Exploring the F&O Trap: Dreams vs. Reality in Trading
F&O Addiction: Turning Dreams into Debt for Retail Investors
F&O trading has become a popular but perilous journey for many retail investors. The lure of quick profits often blinds them to the associated risks, leading to devastating financial consequences. A report from SEBI reports an alarming trend where over one crore retail traders lost a staggering Rs 1.81 lakh crore in the F&O segment between FY22 and FY24.
Why F&O Trading Is Tempting for Investors
Leverage plays a significant role in attracting investors to Futures and Options. While it offers the potential for high returns, it equally magnifies potential losses.
Insights from Retail Traders
Many traders, like Abhimanyu and Chirag, encountered early success, often leading to addiction. Despite the risks and losses, they found it hard to step back from trading.
- Over 75% of loss-making traders continue trading, sometimes borrowing to sustain their activities.
- Experts compare this behavior to gambling addiction, exacerbated by cognitive biases.
The Role of Regulations
The recent actions by SEBI aim to safeguard retail investors from the pitfalls of F&O trading. Regulations are strengthening, focusing on minimizing risks for inexperienced traders.
Advice for Aspiring F&O Traders
Both experienced traders advise that anyone considering F&O trading should start small and be prepared for potential losses.
Educating oneself in the nuances of trading is essential for success and long-term survival in the derivatives market.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.