Choose a trading strategy to play the stock market

"Unfortunately, the myth that 95% of all day traders lose money is wrong. The actual number is closer to 99%. In fact, we did some research and evaluated research papers done by scientists who analysed brokerage data. To our surprise, the performance of the average retail trader is even worse than the myths indicate" --Rolf Schlotmann, trader and entrepreneur

"Based upon the statistics I've seen, and my own personal experience, I'd say this figure is approximately correct. . . perhaps even a bit understated"-- Justin Medlin, active investor in the futures markets using automated trading strategies

A study of hundreds of thousands of day traders from 1992 to 2006 published in 2010 showed that even more than 90% of day traders lose money. It's further supported by the following statementsOne study suggested that 90% of the 10% traders making gains are only able to make a living and it's only the remaining 10%, that is 1% of the total day trading community across the globe, is actually making money.

The 1% making money are not super humans but they simply follow the success mantra that success doesn't mean doing different things but doing same things differently, and the difference lies in their attitude of first learning, understanding, perfecting and then doing.

Let us analyse as to who constitutes the group of 99%. The group consists of people, who have desire to make a quick money via stock markets but do not have the time to learn the art of trading the stock markets for profits only. These are novice, untrained and unprofessional traders. For choosing the stocks to trade, they are guided by their friends with insider information stories or by the brokers, who have vested interest or they take the tips from free tippers.

Now here, I am at a loss to understand as to why someone putting in all efforts, time and energy will offer his or her research for free? Understandably, they are being compensated by the entities they are vouching for. Thus, the trades these people in the 99% group are taking are biased and not in accordance with market movements as indicated by the technical charts and the end result is obvious.

Not only this, the brokers lure these traders for taking more or large trades by offering leverages, not matching their financial capacities; and the latter in the desire of making some big and quick money, end up losing their capital itself.

Thus, the traders trading without learning and understanding the 'perfect trading strategy", which besides giving right trigger at the right time, with inbuilt safeguards for taking care of emotional stability, greed by enforcing proper discipline, are bound to lose.

Stock market trading is the easiest, honest, consistent and legitimate way of creating wealth, provided you know the art of trading on the stock markets. For this, you need to be an expert or follow an expert.

So the only solution for someone in the 99% group to come out and to be a part of the 1% group is to learn the art of trading the stock markets for profits because 90% of success depends on the skills you acquire and 10% on the unknown factor called luck. For this, they need to choose a perfect trading strategy and expert with proven track record and follow the rules of the game.

The writer is Sebi-registered investment advisor