A 50 lac loss on a Capital of 1cr will destroy you as a Trader. But let me tell you that even on a Capital of 50cr it will send you in a depression. Which is why scaling up is so difficult. Probability of bigger losses keeps increasing but ability to stomach them goes up slowly
Investing is a compounding game- Trading isn't. Which is why the legends like Rakesh Jhunjhunwala, Radhakrishan Damani and others focused on Investing after generating their initial corpus from Trading
Forget feeling depressed after making big losses, people feel depressed when in a particular month they don't earn what they feel is their entitlement or quota from the Market🤣🤣🤣
Other way to look at it is that as the Capital size increases, the Preservation of Capital becomes more important than the Return on Capital. The amount of Risk you are willing to take both on a Trade and at Portfolio level drops sharply. Which is why it isn't a Compounding game.
Ashwani Gujral is a discredited man these days. But read his book. Somewhere in there he lays down his Trading history and if I remember right, he scaled up only twice in 8 years- doubling number of lots he Traded each time. Despite the humongous amounts he claimed to be making
Compounding in Trading is much, much more difficult. For a start you have to pay 35-45% Tax upfront on your Profits every year putting a big drag on the Compounding Process.
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