Dhruvin Khandwala (22)

NAME Yash Kheni (23)

Archita Koolwal(24)

B.COM (Financial Markets)

DEGREE

Performance of Intraday
TITLE traders in Stock Market .

SUPERVISOR Prof. Mandar Thakur

DATE 9th March 2019

 ABSTRACT
We have investigated the performance of intraday traders on the basis
of certain psychological factors.

For this we have considered 60 anonymous Intraday traders as our

sample. As a unique data set allows us to examine trading behaviours
which eventually allows to realize returns of all the participants in the
Indian Stock Market.

We used survey method for our research. In the questionnaire we

constructed, the measures of personality traits and emotional states of
each subject was considered along with their relationship with these
measures with daily normalized profits and losses record.

Both the negative and positive side indicted that the trading
performance of intraday traders isn’t upto the mark.

On an average basis, most of the traders lose money while Intraday

trading, even though they use the same trading strategy and for the
same type of options.

Overall individual trader’s trading performance improves with the

experience and sophistication.
 LITERATURE REVIEW

Of the selected topic, The performance of intraday traders in stock market,

no research has been conducted till date. So it was not possible to find the
exact literature review of the same. Though we got an inspiration from an
article in newspaper about how intraday traders lose their money in the stock
market. Though a similar research was conducted in the research paper of
National Bureau of economic research in March 2005. It focussed on the fear
and greed in financial markets, a clinical study of intraday traders. It was more
on risks rather than performance. The article is as follows:-

95% of all traders fail” is the most commonly used trading related statistic
around the internet. But no research paper exists that proves this number
right. Research even suggests that the actual figure is much, much higher. In
the following article we’ll show you 24 very surprising statistics economic
scientists discovered by analysing actual broker data and the performance of
traders. Some explain very well why most traders lose money.

• 80% of all day traders quit within the first two years. 1
• Among all day traders, nearly 40% day trade for only one month. Within
three years, only 13% continue to day trade. After five years, only 7%
remain. 1
• Traders sell winners at a 50% higher rate than losers. 60% of sales are
winners, while 40% of sales are losers.2
• The average individual investor underperforms a market index by 1.5%
per year. Active traders underperform by 6.5% annually. 3
• Day traders with strong past performance go on to earn strong returns
in the future. Though only about 1% of all day traders are able to
predictably profit net of fees. 1
• Traders with up to a 10 years negative track record continue to trade.
This suggests that day traders even continue to trade when they receive
a negative signal regarding their ability. 1
• Profitable day traders make up a small proportion of all traders – 1.6%
in the average year. However, these day traders are very active –
accounting for 12% of all day trading activity. 1
• Among all traders, profitable traders increase their trading more than
unprofitable day traders. 1
• Poor individuals tend to spend a greater proportion of their income on
lottery purchases and their demand for lottery increases with a decline
in their income. 4
• Investors with a large differential between their existing economic
conditions and their aspiration levels hold riskier stocks in their
portfolios. 4
• Men trade more than women. And unmarried men trade more than
married men. 5
• Poor, young men, who live in urban areas and belong to specific
minority groups invest more in stocks with lottery-type features. 5
• Within each income group, gamblers underperform non-gamblers. 4
• Investors tend to sell winning investments while holding on to their
losing investments. 6
• Trading in Taiwan dropped by about 25% when a lottery was introduced
in April 2002. 7
• During periods with unusually large lottery jackpot, individual investor
trading declines. 8
• Investors are more likely to repurchase a stock that they previously sold
for a profit than one previously sold for a loss. 9
• An increase in search frequency [in a specific instrument] predicts
higher returns in the following two weeks. 10
• Individual investors trade more actively when their most recent trades
were successful.11
• Traders don’t learn about trading. “Trading to learn” is no more rational
or profitable than playing roulette to learn for the individual investor.1
• The average day trader loses money by a considerable margin after
adjusting for transaction costs.
• [In Taiwan] the losses of individual investors are about 2% of GDP.
• Investors overweight stocks in the industry in which they are employed.
• Traders with a high-IQ tend to hold more mutual funds and larger
number of stocks. Therefore, benefit more from diversification effects.
INTRODUCTION
Introduction to Indian Stock Market

