0This is an essential question one should ask himself/herself in the trading world. The stock market has become filthy nowadays because of a load of information and introduction of new technologies to spread the information. If you visit any social media groups, you will see advisors and telegram channel people more than traders. Previously advisory firms from Indore, Rajkot, Vadodara were blamed for the loss of traders due to their predatory behaviour. But do all advisors are fake? No, absolutely not.
Instead, in my opinion, its trader's fault mostly who want to be a millionaire within a short span of time. Expectations were so high that if someone(advisors) offers 2-3 per cent per month rate of return on capital, you will laugh at him. But if you look into deep, then you will realize that with consistent 2-3 per cent rate of return, you will be generating more than 25 per cent per year. If you consider compounding, then the profit will be much higher in a longer time horizon. Earning around 25 per cent per year is a higher range of rate of return, only a few MFs and fund houses making that average. If you look at the average return of most of the fund houses, then it comes below 20 per cent per year. Fund houses making more than 30 per cent per year is very rare. And those fund houses are having the latest technology and analytical tools better than individual traders. The point is if your advisor says that you will make 3-5 per cent in a month, then hear to that advisor instead of laughing at him. He is most probably genuine one. And avoid those who promise more than 10 per cent return per month because making a 120 per cent return on your capital is near to impossible.
THE PROBLEM WE FACE TRADING BASED ON RECOMMENDATION OF ADVISOR
I would like to describe it with a few examples. You hired an advisor, and you started trading on his recommendation. First, four calls went in profit. What would you do? Most probably you will increase your lot size to 3-5 folds of the initial lot. And unfortunately, it went in the loss—the profit you made in 4 calls suddenly lost in 5 th call. And from here, your bad days start. You will probably avoid the next call, which will be again in profit.
The second example, your advisor gives you five profitable calls back to back. And you see after booking those stocks run further which you missed. What would you do if 6th call is running in loss and hit stop loss? Most of the traders hold the stock without informing his advisor. Unfortunately, that trade went horribly wrong, and you ended up in heavy loss. If you had more lots in that trade, then you are doomed. There are many such examples when actually traders get lost due to his own mistakes. Sometimes they book early without informing him and keep position through stop-loss is hit. Traders also don't discuss his social life which can be disturbing. Some don't disclose their capital. And there are many more which can be the fault of traders, but all the time we hear that advisors are wrong.
WHAT IS THE SOLUTION?
- Before joining any service, first of all, ask yourself if you are capable make the trading decision on your own, do you have time for research, do you have knowledge of trading.
- If the answer is no to the above questions, then look for an advisor. Ask his experience, his technical analysis knowledge and fundamental analysis promised rate of return.
- After joining him disclose your financial status, social life, emotional character, risk appetite so that your advisor will build the strategy based on your requirements
- Give your advisor at least, three months of time and do exactly what he says. If possible, don't give him authentication to trade behalf on you. Rather trade yourself on his recommendation.
- Keep in mind that sometimes unprecedented incident happens like recently COVID19 came, and Indo China skirmish news came during market hrs. Such an incident is out of the imagination of anybody. Don't blame your advisor for that.
- Never do anything on your own without informing your advisor. Like if you want to increase lot size then inform him before. If you are not available for trading, then inform him.
- If three months of trading is profitable as per promise, then you can have a business relationship with him for the long term.
THE BOTTOM LINE
You can hire an advisor but before starting your journey, give focus on the above points. You won't be regretted.
