Post-Trade Analytics Hold the Secret to Trading Success: Ajay Dusane, CGO of SAMCO Securities

The stock market is often perceived as a place where traders rake in profits by the thousands. While this may be true for certain trades or traders, it is only one part of an otherwise complex and challenging environment. A recent study by SEBI and a Nielsen report commissioned by SAMCO Securities Limited paint a starkly different picture from the often glorified world of stock trading and offer critical narratives that redefine what success in trading truly entails.

The Nielsen Report Commissioned by SAMCO Securities: A Wake-Up Call for Investors

A startling revelation from the Nielsen Report shows that a significant portion of investors across 10 major cities, particularly within the age group of 25 to 45 years, struggle with basic awareness of their stock market ventures. The report found that 65% of investors don’t know their exact stock market returns. Even more concerning is the fact that 63% don’t have a strategy to outperform the indices, and 67% fail to beat the benchmark index. This lack of awareness extends further, with 77% of investors not realising the importance of consistently outperforming these indices.

These findings reflect a sobering reality: While trading may seem accessible and low-cost, the true measure of success lies in making profitable returns, a feat that remains elusive for many.

The SEBI Report: A Deeper Dive into Equity F&O Segment

Further insights from a recent SEBI report draw attention to the equity F&O (futures and options) segment, revealing a grim picture for retail traders. In FY22, a staggering 89% of retail traders in this segment incurred losses. The average loss per trader was around Rs. 1.1 lakh, highlighting a substantial adverse impact on the finances of retail traders.

While these findings offer more clarity on the ground reality, the report notably does not account for the capital deployed, leading to a gap in fully understanding the scale of these losses.

Comparing FY19 and FY22 data allows us to gain a deeper understanding of this aspect. Over time, the average profits of traders have significantly declined, from Rs. 8,347 in FY19 to just Rs. 3,365 in FY22. The percentage of investors outperforming the index has also dwindled, from 9% in FY19 to 6% in FY22, indicating a worrying trend of underperformance. This decline is paradoxical, considering the NIFTY price return increased from 14.93% in FY19 to 18.88% in FY22.

This discrepancy points to a concerning truth: higher market returns do not necessarily translate to higher profits for individual traders.

SAMCO’s Perspective: The Cost of Underperformance

Analysis by SAMCO Securities, one of India’s leading technology-driven stock brokers, brings another dimension to this discussion. The findings emphasise the significant cost of underperformance in trading. In the fourth quarter of CY 2022 alone, the cost of underperformance in trading amounted to around Rs. 120 crores.

Data from SAMCO’s analysis further indicates that 68% of traders and investors have underperformed relative to benchmark indices in this period. This underperformance reflects a substantial opportunity cost and a tangible financial loss.

The Need of the Hour: Awareness, Performance, and Opportunity Cost

The overarching theme from these reports is clear — a lack of awareness and understanding among most stock market participants is the crux of the issue. Many traders are not only losing money but are also consistently underperforming compared to benchmark indices. The concept of ‘opportunity cost neglect’ is particularly pertinent here. Traders often overlook the gains they could have made had they chosen a different strategy or investment.

The results of SAMCO’s analysis coupled with the findings from the Nielsen and the SEBI reports are all a wake-up call for traders. They need to reevaluate their approaches, deepen their market understanding and make more informed choices to navigate the complex but potentially rewarding world of stock market investments.

Ajay Dusane, Chief Growth Officer at SAMCO Securities, discusses the potential solutions to these multidimensional issues faced by the average retail trader.

“At SAMCO, we recognize the pivotal role of performance analytics in empowering traders to navigate the stock market more effectively. The solution to the prevalent challenges faced by traders is rooted in enhancing their understanding of how they perform in the market. It's imperative to them with the tools and insights to identify where they might be going wrong, pinpoint areas needing improvement and discover the best ways to address these issues.

Our focus at SAMCO is to offer such comprehensive analytics, so traders can review their performance and gain deep insights into their trading decisions. This level of understanding is crucial for refining strategies and achieving sustained success in the market. By integrating these analytics into our offerings, we aim to lead traders towards a path of informed decision-making and improved market engagement.”

In response to the multifaceted challenges identified in the stock market, SAMCO Securities has taken a proactive approach to provide tangible solutions. Recognizing the gap in traders’ understanding and performance, SAMCO has developed an innovative suite of tools designed to demystify the complexities of trading and make post-trading analysis easier.

By focusing on the hidden insights in every past trade executed, SAMCO Securities strives to equip traders with the necessary resources to not only identify their shortcomings but also to make informed decisions that can lead to improved outcomes.