Before liberalization, Indian economy was tightly controlled and protected by

number of measures like licensing system, high tariffs and rates, limited
investment in core sectors only. During 1980’s, growth of economy was highly
unsustainable because of its dependence on borrowings to correct the current
account deficit. To reduce the imbalances, the government of India introduced
economic policy in 1991 to implement structural reforms. The financial sector
at that time was much unstructured and its scope was limited only to bonds,
equity, insurance, commodity markets, mutual and pension funds. In order to
structure the security market, a regulatory authority named as SEBI (Security
Exchange Board of India) was introduced and first electronic exchange National
Stock Exchange also set up. The purpose behind this was to regularize
investments, mobilization of resources and to give credit.

Stock Exchanges in India

Most of the trading in the Indian stock market takes place on its two stock
exchanges: the Bombay Stock Exchange (BSE) and the National Stock
Exchange (NSE). The BSE has been in existence since 1875. The NSE, on the
other hand, was founded in 1992 and started trading in 1994. However, both
exchanges follow the same trading mechanism, trading hours, settlement
process, etc. At the last count, the BSE had more than 5,000 listed firms,
whereas the rival NSE had about 1,600. Out of all the listed firms on the BSE,
only about 500 firms constitute more than 90% of its market capitalization; the
rest of the crowd consists of highly illiquid shares. Almost all the significant
firms of India are listed on both the exchanges. NSE enjoys a dominant share
in spot trading, with about 70% of the market share, as of 2009, and almost a
complete monopoly in derivatives trading, with about a 98% share in this
market, also as of 2009. Both exchanges compete for the order flow that leads
to reduced costs, market efficiency and innovation. The presence
of arbitrageurs keeps the prices on the two stock exchanges within a very tight
range.
Listings

a listing refers to the company's shares being on the list (or board)
of stock that are officially traded on a stock exchange. Some stock exchanges
allow shares of a foreign company to be listed and may allow dual listing,
subject to conditions.

Products to be traded in stock market.

Stock market indexes
A stock market index is a statistical measure which shows changes taking place
in the stock market. To create an index, a few similar kinds of stocks are
chosen from amongst the securities already listed on the exchange and
grouped together.
The criteria of stock selection could be the type of industry, market
capitalisation or the size of the company. The value of the stock market index
is computed using values of the underlying stocks. Any change taking place in
the underlying stock prices impact the overall value of the index. If the prices
of most of the underlying securities rise, then the index will rise and vice-
versa.
In this way, a stock index reflects overall market sentiment and direction of
price movements of products in the financial, commodities or any other
markets.

Nifty fifty
The NIFTY 50 index is National Stock Exchange of India's benchmark broad
based index for the Indian equity market. Full form of NIFTY is National Stock
Exchange Fifty . It represents the weighted average of 50 Indian company
stocks in 12 sectors. Last 3 years data shows that nifty has gain by 46.80%.

Sensex
Stock Exchange Sensitive Index or simply the SENSEX) is a free-float market-
weighted stock market index of 30 well-established and financially sound
companies listed on Bombay Stock Exchange. The 30 component companies
which are some of the largest and most actively traded stocks, are
representative of various industrial sectors of the Indian economy. Published
since 1 January 1986, the S&P BSE SENSEX is regarded as the pulse of the
domestic stock markets in India. The sensex of last three years show 47.60%
raise.
TYPES OF TRADING IN INDIAN STOCK MARKET.

The two major practices are listed below.

1. Day trading (Intraday)

1. It involves taking a position in the markets with a view of squaring that
position before the end of that day.
2. A day trader typically trades several times a day looking for fractions of a
point to a few points per trade, but who close out all their positions by days
end.
3. The goal of a day trader is to capitalize on price movement within one
trading day.
4. Unlike investors, a day trader may hold positions for only a few seconds or
minutes, and never overnight.

Real day trading means not holding on to your stock positions beyond the
current trading day; in other words, not holding any position overnight. This is
really the safest way to do day trading because you are not exposed to the
potential losses that can occur when the stock market is closed due to news
that can affect the prices of your stocks.

