to this, F&O are meant for pros who play in crores while investing & not for typical retail investors who typically invest a few lakhs in one go. SEBI also confirmed this.
9 in 10 derivative traders lose money: Sebi study - Times of India
India Business News: Mumbai: There is a stock market saying that most people who trade in derivatives lose money.timesofindia.indiatimes.com
Link: https://tradermarkus.com/nassim-nicholas-taleb-fooled-by-randomness-review/
Tracer_Bullet
Disciple
Yes, so true % of profitable traders in long term will be lower. We need to survive through multiple market phases.
Another risk is that even well developed systems can stop working if market changes behaviour. Hasnt happened to me yet, but its possible. So there is that.
After all of this - its crazy that very simple things work well over long term. Stupidly simple at its core, although we can refine and improve around that to some extent.
Respectable stance, and a step in roughly the right direction. But the benefit to mankind or the country by retailers having the possibility to lose much more money than they trade is negligible. And the systemic risks it creates are huge. If a trade can possibly create a loss of 100 rupees, the broker should have free access to 100 rupees to deduct from that trade.
That's awesome. You should be able to deposit with your broker the maximum loss your trade can incur, before making the trade. Then neither the broker, nor their financiers, nor the financial system has any risks.
Bank loans are available in case your net worth cannot cover the maximum loss your trade can incur. Brokers becoming lenders is completely outside the core competency of brokers, and a systemic risk to the financial system.
BSE Committee Blames Zerodha’s Inaction For Tech Glitch, Brokerage Terms Order Blatant Mistake
Zerodha has questioned an order issued by BSE’s GRC which directed the brokerage to compensate a trader for losses due to a technical glitch.
inc42.com
Last I heard, zerodha didn't get any relief in this matter.
For rest of the points see above post by @kiran6680
Tracer_Bullet
Disciple
Final reply, i am not really in mood to argue over all of this. Gave my perspective as a profitable trader for many years. People only see things when it affects them. And people with no actual relevant experience always seem to have most confidence in their beliefs.
Stopping use of knife because people can be stupid and kill themselves is silly.
Risk i take on each trade is much much smaller than capital kept with broker ( like 0.33%-0.5% of capital), but the max potential risk will always be infinite in things like shorts for example.
But they are very much useful things for price discovery. Intraday brings in a lot of volumes, lot of revenue for brokers and it needs leverage too.
Currency trading will be impossible without leverage as they dont move much.
Not every one does long only.
Destroying large parts of the market in order to remove 'risk' is silly.
There is a difference between loss and margin need to take a position. We need leverage to take the position but actual pnl can be much much smaller than the position size. This depends on the volatility of the instrument in the traded timeframe.
Any responsible trader limits max loss per trade and per group of trades. We take many trades and can have higher combined drawdown through that and even that must be controlled. Else you are gambling which is what greedy amateurs do. I keep it less than 10-15%. Nifty meanwhile can go down 40-60%+ in bad times.
There is not much systemic risk these days since leverage has been reduced drastically few years back. Some risk will always be there and they need to have adequate capital to support that. Look at interactive brokers. One thing SEBI has done well is this - reduce risk on brokers and risk on investors/traders. They have been relentless in this ever since Karvy fraud i think.
Things happen yes. And this did happen. Its was also new instrument so people should have taken precautions while trading. No sayings its fine, but it was somewhat expected to have more risk.
But they are still the most stable broker i have traded with. I trade every day with them and happy with it. No broker will have 100% reliability. But Zerodha right now is likely the best in India. I take thousands of trades with them every year and probably have missed less than 10 trades because of errors in 3-4 years.
Stopping use of knife because people can be stupid and kill themselves is silly.
Yeah right.
Risk i take on each trade is much much smaller than capital kept with broker ( like 0.33%-0.5% of capital), but the max potential risk will always be infinite in things like shorts for example.
But they are very much useful things for price discovery. Intraday brings in a lot of volumes, lot of revenue for brokers and it needs leverage too.
Currency trading will be impossible without leverage as they dont move much.
Not every one does long only.
Destroying large parts of the market in order to remove 'risk' is silly.
Nonsense, brokers provide leverage everywhere and its the risk they take ( and manage ) in return for higher transactions and enabling trading which in turn improves market efficiency and price discovery ( in liquid markets atleast). RMS is part of their competency.
There is a difference between loss and margin need to take a position. We need leverage to take the position but actual pnl can be much much smaller than the position size. This depends on the volatility of the instrument in the traded timeframe.
Any responsible trader limits max loss per trade and per group of trades. We take many trades and can have higher combined drawdown through that and even that must be controlled. Else you are gambling which is what greedy amateurs do. I keep it less than 10-15%. Nifty meanwhile can go down 40-60%+ in bad times.
There is not much systemic risk these days since leverage has been reduced drastically few years back. Some risk will always be there and they need to have adequate capital to support that. Look at interactive brokers. One thing SEBI has done well is this - reduce risk on brokers and risk on investors/traders. They have been relentless in this ever since Karvy fraud i think.
Have you actually traded with them ?
Things happen yes. And this did happen. Its was also new instrument so people should have taken precautions while trading. No sayings its fine, but it was somewhat expected to have more risk.
