Markets— Dreams of Success and the Ground Realities

Traders are dreamers. They dream big. No amount of profit is too large in their dreams. They plan, they work towards these dreams only to be hit by the cruel realities of trading.

90% of the traders end up losing money. Most of them keep losing regularly. Plans remain plans and the profits remain a dream.

Dreams die fast.

Why am I talking of dreams today?

One of the comments yesterday revived memories of my early trading days. All of us have had dreams of such profits. We made plans for such huge gains only not to see the numbers at any time.

This was the comment :

HI SIR ,

Thanks a ton for discussing my trades n highlighting the risk reward ratio .. I do follow your trades religiously and trying to learn more from u sir …

Sir im a trader with small capital so im trying to make 20 % returns on my capital everyday which amounts to 440 % in a month consistently ..

Update on my suggested trades:

BUY ICICIBANK MAR 360 CE at 10 n trgt 12 .. Target reached but 17.5 was the high made (20% returns on the invested capital achieved in a day)

M&Mfin mar 440 ce at 12 n trgt 15.. Target reached n current LTP 17.9 ( 20 % returns on the capital invested in a day )

Axis bank is at loss but net is in profit ..

Im still learning from Pramod sir , i will trade like you sir one day by learning from this Blog .. Thank u sir for enlightening us through this blog n reinforcing our faith that making money in share market is still possible .. Thanks a ton

Nothing wrong with such thoughts.

My blog is about making big profits from Option Buying. With the blessings of the market we are successful to some extent over a 10 month period. But we never dream of 440% profit in a month though it was actually achieved in September 2018.

One of the greatest Hindi poets, Sh. Harivansh Rai Bachchan had this to say about dreams and reality :

Let us learn our lessons and do well to remember that the reality is far stronger than the dreams. Still dreams make life interesting.

Keep on dreaming but be grounded in reality.

All the best.

Comments

Sajeev March 7, 2019 at 7:05 pm

Just as an aside the user who remarked that he is looking to compound at the rate of 440% a month (i.e. amount invested goes up by 5.4 x) even if he invests a meager Rs 10,000 and compounds at 440% and invests the proceeds for the next month and keeps doing this successfully for the next 18 months (months not years) will end up with $ 67.8 Trillion (68 Trillion not billion. Dollars and not rupees). In effect, sir, not only will he be the richest man in 1.5 years (since Jeff Bezos is worth only 123 billion dollars) but also will be the first trillionaire in the world. Also he would have a networth greater than the largest 6 economies US, China, Japan, Germany, UK and India whose combined economies are approximately equal to $50 trillion only. No wonder Einstein remarked that compounding is the 8th wonder of the world. One Einstein gave us the theory and another Einstein is going to show the practical part… We live in interesting times….

admin March 8, 2019 at 9:09 am

Dear Sajeev,

Your calculations are fine but let us not be judgmental. It is possible to make big gains on small capital but when the capital grows big, huge returns are not possible. One can keep making good consistent profits without aspiring to trade in billions and trillions.

As I have said, dreaming is not bad but one must learn to live with the reality of life.

Cheers.
Reply
- Sajeev March 8, 2019 at 11:16 am
  
  Agreed. However most people come into the options market with a gambling mentality. The truth is that if one use a method which has a statistical edge and consistently engages in it and earns even a 30% CAGR from this and other methods over a long time it will lead to a great return.
  
  In this field the thing to stay away from hubris and if one looks at the long time record of some of the greatest traders like Bill Dunn or Seykota who have averaged 60% over a couple of decades then one needs to ask the very real question is if 5000% returns were that obvious then are they fools.
  
  It is not being judgemental since differences in perception exist, however, there is a difference between an improbable dream and a delusion… Dreams give us hope and sustain us. Delusions on the other hand are the first step to insanity and in this field loss of all capital…
  
  Anyhow Sir your blog is much appreciated. I have also been trying a similar method of Relative Strength for the past one year – I used to be a Bank Nifty option seller and have veered towards option buying when I took big losses last year despite having hedged positions. I was wondering if volatility can be reduced in option earnings by using the same methodology but have an equal number of Calls and Puts and let the market trend for that month make the decision for us.
  Reply
  - Ravi kumar March 10, 2019 at 11:16 pm
    
    Hi Sanjeev, even if u achieve a CAGR of 15% iyear on year it’s going to be a record , let alone 30%.
    
