Anuranjan Yadav’s Post

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Director of Engineering, Thoughtspot

F&O trading is similar to tobacco products and all Trading platforms and algo trading firms are behaving like tobacco companies. 91% of people make losses, even amongst people who make profits - a great percentage is less than 10K, almost 50% transaction cost for profit making. Who are the winners here - Algorithms (yes algorithms make the most money), Trading platforms(it seems there are like a million trading platforms. PS: I have little to no knowledge about F&O or trading in general. Don't mean to offend anyone but only calling it out because I feel a poor country like ours cannot have such things. Some scary messages I have read or heard in recent times - An influencer suggesting - Everything is on the chart, you do not even need to know what company is or what does it do . A trading platform suggesting - We have tools which can increase the chance of you making profit(yes this is scary - can you guarantee the increase or call out in what cases it works and when it doesn't). I got worried recently when I heard a conversation of college kids at a cafe - they were boasting about F&O trading. About how this is the path to success. I noticed they convinced two others in the group to get an account and start trading (mind you not investing but trading). The only good message in their conversation was - life is all about taking risks, worst case we will learn something out of it. I hope government and regulators take some steps to either stop it or at least put some limits and checks. At least work towards stopping passive effects like regulate influencers , fact check things, raise more awareness. I seriously do not know what is the way ahead but definitely something which is showing worrisome signs for a poor country like ours. My analysis on why it is similar to tobacco products:

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Anuranjan, F&O trading is definitely not for beginners. If someone engages in derivative trading without knowing much about it, it is risky for sure. "I hope government and regulators take some steps to either stop it or at least put some limits and checks." - this is the tricky part. It is ok that the regulator takes steps to increase awareness and educate market participants about the risks involved. But nothing beyond this. Putting a stop to it because some people in a poor country will lose all their money, is not a solution. The same argument holds true for alcohol and lottery. Lots of people in a poor country consume alcohol in excess and buy lottery tickets, losing their precious money. But the government does not ban it. Social media itself is addictive, and lots of precious man-hours are wasted on social media, including LinkedIn😝. But the government does not ban it. Calling for a ban is a dangerous precedent, it would encourage the government towards implementing a nanny state. The people should decide what to do with their money, not the government. Maybe allow F&O only if the trader is able to clear an exam or show proof of income - though I believe even that is a bit much.

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Slight correction, instead of tobacco it should be cocaine. Said once by Charlie Munger

Suryasis Paul

C# developer,C++ developer @ SmartBear | C# developer, LLMs

2mo

Very insightful this

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