But they are still the most stable broker i have traded with. I trade every day with them and happy with it. No broker will have 100% reliability. But Zerodha right now is likely the best in India. I take thousands of trades with them every year and probably have missed less than 10 trades because of errors in 3-4 years.
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I traded a few Singapore dollars with my friend in exchange for a few hundred rupees a few years ago - without leverage. Words have meanings - including the word "impossible".
False equivalence, we are talking about "unnecessary risks here" when there are much safer investment options available to public unless of course one dreams of becoming a crorepati in 5 years starting from 1 lakh initial capital. There is a thing called entry barrier which is supposed to limit the entry to selected eligible ones & that is exactly what is required here. Sure you are a pro at this but that's exactly why the barrier of entry of average joe living next door should not be same as yours.
I have but only occasionally & only in cash segment which obviously has no stability issue like intraday/F&O.
Tracer_Bullet
Disciple
Again, don't want to continue this for too much.
That stupid dream is what makes people lose, instead of making money through their careers and seeing trading as a sort of investment alternative and waiting to develop competency.
You cant make 1l to 1cr in 5 years generally without taking stupid risk, but you can do that from 10l/20l. Compounding is a wonderful.
Generally, people don't lose beyond what they have as its in broker interest to protect themselves. But stupid people are take personal loans to fund loses - this is something that also should be regulated better.
But at some stage, gloves must come off. I should be allowed to fail. I was allowed that and i am thankful for it as this is my career now.
Zerodha execution is very stable - probably the best in india atleast via api. Had no issue this week and took all my trades and thankfully made some good money too.
News guys create drama. Nobody is perfect ofc.
To clarify, i meant that for leverage. Its very useful and necessary for trading some things but you have to be careful with it.
That stupid dream is what makes people lose, instead of making money through their careers and seeing trading as a sort of investment alternative and waiting to develop competency.
You cant make 1l to 1cr in 5 years generally without taking stupid risk, but you can do that from 10l/20l. Compounding is a wonderful.
Yes, as i said earlier, this i agree with. Initial breaks must be there . I think initial ban period followed by some period where risk taking is controlled (to allow people to experiment safely) makes sense along with getting people to understand that there is no free money here, markets are competitive and you can lose everything.
Generally, people don't lose beyond what they have as its in broker interest to protect themselves. But stupid people are take personal loans to fund loses - this is something that also should be regulated better.
But at some stage, gloves must come off. I should be allowed to fail. I was allowed that and i am thankful for it as this is my career now.
You can make your own mind up, but there is not much difference between segments in general. And we can trade intraday in cash too.
Zerodha execution is very stable - probably the best in india atleast via api. Had no issue this week and took all my trades and thankfully made some good money too.
News guys create drama. Nobody is perfect ofc.
Just a point on that one: It is true for now, because banks are in a cyclical risk-on mode towards unsecured loans, but there is growing realization (by analysts and regulator) of these practices. I do not expect this to last beyond one cycle because banks will be burnt in the down-cycle. The RBI might pose tight regulations against it even before that happens.
Saudi Arabia's petro-dollar exit: A global finance paradigm shift
www.bizcommunity.com
Wondering how it's going to work out for everyone in medium to long term.
Saudi Arabia's petro-dollar exit: A global finance paradigm shift
Saudi Arabia's decision to end its 50-year petro-dollar deal signals a shift in global finance, with implications for currency and digital transactions...
Wondering how it's going to work out for everyone in medium to long term.
India’s looming financial crisis
The country presents a textbook example of the key elements that signal an emerging calamity
www.thehindu.com
why such an article, this looks so confusing considering market is going okayish...
The country presents a textbook example of the key elements that signal an emerging calamity
India’s looming financial crisis
India’s heavily credit-reliant economic strategy is akin to a car speeding toward a cliff’s edge without brakes
why such an article, this looks so confusing considering market is going okayish...
Never judge a country's economy solely by its market. That article might be exaggerating things but reality is that despite Indian share mkt booming the majority of population still lives off govt subsidies due to low income.
Thanks for sharing it. I see some of the ideas are incontrovertible and give some useful nudge to me to be cautious in my job as a risk analyst. I agree with almost everything in the article, but I believe that the music of credit growth has at least 4-5 years to go before it can stop, given how government, regulator, and banks/NBFIs have been thinking and acting. The only hope is that RBI has been turning a little activist lately, which might instill at least some more discipline in this cycle than the last one.
The one point of disagreement that I have, is that the author completely ignores that even credit bubbles, despite all ills, can (and have) also result in greater collective productivity, albeit not necessarily with better outcomes for the population. The general population loses on the upside and also on the downside when bailouts help the major banks. However, as a civilization we do build stuff and technology that could hopefully help the human condition when this fascination towards money recedes at some point of time. Generational change and abundance of resources can cause some of it, although abundance is far off for Indians in general.
I worry that well before the shift plays out fully, the empire would do everything it can, including staging coups, or going to wars, to keep the dollar supremacy intact. There are already signs of commodity price and precious metals price manipulation by western establishment, although such things probably never will be proved.Saudi Arabia's petro-dollar exit: A global finance paradigm shift
Saudi Arabia's petro-dollar exit: A global finance paradigm shift
Saudi Arabia's decision to end its 50-year petro-dollar deal signals a shift in global finance, with implications for currency and digital transactions...
Wondering how it's going to work out for everyone in medium to long term.
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