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SEBI shocker: Day trading decimates wealth
25-Jul-24   08:41 Hrs IST
A new study by the Securities and Exchange Board of India (SEBI) has revealed that the allure of quick profits in intraday trading is often a mirage. A staggering seven out of ten individual traders in the equity cash segment suffered losses in the financial year ending March 2023. This means that 70% of day traders are actually losing money, despite the allure of potential quick gains.

The study, which analyzed trading patterns over the past five years, paints a grim picture of the intraday trading landscape. While the number of individuals participating in this high-risk, high-reward strategy soared by over 300% since 2019, the odds of success remain stacked against them.

Perhaps most concerning is the influx of young traders. The share of intraday traders under 30 years old has skyrocketed from 18% in 2018-19 to a whopping 48% in 2022-23. Alarmingly, this age group also has the highest percentage of loss-makers at 76%. The lure of easy money seems to have drawn a younger generation into the market, but the reality is far from rosy.

The study delves deeper, revealing that those who trade more frequently are even more likely to lose money. For traders making over 500 trades a year, the proportion of loss-makers jumps to 80%. It seems that in this case, practice doesn't make perfect - it makes poorer.

Adding insult to injury, loss-makers aren't just losing their initial investments. They're also spending an additional 57% of their trading losses on trading costs. Even those lucky enough to make a profit are seeing 19% of their gains eaten up by fees.

SEBI's findings serve as a stark warning. Intraday trading is not a guaranteed path to wealth. The high costs associated with trading, coupled with the overwhelming probability of losses, make it a risky proposition for most.

SEBI's research is based on a substantial sample, covering around 86% of individual clients in the equity cash segment during the 2022-23 fiscal year. The regulatory body hopes this eye-opening study will serve as a wake-up call, raising awareness about the risks involved in intraday trading.

As India's stock market continues to attract new investors, this report serves as a stark reminder: when it comes to day trading, the odds may be stacked against the individual investor. Will this revelation lead to changes in trading behavior, or will the allure of potential profits continue to draw in new traders? Only time will tell.

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