Advantages of Day Trading

1. Zero Overnight Risk

2. Increased Leverage

3. Profit in any market direction

2. Swing Trading
1. Swing trading combines the best of two worlds the slower pace of investing
and the increased potential gains of day trading.
2. Swing traders hold stocks for days or weeks playing the general upward or
downward trends.
3. Swing Trading is not high-speed day trading. Some people call it momentum
investing, because you only hold positions that are making major moves.
4. By rolling your money over rapidly through short term gains you can quickly
build up your equity.

How does Swing Trading work?

1. The basic strategy of Swing Trading is to jump into a strongly trending stock
after its period of consolidation or correction is complete.
2. Strongly trending stocks often make a quick move after completing its
correction which one can profit from.
3. One then sells the stock after 2 to 7 days for a 5-25% move. This process can
be repeated over and over again. One can also play the short side by shorting
stocks that fall through support levels.
4. In brief a Swing Traders goal is to make money by capturing the quick moves
that stocks make in their life span, and at the same time controlling their risk
by proper money management techniques.

Advantages
1. Swing Trading combines the best of two worlds the slower pace of
investing and the increased potential gains of day trading.
2. Swing Trading works well for part-time traders especially those doing it
while at work. While day traders typically have to stay glued to their
computers for hours at a time, feverishly watching minute-to-minute
changes in quotes, swing trading doesn’t require that type of focus and
dedication.
3. While Day Traders gamble on stocks popping or falling by fractions of
points, Swing Traders try to ride swings in the market. Swing Traders buy
fewer stocks and aim for bigger gains, they pay lower brokerage and,
theoretically, have a better chance of earning larger gains.
4. With day trading, the only person getting rich is the broker. Swing
traders go for the meat of the move while a day trader just gets scraps.
Furthermore, to swing trade, you don’t need sophisticated computer
hook-ups or lightning quick execution services and you don’t have to
play extremely volatile stocks.
OBJECTIVES
To find out the performance of the traders in Indian Stock markets on the basis
of their age, type of instrument they trade in, the techniques they use for
analysing before they trade. The basic idea is to find out that traders either
make money or lose money in intraday trade.

STATEMENT OF HYPOTHESIS
This is assumed that most of the traders lose their money in intraday trade.
The objective behind this research is to find out whether the above statement
makes sense and is factual or not.

LIMITATIONS OF THE STUDY

• The sample included only 60 respondents who all are from Mumbai.
• All respondents do not equally belong to respective age groups of the
study.
• Non-availability of secondary data.
• Opinions of traders we’re not studied.
• We couldn’t’ make our respondents to answer discrete questions based
on their opinion.
RESEARCH DESIGN
Sources of Data

The primary data was collected from 60 respondants who are current active
traders in the Indian stock markets.The data was collected from pool of ages
ranging from 15 to 40 years and above having different years of experience of
trading in stock markets.

SAMPLING PROCEDURES

Only the people who are currently active traders in both cash segment and the
fno segment were choosen as samples.The samples totalling of 60 respondants
were merely handpicked for conducting the research to effectively justify the
objective of the project.

METHODS OF DATA COLLECTION

The primary data was collected by conducting a survey.The survey was

conducted by distribution of a questionnaire consisiting of 9 questions.

TREATMENT OF DATA

The data collected by conducting the survey was used for ananlysis.Various pie
charts and bar charts is used to make conclusions on the findings.
RESEARCH
MEHODOLOGY
Survey results
 ANALYSIS OF DATA

