We are discussing the mindset of a retail trader who becomes an investor from being a day trader and does not even realise when this even occurred. Have a look at the chronological events below:
1) Buy 500 stock A for intraday at 200 with a stop loss and hereafter called as a stop of 197.
2) Stock moves to 205 slowly after an hour and u think ur entry is great and begin taking the market to market (mtm) screenshots to send to your friends.
3) Then comes a big red candle straight to 200. U assume it as a retracement.
4) After few minutes of hovering near your cost, it begins to fall to 198.
5) You start becoming jittery. Your mind which was tuned to only accept profits after watching mtm in point 2, is unable to accept the loss. So you move your stop to 195.
6) Stock drops to 196
7) You think this is a retracement and add another 200 at 196.
8) Now Stock moves to 199 slowly. You feel elated and hope that it will further move up.
9) Another red candle, stock drops to 196. You start feeling nervous.
10) You remove the stop thinking that it might hit
11) Your nightmare comes true and stock suddenly drops to 192.
12) Now slowly you convert intraday to normal and make up your mind to exit at your average cost of 198 if it comes.
13) Stock moves in the range of 192-195 till half an hour left for market close......
14) Then stock drops to 190. You then begin to search for fundamentals and see that company has been showing good profit growth and no debts,,, etc.
So you decide to hold this.
15) Next day stock drops 5% gap down. You don’t have any other capital as everything tied here.
16) Stock continues to drop after some mild retracement during the next one week; You start speaking about this stock as a good one citing fundamentals to your friends. You think the market is wrong and keep cursing the market. In reality, your actions were wrong.
17) 1 month passes on; Stock at 160. Your loss is mounting and you are out of the stock market just bcoz of 1 wrong decision of not booking SL. Now your original trading position has changed to long-term investment.
This is how a typical retail trader turns into an investor.
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