Day trading is risky! 7 out of every 10 traders lose money in equity cash market, reveals SEBI study

Market Risk: Seventy one per cent of individual intraday traders incurred losses in the financial year 2022-23, that is the period between April 1, 2022, to March 31, 2023, according to capital market regulator Sebi. Simply put, that’s seven out of every 10 intraday traders! And that’s not all, the number of participants taking to intraday trading - or the act of purchasing and selling of stocks within the same trading day with an aim to gain from very short-term price movements – increased more than four times (yes!) within a four-year period, till March 2023. 

Here are some of the key takeaways from the study: 

• One in every three individuals, who trade in the equity cash segment, trades intraday
• Number of individual traders who traded intraday in equity cash segment, rose over 300% in FY 2022-23, as compared to FY 2018-19.
• Share of intraday traders aged below 30 years old grew to 48 per cent in FY23 from 18 per cent in FY19
• Proportion of loss-makers increased to 80 per cent for traders with very frequent trading activity - more than 500 trades a year
• Percentage  of  loss-makers among traders below 30 years old was higher, at 76 per cent, than in other age groups in FY23
• On average, loss-makers carried out more trades than profit-makers

The regulator analysed data on trends in aspects such as profits and losses in intraday trades by individuals operating in the segment. Aimed at promoting awareness about the risks involved in intraday trading in the equity cash segment, the study - based on a sample of individual clients of the top 10 stock brokers - was peer-reviewed by a working group with representation from academia, brokers, and market experts. The sample accounted for around 86 per cent of the individual client count in the segment in FY23, it said.

Several analysts and fund managers caution against engaging in day-to-day trading without adequate knowledge, guidance, or professional assistance.

"It is very difficult to make money by day trading. But it is very simple to make money from the markets provided you have patience and perseverance. Buy an index fund and just keep holding it for a very long time . You will definitely make money," market expert Ajay Bagga told Zeebiz.com.

"As Jason Zweig once said: 'Option Trading helped me put two kids through Harvard...but they were my broker's children.' Day trading will enrich the broker, the exchange, the clearing corporation, the government through IGST, STT, stamp duty... And institutions will take your money from your pocket," said Bagga.

'Avoid day trading unless...', says Ajay Bagga

"Avoid day trading unless you have 3 Ts: Time, training and temperament," added the market veteran.