Only 1 out of 10 F&O traders made profit in FY22; average loss stood at ₹1.25 lakh (2024)

FAQs

How many people make loss in F&O? ›

The futures and options (F&O) market is a complex and risky market, and it is no surprise that 9 out of 10 traders lose money in it.

Calculation of Average Profit per Trade

Total Number of Trades: Count the total number of trades executed during the same period. Include both winning and losing trades in the calculation. Average Profit per Trade: Divide the total profit (or loss) by the total number of trades to obtain the Average Profit per Trade.

The emotional aspect of trading often leads to irrational decisions like panic selling. When the market moves unfavourably, many traders, especially those who are inexperienced, tend to panic and exit their positions hastily. This panic selling often occurs at the worst possible time, leading to significant losses.

With a $10,000 account, a good day might bring in a five percent gain, which is $500. However, day traders also need to consider fixed costs such as commissions charged by brokers. These commissions can eat into profits, and day traders need to earn enough to overcome these fees [2].

Based on several brokers' studies, as many as 90% of traders are estimated to lose money in the markets. This can be an even higher failure rate if you look at day traders, forex traders, or options traders.

Recently, the Securities and Exchange Board of India (SEBI) issued a report, stating that 9 out of 10 individual traders in the equity F&O segment incurred an average loss of Rs 1.1 lakh during FY22, with most of them operating in the options segment.

But that doesn't mean your ideal profit margin will align with this number. As a rule of thumb, 5% is a low margin, 10% is a healthy margin, and 20% is a high margin.

This is calculated by dividing the average winning trade by the average losing trade. This field is not a very meaningful value by itself because it does not take into account the ratio of the number of winning vs losing trades, and strategies can have different approaches to profitability.

The profit/loss ratio acts like a scorecard for an active trader whose primary motive is to maximize trading gains. The profit/loss ratio is the average profit on winning trades divided by the average loss on losing trades over a specified time period.

It is a high-stakes game where many are lured by the promise of quick riches but ultimately face harsh realities. One of the harsh realities of trading is the “Rule of 90,” which suggests that 90% of new traders lose 90% of their starting capital within 90 days of their first trade.

Why do most option traders fail? ›

Lack of a clear strategy: Options trading requires a well-defined strategy. If options buyers do not have a clear plan, exit strategy or risk management in place, they may make impulsive decisions that lead to losses.

A common approach for new day traders is to start with a goal of $200 per day and work up to $800-$1000 over time. Small winners are better than home runs because it forces you to stay on your plan and use discipline. Sure, you'll hit a big winner every now and then, but consistency is the real key to day trading.

According to a study by Sebi, in FY22 only 11 percent of individual traders in the equity F&O segment made profits, with an average profit of Rs 1.5 lakh.

But that's not all, the biggest reason day-traders lose money is the risk they take on. Day traders are more likely to make risky investments to reach for those higher potential returns, and as you can probably guess, high risk = high potential loss. You make a 15% return in 1 year (which is a great return by the way!)

It's a shocking statistic — approximately 90% of retail investors lose money in the stock market over the long run. With the rise of commission-free trading apps like Robinhood, more people than ever are trying their hand at stock picking.

The success rate for investors who trade options can range from 50 to 75%. There are various strategies that investors employ to aim for success.