The “kick” in online stock trading

I was introduced to online trading by Indiabulls in August 2004. The Indiabulls trading screen was a snapshot of the BSE trading screen and was very easy to operate. The trading was almost real time – a gap of maybe 5 seconds between the BSE time and the online trading time. Once my account was set up and I had transferred shares into my linked demat account as margin, I was ready for day trading. I had no intention of doing day trades – my initial thinking was to use the online trading facility for investing in shares in the short term and supplementing my professional income with short term profits. I was doing reasonably well having made about Rs. 70000 odd in three months. All trades made were confirmed by an e-mail received from Indiabulls, also I could download all contracts and bills for my records from their site. Being an accountant, documentation has always held importance for avoiding tax headaches at a later date.

Sometime in November 2004 I got an e-mail from Indiabulls stating that I had made some four thousand odd rupees in a futures transaction. I was surprised, as I had not initiated the transaction and was averse to futures and options as I did not understand it then. I called up my relationship manager and he told me that he had seen the idle margin in my account and had done the transaction on my behalf. I really freaked out – I asked him what right did he have to play with my money, what if there was a loss – how would he expect me to take the loss? No answer – I escalated the matter – as to me this was a clear breach of trust and misuse of my margin available with Indiabulls. My relationship manager was changed and they told me to keep the profit – though I told them that it was not mine to take as the transaction was not done by me – they convinced me to let bygones be bygones and trained me a bit on futures trading. I guess that was the game plan – to get another client sucked into volume transactions by giving him the feel of futures.

I fell for it and completely stopped my short term trading and switched over to day trading in futures! Now futures trading means trading in lots of designated shares, trading in the Nifty or the sensex. The futures trading cycle lasts for about a month and always closes on the last Friday of the month. If you have any open position at the end of the month, you need to roll it over to the next month by paying additional margin, if required. Most novices trade in long positions (meaning “buy”). Each lot of a share would vary in number, though the approximate value would be around Rs. 5 lacs.

The more I got a hang of it the more I became addicted to it. It was like actually trading in money. Everyday I used to wait for the opening bell and start trading, sometimes making money sometimes losing money. One day in January 2005 took the cake, the market was very volatile and it was expected to fall. I used to trade regularly in lots of Syndicate Bank as it used to operate in a Rs. 10 band and in a given time span. I went short in Syndicate Bank shares and the market fell, I covered my position and went short again and bought back when it fell further, I repeated this process about three more times with the market continuing to fall and Syndicate Bank also falling. During this time I was completely glued to the computer screen, just staring at the ticker as it moved up and down. My blood used to race and heart pound with each downward move. This was like a high which you probably experience with drugs, it was amazing. In one day, by the end of trading I had made about Rs. 1.5 lacs! and I was in a state of complete euphoria! The next day, I came to office and started the computer and logged into my Indiabulls account and found that I still had a short position open (one lot of Syndicate Bank was 8000 shares). I started sweating, market was yet to open, and I desperately checked my account for all trades made the previous day as I was sure in my mind that I had completely squared off my positions. On verification, I was proved right, all trades made that day had been squared off, but I had an open position from the earlier day, which I completely forgot about in the rush and euphoria of hitting the jackpot (for me – in those days – it was a jackpot you see)! That day the sensex opened 100 points up and never looked back for the entire month! I had started sweating in tension because the price at which Syndicate Bank was trading was way above what I had sold it at! I waited desperately for the market to go bad, if not at least for Syndicate Bank to fall, but that was not to be. In fact I ultimately ended up losing more than two times the amount I had made in all those earlier trades. On March 31, 2005 I completely stopped futures trading and changed my philosophy to long term investments with which I have had no regrets. The “kick” I got out of futures trading is enough to last me a lifetime.