UnFiltered & Dumb mistakes people do when they start their journey in the stock markets. A thread.
1. Opening account with the same broker as their friends. Groupthink. Not researching enough about commissions, and broker reliability, etc. Just jumping into the bandwagon, signing up with Zerodha or upstox or whatever.
Usually people come into the stock market during bull markets. I came in by 2016 december. They do almost all following classic mistakes. I signed up with zerodha first as my colleagues were signing up with zerodha.
2. You hear about sites like CNBC and Moneycontrol. You feel smart that you know about these. You go into the moneycontrol blog and read the news and stock recommendations. You think of buying some of those stocks when your friends/colleagues also mention they are doing it.
3. You look into buying Mutual Funds first based on whatever is 5-star rated on Moneycontrol, and how much returns the mutual fund has given in the last 3 years. You go for the one that's given highest returns - probably small cap or microcap.
4. Your friend/colleague just put some money into a stock and it went up 10-15%. You are thinking "wow, that's more than FD rate for a year and he earned that in 2 days! WOW". Spikes your excitement. You get very curious. You put your money in that stock.
5. One or two of your friend's/colleague's pick become successful. You think he's doing some magic and that he's very knowledgeable. You ask him how, and he says "just happens man, i am reading all about it!". You believe him and you start looking up to him/following him.
6. You also feel like if he can do it, you can do it. You feel so smart, you have studied well, and if you can study this properly you can also pick stocks to invest and make money from tomorrow. So you go to moneycontrol and start reading analyst calls.
7. You see some company names listed and some of them are familiar from the products you use in your every day life. You get excited, wow this is a great company, we use their products. You see many analysts have given buy calls, and eye popping targets thinking it will be hit.
8. You then discover sites like marketsmojo, financial times, etc., and you want to feel smart, so you go through those sites, read articles. You discover moneycontrol forums and people like ArvindBajajMoneyRain (🤣) giving calls/tips every day.
9. You see them telling on forum that they told so, that they gave some calls which went up 30-40% or so, and you get tempted. You start following those forums, and jump on the bandwagon buying selling stocks they recommend.
10. You rinse and repeat this for a while, mix and match calls, invest in some stocks, some stocks go up, some go down. The ones which go up, you think you've invested for long term, let it go up. The ones which go down, you think you've invested for long term, it will come up.
11. The ones in profit, go to great levels of profit in few months - like 20-30% or more. Then they reverse back, you sit and watch them reversing and coming down to cost. You think you are holding it for long term and you say to yourself you'll be patient.
12. The ones in losses, go further into loss like 20-30% more. You feel like "selling at a loss anyway is waste. I'll hold it for 2-3 years. It has to come back up. I ll keep it as long as it takes to come back to cost".
13. Soon, you're looking at your portfolio and see a loss of 10-20% at a portfolio level. You feel like "what have I done?!". You see the red becoming red-der. One of your friends/colleagues say "average down bro!". You look up what that means.
14. You put in additional capital from your salary/savings, average down on all stocks that are in losses. Your average cost is shown lower, and your losses are also shown lower in %. You feel a temporary relief. You feel so smart and think "stocks always go up in long run!".
15. When the stocks come back up and make some 5-10% profit, you take the profit and exit. You keep holding on to losers and averaging down thinking they have great prospects.
16. You hear about IPOs and some hot IPO coming up. You hear higher probability to get allotted if applied from multiple accounts. So you get demat acc for all your family members. Force them to do the KYC saying you'll multiply their money like anything.
17. You go to chittorgarh website and look at the consensus opinion by analysts. If most say subscribe, you subscribe from all accounts. You get allotted a lot or two. The IPO lists and you make 20-30% profit and you feel so smart!
18. You keep doing this over time and one such IPO you start questioning "if it is so good, why don't we invest for long term?". You see IPOd stocks rallying 100% or more in a short time. So you liquidate your mutual funds and other savings. Bring in few many thousands/lakhs.
19. There's a hot IPO coming. You subscribe. Get allotted. Lists in profit. You don't exit. You add thousands/lakhs of rupees to the stock. You see it rally. You feel so smart. It rallies 40-50% in two three days. You don't take the profit. You think it will go more and more up!
20. You're in office and you haven't watched the market. When you open the portfolio, you see the stock is down to its ipo levels, your investment is in a net loss (including ipo subscribed money). You think you'll hold the stock and that it will go up, since it's quality co.
21. 4-5 months pass and there's no movement in the stock. It's rangebound. You see that your money is not multiplying. You get frustrated. One fine day you open the terminal and see all the stocks have gone down highly. You feel heaviness in your heart. A lot of pain.
22. But you continue on, rinse and repeat. You keep doing this and one or two years passes, and you have a net loss. Your friend's/colleague's suggestions have gone sour. Your portfolio is red. The market has turned. You feel so disgusted at yourself and you also feel so stupid.
23. Then one of your colleagues/friends talk about Options and Futures and how you can make 40-50% in a day itself. You look at how options, futures move. You are astonished. You beat yourself up about how could you not know this all this time!
24. You look at options going up 300-400% at times. 20-30 rupees becoming 120-140 rupees in a day. You are so psyched! You think you can trade them and make money. You look at your red portfolio, down like 40-50% and you feel like you can make it all back.
25. You liquidate your entire portfolio in loss. You start trading options. First day you made 1500 rupees profit. You think "wow this is more than i earn in a day and i did it in 25 mins!" and you're so psyched.
26. You hear about traders on twitter. Sign up with Twitter. Follow those traders. See huge profits on MTM screenshots. You start daydreaming about being able to recover all your losses and then make profits and quit your job freedom from boss sucking your life out of you.
27. You make profit one day, make loss another day. You take profits quicker. You hold on to loss thinking it will come back up or you'll close at better price. You do this for a couple of months. You make 1x and you lose 2x.
28. Along the way you see people talking about charts, RSI, moving average, etc., and you want to learn and you learn them. You go through forums/twitter for profitable strategies. Whatever you find you start trying it out, trading it.
29. Another two three months passed. You have blown your entire account. You look at twitter MTM screenshots by famous traders and you DM them to teach you. They don't even bother to respond, and if they do, they ask you to attend their workshop.
30. You look at the workshop cost and it's a month's salary or two. You think you'll make riches by attending workshop, so why not! You pay for the workshop, attend it. You look for their profitable system. The workshop covers some topics. You come back and put fresh capital.
31. You start trading again. Still same results. Nothing much has changed. You ping your workshop trader. He says, "keep at it. it's not easy". You keep it at and blow your account once more. You meanwhile look at traders like him making lakhs and lakhs of money everyday.
32. You hear about another good trader. You save some money, go to his workshop. Come back try again. Same results. No improvement. You start going through different forums for strategies. You don't improve. Slowly you feel like everyone is a fake, and it's a rigged game.
33. You have blown up a third time. You decide to stop trading and do something productive with your time. You slowly stop following the markets. You put your money in FD and some mutual funds and go about your life.
If by this point you haven't given up, you decide to take things into your hands, and study the market properly. You take good books and read. You discover good traders, legit ones, you go about approaching trading like a business, in a systematic way eventually.
You eventually start trading/investing with a level-headed approach and if you belong to the top 1-2% of traders, you go on to make some money. If not, you resign yourself to the fact that you are just not cut out for it, and you give up eventually looking at it as time waste.
