Investment and possibilities
Profit and Loss are two different faces of a coin ‘called investment’. Have you ever wondered why 95 % of people in stock and commodity market make losses? Even when we Toss a coin there is 50 % probability (chance) of Head and 50% chance of a tail, So even a careless investment should have equal chances of profit and losses, and after some care, some analysis and some labour one should be able to raise the probability of profit up to 60-70 percent , But it never happens !! why??
There are three main reasons responsible for that.
1) Expense :When profit comes, expenses reduces it and when losses comes, expenses increases it, so our coin is biased now and (50-50 )% profit-loss probability theory will no more work on it lets say, new profit- loss probability ratio should be around (45-55)% or (40-60)% (depending upon expenses).
2) Confusion : Everyone else in the market is confused and in search of answer of these simple questions :
What to buy/sell? : It’s really a very difficult question for an investor, Financial markets provides infinite no. of options to trade in, so in such cases selection of a right instrument is really a very difficult task. When to Buy/sell? : Identification of right buying and selling opportunity is very difficult, because this decision directly influences the performance of your investment, the stock/instrument should obey the direction you chose in order to make you earn. How much time to hold? This is the most difficult decision making once one has made investment. If my position is running in profit, should I hold or book profits and if i am making losses in positions then should we cut or should we wait some more ?3) Conspiracy : There is a very old saying, 'if you want to create 1 rich man, go and create 1000 poor man first', and this is a million year tested and proven formula. So, what is the reason behind this? ''Limited Resources and Unlimited Consumers'' . In market, money is limited and investor/trader are unlimited, so every one can not take the money home, So who will make the difference?. The person/people who could kill all the competition and eat-out other's profit. If others are loosing you will win for sure and will take whole of the money home. So the large fund houses, Franchise Buyers, Foreign Institutional Investors (FII), Domestic Investment Cos., Promotor of Companies, Stock Brokers, Hedge Fund Houses etc. make several conspiracies in market and trap maximum general masses into the trap and with the help of unlimited resources and money they are equipped with, move market in they way they like and as a result everyone else is a looser. We will discuss this section in detail in later part of this blog .
Result
All the above mentioned factors together reduces the profit-loss probability from (50-50)% to (5-95)% and as a result everyone else is a looser in the market, some are holding the loss making position for last five years while some are triggering stop losses in day trading.
