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How to optimize your trading performance

Individual investors are increasingly turning away from conventional safe-haven assets like gold, real estate and bank deposits.

Many new traders have embraced stock trading for a variety of reasons.

This is the age of retail investors, and India is not immune to the global trend. We can prove it with numbers. Retail investors’ share on the NSE alone increased from 33% in 2016 to 45% in 2021. In June 2021, the number of new investors registered on a monthly basis reached an all-time high of 1.5 million.

Individual investors are increasingly turning away from conventional safe-haven assets like gold and real estate, as well as bank deposits.

While this isn’t the first time India has seen a retail investment boom, it is the first time that these first-time traders are coming from beyond the metros like Delhi and Mumbai, and from the country’s smaller towns and cities. They are even defying conventional wisdom and willingness to go against conventional trading strategies.

Many new traders have embraced stock trading for a variety of reasons. The pandemic undoubtedly fuelled the surge in interest. Millions of people suddenly found themselves with greater money and more free time. The prevalence of easy-to-use investment apps, which are progressively being incorporated into payment apps, making money transfers even more simple, fuelled the unanticipated retail investing frenzy. These tendencies have been building for some time, but their influence has only recently been apparent.

Some of the reasons for first-time traders to start trading include greed, FOMO (fear of missing out), hope, frustration, and boredom.

While trading in the financial markets is fascinating, exciting, and gripping, for some people, trading—with its promise of great income, financial freedom, often frenetic pace, highs, and lows—can become an addiction, similar to alcohol or gambling. Whereas some average investors might strike it rich, for most people it can cost them socially and economically. Just as the saying goes – Too much is too bad. Isn’t it? But what defines ‘too much’? Is it the capital? Is it the number of trades? Is it the trades in the same script? Or anything else for that matter!

A typical trader whilst seeing the charts knows admittedly, how the mind races to take trades. Going long / short / hold / squaring off the position are the most common calls the mind screams and a trader is driven by. And the only way to know the performance is by the Profit/Loss statement. But this only states the performance, and fails to improvise the trader.

Now what if, the trader wants to just check which trades taken were in favour and which were not. How long the trades were held and what happened after the exit?  At what time of the day the trades were generally successful?   On what days the trades were successful? How often were the trades sold in panic? What is the suitable risk appetite?

In India, most of the first-time traders in the year 2020 were influenced by the traders who showed screenshots of their profits on social media platforms like Twitter, YouTube, Instagram, Facebook, & Telegram. People just saw their profits and jumped into the trading. Either copying their trading calls or being dependent on random calls they received from various sources. A few traders decided to take lessons from professional trading academia and a few just learnt by committing several mistakes on their own.

They chose to march on regardless of the road until they all suffered significant casualties. Many of these people left the journey knowing that they couldn’t take any more losses. On the other hand, the number of people who joined this ever-changing wheel of trade continued to grow at an incredible rate. YouTube, Instagram, Facebook, Twitter, and Telegram have all played a vital role in this rise that cannot be overlooked.

All of these platforms, if you look closely, have one thing in common: financial success! This generation is influenced by the massive profits made by the “chosen few” on these platforms. FOMO (fear of missing out) triumphs over logic and rationality, encouraging new traders to make money by following the “chosen few” on these sites. They make money one day and lose money the next (which is perfectly normal) till the whole invested capital does not vanish. Although some people opt to give up in the middle and others decide to borrow more money from their loved ones to cover their losses. They lose more in the process of recovering, and they realise this is nothing more than a risk.

There is no way to define the real success metric of “the select few” that they are genuinely doing good. Their results (profit or loss) are not just due to luck but sheer knowledge and skills that empower them to do wonders. There is no way to rank these traders in a way that would not just define their profitability but their behavioural and technical skills coupled with knowledge about the markets. The ranking metric is not just applicable for “the select few” but also for every trader to motivate and know how good they are with their skills and knowledge.

While in this day and age, there are plenty of platform tutors who educate about trading and making profits but until recently there was no way to find a trader’s success other than her/his P&L statement, no tools that were available in the market to define behavioural traits of the trader based on the trades s/he took, and there was no platform that existed that could predict what strategy a trader used.

On this front, the Indian stock market has witnessed the arrival of a new platform by Anastrat to help traders analyse their trading behaviour and maximise profits. This platform is beneficial for those traders who have less time in today’s fast-paced world. It provides post-trade analytics that helps traders zero in on winning strategies and avoid losses.

(By Mohit Golecha, CTO, AnaStrat)

Disclaimer: This is the author’s personal opinion. Readers are advised to consult their financial planner before using any app or making any investment.

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