Table of Contents
Reason behind loss in crypto market
Its simple. A lot of times, people just start trading with half baked knowledge. trading with half baked knowledge is equivalent to almost 5x or 10x multiplication of risk.
Some common reasons for loss are :
- Deviating from planned strategy : All successful futures traders have a system in place to help them select trades and keep losses to a minimum. However, just when a trading strategy is starting to show promise, many traders will deviate or abandon the system they are using. Doing so allows emotion to creep into their trading, which ultimately leads to losses.
- Containing of risks Futures trading (like all trading) involves a certain degree of risk, so it is important to protect yourself. There are a few ways to do this, such as using sell or buy stops to limit your losses to a comfortable level, or by using hedging strategies like buying puts. Taking steps to protect yourself will help keep losses to a minimum while maximizing profits.
- Lack of needed attention and focus : Trading futures successfully requires your undivided attention to read and evaluate the markets effectively. Sometimes distractions are unavoidable, but you always want to have as few as possible when you are trading.
- Lack of adoption of new ideas : The markets are always changing. No matter how great you think you are as a trader, there’s always a new idea that can help you improve your results. Too often, traders get caught up in thinking they already know enough and aren’t willing to learn anything new. As market conditions change, this type of trader is left behind with nothing to show but losses. However, if you remain open to new ideas, you will be able to change with the markets – and profit consistently, no matter what they do.
why loss in this volatile market
- World’s greatest investor, Warren Buffet said “Derivatives are weapons of Massive Destruction”
- Some of the reasons that most people loose money in Derivatives are:-
- Trading is not investing; It’s speculating, assuming a business risk with the hope of profiting from market fluctuations. Successful speculating requires analyzing situations, predicting outcomes, and putting your money on one side of a trade based on which way you think the market is going to go, up or down.
- Every trader can’t do all these analysis properly, making it more of a lottery game than trading.
- In Future and Options, there can be wild movement in Stock on either sides. Options can show moves of 20%-30% easily. This makes trading them riskier. It’s a HIGH RISK, HIGH RETURN trading.
- Futures trading offers leverage up to 90% to 95%. This means that a trader can invest in a futures contract by putting up only 10% of the actual value of the contract. The leverage magnifies the effect of any price changes in such a way that even relatively small changes in price can represent substantial profits or losses.
- Another thing, Leverage does is, Trader can loose more money than the he invested in trade. There’s potentially unlimited liability. (Say, If someone sell call options or buy put options)
25 reasons why I loose money in crypto
- Invest one lakh rupee in the stock market
- Close your eyes and buy only one penny stock.
- When it is coming down, don’t average it.
- Don’t put any stop loss selling for that.
- After coming down to 50% less of the stock price,
- you are thinking to bring again one lakh rupee.
- Borrow the money for interest.
- you are receiving some stock recommendation from unknow number saying that you can make 200% profit in 3 months.
- Without analyzing it, you can buy that stock (one stock) for one lakh rupee.The stock price is 350 rs.
- After bought, the stock price is continuously increasing by 2% every day for 20 days.
- After 20 days, it is coming down daily and closing in lower circuit on daily basis. (The best example for that is “meenakshi enterprises”.
- You are trying to sell the stock, but it is not possible because of the lower circuit. (20% , 10% abd 5%)
- After 3 months it is becoming 50 rs. only. But still you are not able to sell.
- After losing, you take some advice from your friend.
- Your friend is suggesting to do intraday by using margin+ option.
- The margin+ is, if you have stock worth of 80,000, the stock broker will give you 5 time buying power. that is 4,00,000.
- Also, since your are doing intrady, you are paying 10,000 as fee and getting recommendation from analyst.
- In margin+ , the broker will give you 4 days time. Within 4 days you have to sell the stock. once four days over, they will sell your margin holding automatically. Since you bought at higher rate, it is huge loss.
- Since that is also not giving profit for you, you are going F&O trading.
- Based on the recommendation, you are buying the put option.
- After taking the put option, you don’t want to put stop loss thinking that it will make profit after some days.
- The stock price is continuously increasing (like tata steel in August)
- In the expiry date, it square off automatically.
- In the end, in your account you have only 20,000 rs.
- Since, you sentimentally feel the current stock broker not good. You are thinking that, the broker is the only reason for your loss.
- with that 20,000 , you are going and opening another trading account with other stock broker.