Leveraging Post-Trade Analytics Using SAMCO’s App-Based Tools

Recognizing the crucial need for insightful post-trade analytics, SAMCO Securities introduced ‘My Trade Story’ — an industry-first feature in their trading app. This innovative tool is designed to give traders a comprehensive analysis of their trading activities and empower them with actionable insights to enhance their trading performance.

'My Trade Story': A Deep Dive into Trading Analytics

‘My Trade Story’ is essentially a detailed report card of a trader's activities. It categorises and analyses past trades to provide clear feedback on performance. This tool is split into two main parts: the Analytics section and the Trade Spreadsheet.

The Analytics section delves into the trader's performance and provides strategy-wise, sector-wise and market cap-wise insights. This multi-level analysis helps traders understand which strategies work well for them and which need refinement. The Trade Spreadsheet, on the other hand, offers a detailed view of individual trades, so traders can scrutinise each decision and its outcomes.

The Key Analytical Tools in SAMCO’s New-Gen Trading App

Let's delve deeper into the key features of SAMCO’s app-based tools: [One can download the app here]

The SAMCO Trade Score reveals a trader’s trading success ratio in the stock market. It takes into account various parameters like the winning and losing trade percentage and the average gain and loss percentage. For instance, a high trade score could indicate a well-timed trade that aligns with a low-risk, high-probability setup, while a low trade score might reflect a trade made against market trends or one that significantly deviates from the trader's usual strategy.

This feature directly addresses the problem of traders not knowing the quality of their trades. In the context of the Nielsen report’s finding that 65% of investors are unaware of their stock market returns, the trade score offers a clear and quantifiable measure of each trade's effectiveness. This makes it possible for traders to understand the outcome and the quality of their decision-making process.

The strike rate is another crucial metric in post-trade analysis. In the SAMCO trading app, traders can track their strike rate to understand what percentage of their overall trades are profitable. A consistently high strike rate over a long period can indicate a robust trading strategy. Conversely, a low or fluctuating strike rate might suggest that the trader needs to refine their strategy and adjust better to changing market dynamics.

This feature in SAMCO’s trading app addresses the concern highlighted by SEBI's report about the high percentage of retail traders incurring losses. It provides traders with a clear percentage of their successful trades and offers insights into the effectiveness of their strategies. For example, a trader with a high strike rate in bull markets but a low rate in bear markets may need to adapt their approach to different market conditions.

Another reason traders suffer unprecedented losses in the market is that they tend to hold on to losing trades, but close winning trades too quickly. In a falling market, traders may irrationally hope for a reversal and fail to exit losing positions at the right time. Conversely, in a bullish market, traders may exit winning trades too quickly and fail to realise the maximum potential profit from a position. The average holding period is a crucial metric that helps traders understand this aspect.

In the SAMCO trading app, traders can monitor the number of winning and losing days. These hidden insights from the app’s post-trade analysis help traders optimise their holding period for better trading outcomes. It also empowers traders to cut their losing trades faster and let their winning trades run.

The average profit or win size, which is a part of SAMCO’s in-app trade analytics, indicates the average profits in terms of amount and percentage. Similarly, the average loss size offers clarity on the average loss incurred during a period. Traders can assess these metrics for every trading strategy, sector or market cap in their trade story. For example, a trader might have a high average profit indicating successful trades, but if the average loss is disproportionately high, it could signal a lack of effective risk control. Conversely, a low average profit coupled with a minimal average loss might suggest a conservative strategy with tight risk controls.

Directly linked to the Nielsen report’s findings, this feature helps traders quantify their financial performance. In a scenario where most investors are unaware of their returns, knowing the average profit and loss size provides a clear and straightforward understanding of trading success or lack thereof. This can be a crucial tool for traders to reassess and adapt their strategies to improve financial outcomes.

In light of the challenges and opportunities identified in the world of stock trading, SAMCO’s CGO Ajay Dusane emphasises the importance of understanding beyond mere numbers. Here, Dusane explains how SAMCO’s app-based tools are transforming the landscape of trading analytics.

“At SAMCO, we are acutely aware of the challenges traders face in today's volatile market. ‘My Trade Story,’ our proprietary feature, reflects our commitment to empowering traders with actionable insights. The analytical tools we’ve designed and integrated into our app directly address the concerns highlighted in reports like those from Nielsen and SEBI.

In a market where many are struggling to keep pace with rapid changes, we aim to provide a platform where traders can gain a deeper understanding of their performance, learn from their past trades and adapt their strategies for better outcomes. We believe in transforming data into knowledge and knowledge into actionable strategy. This is the core of what we do at SAMCO to empower traders to navigate the market with confidence and precision.”

Final Thoughts

By providing these detailed analytics, SAMCO’s app empowers traders to conduct a thorough self-assessment. Traders can leverage these insights to fine-tune their strategies, balance risk and reward more effectively, and ultimately make more informed trading decisions that align with their individual trading goals and risk appetite.