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| Yudhisthira by VachalenXEON |
This financial year, I decided to test the waters of futures and options trading. Having been in the markets for four years and making decent profits, I thought, why not try my hand at something more challenging? At first, it seemed like a good idea. My initial trades were profitable—one after another. The first trade brought gains, the second followed suit, and even the third was often a win. But then the pattern changed. By the fourth trade, the day’s profit would sometimes vanish. A fifth trade would deepen the loss, and before I knew it, I had exhausted my trading quota for the day—or worse, for two days. This pattern repeated itself, and I found my options trading account reflecting this cycle of initial success followed by inevitable loss.
In the midst of this struggle, I was discussing Yuganta by Irawati Karve and Mahabharata’s episode of Rolling of Dice with a friend. We delved into the episode of the Rolling of Dice, where one character, in particular, captured my attention: Yudhishthira. Here was a just king, who gambled away his entire kingdom, his brothers, and even his wife in a single game of chausar. Like me, he was winning at first, but ultimately, he lost everything. In understanding why Yudhishthira lost, I found a reflection of my own failures in options trading.
Why Retail Traders Lose Money in Futures and Options Trading
Retail traders, much like Yudhishthira, often find themselves caught in a dangerous cycle when it comes to futures and options trading. The initial success can be intoxicating. Early wins create a sense of confidence, a belief that one has mastered the game. But this is often a false sense of security, as the complexities of the market begin to reveal themselves.
1. Overconfidence and Lack of Knowledge: After a few profitable trades, it’s easy to believe you’ve figured it all out. But just as Yudhishthira was lured into continuing the game by his early successes, retail traders often fall into the trap of overconfidence. They may not fully understand the intricacies of options strategies, market movements, or the risks involved. This lack of deep knowledge leads to poor decision-making and increased vulnerability to losses.
2. Psychological Traps and Chasing Losses: Yudhishthira’s ego and sense of duty were manipulated by Shakuni and Duryodhana, pushing him deeper into the game. Similarly, retail traders are often driven by emotions—greed, fear, or the need to recover losses. I’ve found that once a person experiences a loss, they often enter a mode of chasing that loss, desperate to recover what’s been lost. In this state, judgment becomes clouded, and mistakes multiply, leading to even greater losses. Just like Yudhishthira, who continued to gamble despite the mounting risks, retail traders too can find themselves trapped in a vicious cycle, where each loss only deepens the next.
3. The Power of Big Players: In the game of chausar, Shakuni, the skilled manipulator, controlled the flow. In the financial markets, big players or operators hold similar power. We can say they are the Shakunis of modern era. They have access to better information, resources, and the ability to move the market, often to the detriment of retail traders. Retail traders, like Yudhishthira, are often outmatched by these larger forces, making it difficult to sustain early successes.
4. Lack of Risk Management: One of the key reasons Yudhishthira lost everything was his inability to stop. Retail traders often mirror this behavior by failing to set strict limits on their trades or not adhering to risk management strategies. They may keep trading even after losses, hoping to recover, but instead, they find themselves deeper in the hole.
The story of Yudhishthira is a timeless reminder of the perils of overconfidence, emotional decision-making, and the dangers of playing a game where the odds are not in your favor. Retail traders, especially in the high-stakes world of futures and options, must approach the market with caution, humility, and a clear understanding of their limitations. Without this, they risk repeating the same tragic pattern—winning at first, only to lose everything in the end.