- You are following the above all things without analyzing the reason for loss.
In this way, you can loss huge money.
Pray to your favorite god that even your enemy should not get like this situation.
Thanks for reading and not follow the above steps.
Why do people trade in Options when they are risky and there are other options to make money from share market with lesser risk?
We have below 3 trading instruments in the stock market:
- Equity
- Futures
- Options
So, a trader should know how these trading instruments work.
Now assume a new trader has Rs. 2,00,000 in his trading account and he wants to make a trade with APOLLO HOSPITALS today (as on 20/06/2020 CMP 1370).
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Why do people trade in Options when they are risky and there are other options to make money from share market with lesser risk?
We have below 3 trading instruments in the stock market:
- Equity
- Futures
- Options
So, a trader should know how these trading instruments work.
Now assume a new trader has Rs. 2,00,000 in his trading account and he wants to make a trade with APOLLO HOSPITALS today (as on 20/06/2020 CMP 1370).
ff support data hack zombie tsunami.
The current Market Price of APOLLO HOSPITALS is 1370.
So, the total shares he can buy is 146 (approx) with a capital of Rs. 2,00,000.
Now we will try to understand both the ‘Risk’ and ‘Reward’ from this trade.
Reward – Assume, on the next trading day this script moved 10% on the upside. In this case, he will make a profit of Rs. 20,000 and his current portfolio value is Rs. 2,20,000.
Risk – Assume, on the next trading day this script moved 10% on the downside. In this case, he will make a loss of Rs. 20,000 and his current portfolio value is Rs. 1,80,000.
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The current Market Price of APOLLO HOSPITALS is 1370.
Image – Margin requirements information (as on 20/06/2020)
So, with a capital of Rs. 2,00,000, he can buy 1 lot (500 quantity).
(This info can be found in F&O Margin calculator from most of the broker sites)
Now we will try to understand both the ‘Risk’ and ‘Reward’ from this trade.
Reward – Assume, on the next trading day this script moved 10% on the upside.
10% of 1370 (CMP) is 137.
Total Profit = 1 lot (500 quantity) X 137 = Rs. 68,500
In this case, his current portfolio value is Rs. 2,68,500.
Risk – Assume, on the next trading day this script moved 10% on the downside.
10% of 1370 (CMP) is 137.
Total Loss = 1 lot (500 quantity) X 137 = Rs. 68,500
In this case, his current portfolio value is Rs. 1,31,500.
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The current Market Price of APOLLO HOSPITALS is 1370.
One should look at the option chain for the nearest strike price on the NSE India website or with your broker terminal to get the LTP.
Image – APOLLO HOSPITALS Option chain CE/PE info at 1380 strike price (as on 20/06/2020)
So, with a capital of Rs. 2,00,000, he can buy 4166 (LTP of both CE and PE is 48) quantity (ignoring Lot size at the moment)
Now we will try to understand both the ‘Risk’ and ‘Reward’ from this trade.
Reward – Assume, on the next trading day this script moved 10% on the upside.
Option LTP approximately increase by 75% of the change in the underlying price (Implied Volatility is also around 70–75% for this script).
10% of 1370 (CMP) is 137 (change in the underlying instrument) and 75% of 137 is 102.75.
So, Total Profit = 4166 quantity X 102.75 = Rs. 4,28,056
In this case, his current portfolio value is Rs. 6,28,056
Risk – Assume, on the next trading day this script moved 10% on the downside.
In this case, LTP of 1380 CE will become zero.
Hence, this trader will lose his entire capital.
PS: I have considered only “Options Buying” as most the retail traders only do options buying and the above question is also relevant to option buying.
It certainly seems like bitcoin’s bubble has burst as investors have lost confidence in the crypto sector, causing prices to crash:
- In 2021 the price soared by more than 700% in 12 months to a record high of $69,000 in November
- Fast forward to June 2022 when it plummeted below $18,000
When assets rise very quickly in price and surge to a record high, typically this makes a crash much more likely – or at least a correction, which is when the price falls back down to a more “normal” level.
This appears to be the situation that bitcoin is in right now. It took the cryptocurrency 11 years from launch to get to $20,000 per coin, but only three weeks for bitcoin’s price to double from there.
A decisive year for crypto investors was 2013. Bitcoin’s price went from $13.40 at the start of the year to its height in December of $1,156.10, before falling to about $760 three days later.