The survey was conducted with 60 respondants.Every

respondent is an active trader in the stock markets. Among
the respondants,56.7% belongs to the age group of 14-
25,21.7% belongs to the age group of 25-40 and the
remaining 21.7% belongs to the group of 40 and above.so the
major class of sample belongs to the young ages.62.5% of
respondents have less than 3 years of experience of trading
in the stock markets. This shows many new participants have
entered in the stock markets in recent years. The participants
having experience of more than 8 years is least at
17.9%.Majority of the respondents trade only in the cash
segment. This is due to high risks involved, high margin
requirements, high volatility in the fno segment.
The traders have been using various techniques for
conducting their analysis for selection of stocks. The
techniques includes chart patterns, moving
averages,indicators,softwares.A majority of traders used
chart patterns for conducting their technical analysis since
they believe it is the best picture of the performance of the
company. Many young traders with good tech skills have
been using trading software for choosing stocks for trading.
As high as 46.7% of the traders prefer trading in the intraday
as compared to swing and positional trading. When asked
about the reason of prefer intraday, half of the sample trade
in intraday because of high quick gains as compared to other
forms of trading and involvement of low market risk i.e.- zero
overnight risk.
As indicated by the pie chart above,40% of the traders have
success ratio of less than 25% of total trades taken by them.
Only a mere of 10% of population is having a profitable
success ratio of more than 75%.This shows a majority of
traders are losing their money in intraday trading. This point
is also supported strongly as as per the survey 46.7% are
making a loss in intraday trades and 31.7% are uncertain of
their of their performance. This shows almost half of the
traders in the stock markets are losing their money in
intraday trading.
While evaluating the performance of traders based on their
experience and the following results were obtained:-
PERFORMANCE BASED ON EXPERIENCE
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
less than 3 years 3-8 years above 8 years

uncertain make money lose mony

As per the bar chart shown above, the traders having an
experience of less than 3 years have lost the highest
percentage of money in intraday trading as compared to
other groups, this may be caused due to sheer lack of
experience of trading in the markets or due to over trading.
The traders with 3-8 years of experience of trading have
achieved a comparatively better performance than the
previous group. Though majority of the traders in this group
are losing money, the profit % of this is more than the
previous.
The traders having an experience of more than 8 years of
trading in the markets have emerged as a clear winner
among all groups on the basis of profit %.This group has the
highest number of traders who are profitable in intraday
trading. They also have the least traders who are in loss or
their trades are uncertain. This is due to their good
experience of trading.

PERFORMANCE VS SUCCESSFULL TRADE %

50
45
40
35
30
25
20
15
10
5
0
below 25% 25-50% 50-75% above 75%

Less than 3 years 3-8 years more than 8 years

The above bar chart explains the relationship between the
performance of intraday traders and their years of
experience. It is noted that their exists a direct relationship
between successful trade % and years of experience. The
majority of the traders having less than 3 years of experience
in trading ranks the highest in the below 25% group. As the
experience of traders is increasing the success ratio is also
improving. The same trend is being followed in the 25-50%
group as well. In the 50-75% group, the majority of the
traders belong to traders of experience of 3-8 years. In the
above 75% category, the bars are reverse of the first variable
in the chart. This shows a higher percentage of more than 8
years to less than 3 years. Looking at the chart from another
aspect, the blue bars(less than 3 years) are declining as we
move from left to right of the chart indicating the fall in
success rates. And on at the same time grey bars(more than
8 years) increasing from left to right indicating improvement
of success % with experience.
 CONCLUSION
The primary objective of the research was to find out the
performance of Intraday traders in the Indian Stock Market.
As we assumed that most of the people lose money rather
than making money. So the results proved the assumption,
I.e. the statement of hypothesis true.
However we have concluded that nearly 46.7% people lose
money in stock market especially the once who are practicing
intraday trading. We can furthermore see that around 31.7%
people are uncertainty, which basically concludes that only
21.7% actually make money in Intraday trading.

Reasons for the same can be:

1. Failing to understand the market or company.
2. Playing with numbers.
3. Poor money management skills.
4. Going by tips blindly.
5. Failing to track global markets.
6. Speculating on news and events.
7. Resistance to place stop loss.

We believe that the Swing Trading in stock market method is

a better way for the individual investor to attain superior
investment results through short-term trading in the stock
market. This trading strategy has been carefully designed for
the needs of the individual investor who does not have the
resources that institutions and professional money managers
may have. Swing Trading combines the best of two worlds
the slower pace of investing and the increased potential
gains of day trading.

Also from the research conducted, we infer that experience

and sophistication can help the traders to perform better
and make money.
 BIBLIOGRAPHY

• Research paper on Fear and greed in financial markets of

National bureau of Economic research.
• www.invesopedia.com
• www.nseindia.com
• https://www.tradeciety.com/24-statistics-why-most-traders-lose-
money/