Why most traders lose money in year one: about 9 in 10 individual F&O traders lost money in FY26

Almost every new trader begins with the same picture in mind: a few good trades, a growing account and a steady income from the screen. The data says something different.

India's market regulator, SEBI, has studied individual derivatives traders several times. Its latest study, covering FY26 (April 2025 to March 2026), found that 87.7% of individual F&O traders ended the year with net losses. Aggregate losses were roughly ₹91,685 crore. That is an improvement on the year before, when about 91% lost money, but the pattern hasn't changed.

Bar chart of the share of individual F&O traders with net losses: 89% in FY22, 91.1% in FY24, 90.9% in FY25 and 87.7% in FY26 Source: SEBI studies as reported in secondary summaries. FY23 is not shown.

Earlier SEBI research found that about 93% of individual F&O traders lost money between FY22 and FY24, with combined losses above ₹1.8 lakh crore. Only about 1% earned more than ₹1 lakh in profit after costs. The same report noted that over 75% of loss-making traders kept trading despite consecutive years of losses.

These numbers cover derivatives, not every kind of trading. They still show how hard the first stretch is. This article looks at why beginners lose and what the traders who last do differently.

Why most beginners lose

1. They trade the riskiest instrument first

The FY26 SEBI study found that about 92% of aggregate losses came from options. Roughly 97% of the traders studied mostly bought options. Options have limited upside time and are sensitive to time decay and volatility. For a beginner, that is one of the hardest places to learn.

Donut chart showing that 92% of FY26 retail F&O losses came from options Source: SEBI FY25-FY26 profitability study.

2. They are young, under-capitalised and under-prepared

Another cut of the FY26 data showed that 88.5% of traders under 30 lost money. It also showed that traders with annual incomes below ₹5 lakh made up 73% of the base and 53% of the losses. Small accounts and high leverage leave very little room for error.

Bar chart: traders earning under 5 lakh a year were 73% of individual traders and 53% of aggregate losses in FY26 Source: SEBI FY26 study as reported by PTI.

3. They have no written plan

Beginners often enter a trade because of a tip, a chart screenshot or a feeling. Without a defined entry, exit and position size, every trade is improvised. A loss then becomes an emotional event instead of a planned, acceptable cost.

4. They treat risk as an afterthought

Most beginners spend their effort on finding entries. Very few decide in advance how much they can lose on a trade, or on a day. Many of the common trading mistakes come down to this: no written plan, oversized positions, revenge trading, and no record of what actually happened.

5. They mistake costs for noise

SEBI's FY26 data showed that a smaller share of traders lost money before transaction costs (82.1%) than after (87.7%). Brokerage, taxes and slippage act like a steady tax on frequent trading. A strategy that is roughly break-even on paper can still lose money in practice.

What the survivors do differently

Nobody publishes a survey of how every successful trader behaves, so what follows are habits that risk-focused educators and experienced traders consistently describe, not statistics.

They define risk before they define profit

Surviving traders decide what a trade can cost before they enter it. A common guideline is to risk only a small fraction of capital, often 1% to 2%, on any single trade. Practical risk management and stop-loss rules turn that into numbers: the stop-loss price, the position size that follows from it, and a limit on total daily loss.

The calculation is simple. If your account is ₹2,00,000 and you risk 1%, your maximum loss on a trade is ₹2,000. If your entry is ₹250 and your stop is ₹240, you can buy about 200 shares. If you want a wider stop, you take fewer shares. The size comes from the stop, never from how confident you feel.

Position sizing example: account of 2,00,000 rupees, 1% risk, entry 250, stop 240, giving a quantity of 200 shares

They trade strength, not hope

Many beginners buy stocks because they are "cheap" or have fallen a lot. Experienced momentum traders tend to do the opposite and look for leaders. A useful measure is relative strength, which compares a stock's performance to its benchmark or sector index. A stock outperforming the market tends to attract institutional attention, while a persistent underperformer often keeps lagging. This isn't a guarantee, only a way to tilt the odds.

They use rules and filters, not gut feel

Screening for setups turns a vague hunt into a repeatable process. Instead of scrolling through hundreds of charts, you define the criteria first, such as trend, volume, relative strength and a breakout level, and then let stock scans narrow the field. Your judgement still decides which trades to take. The scan only removes the noise.

They keep a journal and review it

A trading journal records the setup, the reason for entry, the stop, the result and your emotional state. After 30 or 50 trades you can see which setups actually pay and which mistakes repeat. Many traders discover that a small set of errors, such as chasing, moving stops or overtrading, accounts for most of their losses.

The survivor's loop: plan, filter, execute, journal, review, then repeat for 30 to 50 trades

They stay small while they learn

Survivors treat the first year as tuition. They trade small, accept that early losses are the cost of learning, and avoid scaling up until their process, not one lucky month, has proved itself. They also avoid the trap of trying to recover a loss in a single trade.

They pick one approach and master it

Trading too many markets and styles at once is a common beginner problem. Those who last tend to pick one approach, such as swing trading or positional trading, learn it thoroughly and expand only later. Reading about what a realistic first year of stock market trading looks like can help set expectations before real money is at stake.

Is structured guidance worth it?

Learning alone is possible, but it is slow, and the cost of mistakes is paid in real money. Beginners generally have three routes: self-study through books and free content, paper trading before going live, or structured guidance with feedback from experienced traders.

A trading mentorship program is one version of the third route. Its main value is feedback: someone reviews your trades, questions your process and flags your blind spots early. It isn't a shortcut or a guarantee of profit, and it won't compensate for poor discipline. Whatever route you choose, check that the people teaching are registered where required and open about the risks, and be wary of anyone promising assured returns.

A practical first-year checklist

  • Paper trade or trade very small until you have at least 30 to 50 logged trades.
  • Write a one-page plan: market, setup, entry, stop, target and maximum risk per trade.
  • Set a daily loss limit and stop trading when you reach it.
  • Avoid buying options as your first live instrument. Learn how premium, time decay and volatility behave first.
  • Track costs. Know what each round trip really costs you.
  • Review your journal every week and fix one mistake at a time.
  • Keep trading capital separate from your savings and long-term investments.

The takeaway

Most first-year traders fail because they are underprepared, overleveraged, and working without a plan. They don't fail because the market is rigged against them. The statistics are sobering, but they also show what separates survivors: small, defined risk, a repeatable process, honest record-keeping and patience. Treat year one as an apprenticeship, protect your capital, and let skill build before you ask the market to pay you for it.

 

Disclaimer: This article is for educational purposes only and is not investment advice. Trading in derivatives and equities involves substantial risk of loss.