    Anyhow, could you tell ur option selling experience since on this blog there are many a people who like that idea and any your experience could he an eye opener.
    Reply
  - Sajeev March 21, 2019 at 7:59 pm
    
    Hi Ravi,
    
    Sorry about the delay. I have been selling options (only Bank Nifty) for many years – most years profitable. However this year I am running negative. I manage hedged positions. The main problem with option selling is that you make good returns (between 24 – 36%) if you do it properly, however, one bad day can wipe out many months of profits – sometimes it can wipe you out. I would advise you against it. I am also doing very little option selling since as we approach elections, the volatility, risk and chances of a big loss become more probable.
    Reply

PRAKHAR March 10, 2019 at 3:33 pm

Sir, I am in a serious crisis of hope here.
I have tripled my capital following you.

But every now and then people on Twitter suggest to put back profit into the market and talk About ‘CAGR’ & not thinking of more than 30% annually.
I am highly inspired by your first post on this blog where you compared trading stocks with vegetable and groundnut vendor.
I don’t think CAGR is for trading.
All We need is Working Capital which we need to rotate like any other trader to increase our capital. People in all other business do it. Once there Core Capital increase they increase there working capital in the rotation and us trader can also do that by increasing position sizes.
I seriously don’t understand the need of CAGR in trading.
May, we have Your thoughts on it.

Sajeev March 7, 2019 at 7:05 pm

Just as an aside the user who remarked that he is looking to compound at the rate of 440% a month (i.e. amount invested goes up by 5.4 x) even if he invests a meager Rs 10,000 and compounds at 440% and invests the proceeds for the next month and keeps doing this successfully for the next 18 months (months not years) will end up with $ 67.8 Trillion (68 Trillion not billion. Dollars and not rupees). In effect, sir, not only will he be the richest man in 1.5 years (since Jeff Bezos is worth only 123 billion dollars) but also will be the first trillionaire in the world. Also he would have a networth greater than the largest 6 economies US, China, Japan, Germany, UK and India whose combined economies are approximately equal to $50 trillion only. No wonder Einstein remarked that compounding is the 8th wonder of the world. One Einstein gave us the theory and another Einstein is going to show the practical part… We live in interesting times….
- admin March 8, 2019 at 9:09 am
  
  Dear Sajeev,
  
  Your calculations are fine but let us not be judgmental. It is possible to make big gains on small capital but when the capital grows big, huge returns are not possible. One can keep making good consistent profits without aspiring to trade in billions and trillions.
  
  As I have said, dreaming is not bad but one must learn to live with the reality of life.
  
  Cheers.
  - Sajeev March 8, 2019 at 11:16 am
    
    Agreed. However most people come into the options market with a gambling mentality. The truth is that if one use a method which has a statistical edge and consistently engages in it and earns even a 30% CAGR from this and other methods over a long time it will lead to a great return.
    
    In this field the thing to stay away from hubris and if one looks at the long time record of some of the greatest traders like Bill Dunn or Seykota who have averaged 60% over a couple of decades then one needs to ask the very real question is if 5000% returns were that obvious then are they fools.
    
    It is not being judgemental since differences in perception exist, however, there is a difference between an improbable dream and a delusion… Dreams give us hope and sustain us. Delusions on the other hand are the first step to insanity and in this field loss of all capital…
    
    Anyhow Sir your blog is much appreciated. I have also been trying a similar method of Relative Strength for the past one year – I used to be a Bank Nifty option seller and have veered towards option buying when I took big losses last year despite having hedged positions. I was wondering if volatility can be reduced in option earnings by using the same methodology but have an equal number of Calls and Puts and let the market trend for that month make the decision for us.
    - Ravi kumar March 10, 2019 at 11:16 pm
      
      Hi Sanjeev, even if u achieve a CAGR of 15% iyear on year it’s going to be a record , let alone 30%.
      
      Anyhow, could you tell ur option selling experience since on this blog there are many a people who like that idea and any your experience could he an eye opener.
    - Sajeev March 21, 2019 at 7:59 pm
      
      Hi Ravi,
      
      Sorry about the delay. I have been selling options (only Bank Nifty) for many years – most years profitable. However this year I am running negative. I manage hedged positions. The main problem with option selling is that you make good returns (between 24 – 36%) if you do it properly, however, one bad day can wipe out many months of profits – sometimes it can wipe you out. I would advise you against it. I am also doing very little option selling since as we approach elections, the volatility, risk and chances of a big loss become more probable.
PRAKHAR March 10, 2019 at 3:33 pm

Sir, I am in a serious crisis of hope here.
I have tripled my capital following you.

But every now and then people on Twitter suggest to put back profit into the market and talk About ‘CAGR’ & not thinking of more than 30% annually.
I am highly inspired by your first post on this blog where you compared trading stocks with vegetable and groundnut vendor.
I don’t think CAGR is for trading.
All We need is Working Capital which we need to rotate like any other trader to increase our capital. People in all other business do it. Once there Core Capital increase they increase there working capital in the rotation and us trader can also do that by increasing position sizes.
I seriously don’t understand the need of CAGR in trading.
May, we have Your thoughts on it.

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