India’s retail trading boom has brought millions of individuals into the stock market, but data from the Securities and Exchange Board of India (SEBI) shows that making consisten
money through active trading remains extremely difficult.
The often-cited 94% figure comes from SEBI’s FY2021-22 study of active individual traders
in equity futures and options (F&O).
SEBI found that 90% of active traders lost money. After excluding the top and bottom 5% of traders from the analysis, the proportion of loss makers rose to 94%.
The broader numbers are equally striking. An updated SEBI analysis covering FY2022 to
FY2024 found that 93% of individual traders in the equity F&O segment incurred losses over
the three-year period, with aggregate losses exceeding ₹1.8 lakh crore.
Trading Is Not the Same as Investing
The distinction is important.
Trading generally involves attempting to profit from short-term price movements, while long-term investing involves owning assets with the expectation that their underlying businesses and earnings will grow over time.
Zerodha co-founder Nithin Kamath has repeatedly warned about the dangers of excessive
trading. Overtrading can significantly increase transaction costs, including securities
transaction tax, exchange charges and other fees, which can eat into returns over time.
The challenge isn’t simply that retail traders are competing against other individuals.
Markets include professional traders, institutions and increasingly sophisticated
algorithms, creating a difficult environment for someone attempting to consistently predict
short-term price movements.
The Problem Gets Worse for Smaller Investors
SEBI’s FY2023-24 analysis found that around 76% of individual F&O traders had declared
annual incomes below ₹5 lakh, while roughly 94% had incomes below ₹10 lakh.
Among the lowest-income group, 92.2% were loss-makers.
SEBI has also highlighted the risks associated with derivatives.
Unlike simply owning shares of a company, derivatives can amplify both gains and losses because relatively small amounts of capital can provide exposure to much larger positions.
Why Do People Continue Trading?
The answer isn’t simply a lack of information.
Fast-moving markets, social media, stories of spectacular gains and the psychological
appeal of making quick money can encourage investors to trade more frequently.
Behavioural biases such as overconfidence, fear of missing out and loss-chasing can
further encourage people to continue trading even after suffering repeated losses.
The rise of financial influencers and social-media trading content has added another layer
to the problem, with investors increasingly exposed to narratives that can make short-term
market gains appear easier than they actually are.
The Bigger Lesson
The data doesn’t mean that every individual trader will lose money, nor does it suggest that
long-term investing guarantees profits.
What it does demonstrate is how difficult consistent short-term trading can be for retail
participants.
For investors with a long-term horizon, the approach can be very different.
Instead of constantly attempting to predict the market’s next move, investors can focus on asset allocation, diversification, business fundamentals and staying invested over long periods.
The numbers therefore reveal an important paradox behind India’s trading boom:
The easier it becomes to trade, the more important it may be to know when not to trade.
Fact check: The statement “94% of traders lose money” needs context.
It refers specifically to active individual F&O traders in FY2021-22, rather than 94% of everyone participating in India’s stock market.
SEBI’s more recent FY2022-FY2024 analysis found that 93% of individual F&O traders incurred losses over the three-year period.
Why 94% of Traders Lose Money And Why Millions Still Keep Trading
