CK Narayan

Contributor, ET NOW
Dr Narayan is a Dalal Street veteran and one of finest exponents of Technical Analysis in
Indian financial markets. He has nearly four decades of experience and insights on Indian
markets and is popular for his talk show, Talking Technicals, on ET Now. He is also Chief
Mentor at ChartAdvise.

How not to become part of the 90% losers’ gang in trading & thrive
on their money instead.

There is this big bunch of new market entrants who are all starry-eyed about trading.

Is trading worthwhile? This is a question a lot of people ponder about. They do so because
trading, somehow, seems a lot more attractive, glamorous, when compared with investing.
The latter appears dour, uninteresting, almost drab!

Trading connotes impressions of a great deal of action, quick fire decision making, the thrill
of earning a great deal of money within a short span of time. Investing on the other hand,
speaks of steady returns, to be gathered over the years, with minimal volatility and, hence, no
promise of excitement.

So, there is this big bunch of new market entrants, who are all starry-eyed about trading and
what riches it is going to create for them. Many of these people are not even clear whether
they are there in it for the money or for the anticipated thrill of the ride!

Then there is the other set – the employed guys. Oh, how they hate their jobs and wish they
could quit tomorrow! And what better to do than enter the world of trading: Buying and
selling equities, commodities, currency pairs!

The sheer thought of doing all that in your own time, with no perfidy of a boss to report to, no
pesky or irritating colleagues to put up with, no fixed timings and freedom to do whatever
you want! This group is a legion, contained in number only because many of them lack the
courage to actually quit their jobs and plunge in.

Then, there is a third set – the lazy, incompetent ones. They are actually unfit for any work,
either because they are too lazy or they just don’t have the skills or the intelligence. Many of
them end up as traders (and the balance as real estate agents!), because this business has no
entry barriers, requires no capital, can be run from anywhere and keeps them occupied all
day!

Now, many of them are told by their well-wishers NOT to get into this business of trading.
Over 90% lose, they say. How can anyone be successful in there, goes their refrain? But do
people listen?

Seldom. Somehow, they convince themselves that they are not among the 90% or that they
will somehow find a way not to be part of it. The fact that around 90% of the people lose is
true. So, the question really is valid: Is trading worthwhile? Can one run the risk of being part
of the 90%?

The answer lies elsewhere. Consider this.

• Most business enterprises fail, to the tune of 90%.

• Most new products introduced into the market (even by big or reputed companies) fail
up to 90% of the time.

• Most movies made fail to become hits – up to 90%.

There are also other areas.

• 90% of the people who go on a diet or join a gym in January first week drop out of the
program shortly after starting out.

• 90% of the people do not have the basic skills to run any business.

And more specific to trading:

• 90% of the people trading currently are not doing it for the money, but more for the
thrill or just to have something to do with their lives.

• 90% of the traders are unwilling to learn, to educate themselves on basic and
advanced skills.

• 90% of the traders cannot admit to being wrong, to the error of their ways.

So, it is clear that this 90% figure dominates everywhere! It is not just confined to trading.
Isn’t the statistic being twisted to show something that is much more prevalent across what
most people do?
Unfortunately, no one tells you all this. In business communities, it is not a stigma to fail in
one business, they just move on and start another. But even they don’t apply the same
yardstick when it comes to trading the financial markets!

Why this double standard? No explanation. Just a ‘feely’ thing!

So if 90% is the norm out there, then why bother about it? Why not twist that into some kind
of an advantage, if possible?

Let’s look at it this way: if 90% losers were not there, how would you win? Trading is a zero-
sum game, after all! So, the more bad traders and investors there are, the greater the chances
for you to win, right? (Wow, that actually makes it a whole darn more worthwhile than we
thought it was at the beginning!)

Now, the question is only how to not be the 90% and how do we get to be in the 10%? Well,
here are some of the things you could do:

• Not think like the 90%

• Not be in it for the thrill or the gamble or the fantasy

• Be willing to learn, all the time, to build and refine skills at playing the game.

• Create a process, vet it, refine it till it works consistently. And then sit back and work
it.

• Be more focused and less emotional in response to events and news. That is antithetic
to the behaviour of the 90%.

• Don’t fall for short cuts. Make the effort. Those who fail are always the short-cut
guys.
Understand that all of these take time to become part of you, but it must happen if you have
to elevate yourself to the 10%. Remember that the 90% gang comprises those who create the
pool of money from which the 10% are going to draw their shares.

The only way that can happen is if you are not part of that 90% gang. The good news is that
the world is always producing this 90% gang – there will never be any shortage of them! The
need to seek thrills, the unwillingness to work hard, the intense desire to get ahead by using
short cuts, the inability to skill themselves will always ensure that the pool of money will
never disappear even 100 years from today.

So, the final answer to the first question is: Yes, Trading is indeed worthwhile. Provided you
become part of the 10% gang.