Yes, it is possible to make money in stock trading. Some people have actually made millions trading in markets day in day out.
Eg : Jessie Livingston, George Soros, Rakesh Jhunjhunwala etc
But there is a catch! Only a few people will be able to make it! The number of successful trader will always remain low irrespective of how much wisdom knowledge you gain! You will lose one day or the other. What most successful traders do is they follow a system :
- Never over trade
- Always have a stop loss and target
- Trade only when you understand and can fully comprehend the situation and act accordingly with immediate action
- Understand the market psyche
But the above is not enough, one needs knowledge of technical analysis (charts, data ) and fundamental analysis. And also add to it historical perspective which one builds over time. Experienced traders over time realize where they are wrong and only trade when all indicators and knowledge align to their view or course of action. If anything backfires they stop out.
One personal perspective from my side after trading a lot in the Indian stock market is.
The stock market is rigged!
Yes it is rigged most of time. Indian stock market is dominated by bigger players like mutual fund, pension funds, hedge funds etc. They are market makers and move the market. The market maker is the only trader which always wins and takes home the money on the table.
I'll elaborate with an example. Suppose on the charts its forming a bearish flag and you turn bearish and buy puts to make a profit from falling markets. But if the majority of the retailers or players start buying puts in excess of calls on the index. Then you will be pushed out of the market. The market maker will manage the nifty index by suppose buying banks or raising IT sector or FMCG heavy weights on the index to restrict falls beyond your strike price leading to gradual decay of your put premiums. Eventually all the majority ( bears) will be pushed out and only a minority (bulls) will be favoured. The difference is pocketed. Neat huh ? ;)
Successful traders are always on the minority. They understand the mind game and psyche of the majority market to find out which side is it on ? And then its a pretty clear contrarion bet.
You think I am kidding ? Go check the levels of puts vs calls in any upward rally. Puts written will be more compared to calls. And the moment call writing becomes heavy you should see the opposite.
Note: I have used only a case for put vs calls as instruments of trading. It will be a mix of futures options and cash positions.
No doubt the majority lose since market always moves against them. Try to find what kind of trader you are - positional trader, swing trader or an option writer ? I am an options writer in the making.
Welcome to a war of mind games where only the fittest will survive!