In a cautionary note to retail investors venturing into equity derivatives, Gurmeet Chadha, Managing Partner and CIO of Complete Circle Wealth, has flagged the risks of trading, particularly for those juggling it with full-time jobs. "Only 1% of traders actually make money. These are high-frequency traders using AI, machine learning, and sophisticated algorithms,” Chadha explained while speaking with Sharan Hegde, the founder and CEO of 1% Club.
Chaddha emphasised the stark odds against retail investors competing in the fast-paced trading environment. He drew a sharp contrast between high-frequency traders, who employ advanced risk management strategies, and retail investors, who often chase returns. "They are risk managers; retail investors are return managers. It's a very sophisticated trade — like a casino where the house wins."
Chadha's remarks are in line with recent findings from the Securities and Exchange Board of India (SEBI). A September 2024 study revealed that 93% of over one crore individual traders in the equity futures and options (F&O) segment incurred significant losses from FY22 to FY24. The average loss per trader during this period was Rs 2 lakh, with aggregate losses surpassing Rs 1.8 lakh crore.
Highlighting the scale of trading activity in India, Chadha noted that the F&O market in India is 2.5 times larger than that of the United States, with F&O trading accounting for 99% of market activity. "Everybody wants to get rich quickly,” he remarked.
When asked whether trading was slowly started becoming like betting, the CIO said: 'Absolutely.' He pointed out a societal inclination toward quick results. "We have three crore unique people who do SIPs, but 17 crore people are on Dream11, and about 10 crore are playing online rummy and poker. This tells you about our psyche,” he observed.
Urging caution, Chadha advised retail investors to approach trading only if equipped with the necessary skills, risk management techniques, and tools. "(If you’re going 9 to 5 and doing trades)...you’re a perfect slaughter for these high-frequency traders,” he warned, adding that such unchecked participation could pose systemic risks — a concern SEBI has flagged in its reports.
Chadha also recalled that one of his very seasoned clients told him - "'If you want to become rich slowly, it will take 15 years. If you're in a hurry, it will take 30'. The sooner you learn it that wealth will come slowly, the better."