Why Most Retail Traders Lose Money, and What the Data Says

Most people who trade in India lose money, and the regulator has the numbers. SEBI has now published several studies of what happens to individual traders in equity derivatives, and the picture has stayed consistent from one year to the next.

What the studies found

SEBI's study for FY25 found that more than 91 percent of individual traders in the equity derivatives segment made net losses, with aggregate losses of about Rs 1.06 lakh crore as first reported. Its study for FY26, released on 20 August 2026, found that 87.7 percent of individual traders again ended with net losses. Aggregate net losses were about Rs 91,685 crore, around 92 percent of them from options trading, and the average loss per trader was about Rs 1.17 lakh. Individuals also paid roughly Rs 25,000 crore in transaction costs during the year.

The number of active traders fell sharply in FY26, so the improvement in the headline figure came with fewer people trading, not with most traders becoming profitable.

The studies measure profit and loss after costs, so the totals include brokerage, taxes and charges as well as trading losses. They also look at individuals only. They do not cover institutions or professional trading firms, whose tools, costs and risk limits are very different from those of a person trading from a phone.

One caution on scope. These figures are for equity derivatives, the riskiest corner of the market. They do not say that everyone who buys shares loses money. They do show what happens when leverage, short time frames and weak discipline are combined.

Four reasons the numbers look like this

1. Leverage magnifies small mistakes

A lot-size contract controls far more value than the money you put up. A move that would be a minor dip in a shareholding can wipe out a large share of the capital behind a derivatives position. The same leverage works the other way, and that is the attraction, but losses arrive faster than most people plan for.

2. Frequent trading is expensive

Each trade pays brokerage, taxes, exchange charges and the gap between the price you see and the price you get. Trading often turns a small cost into a large one over a year. The Rs 25,000 crore figure above is that effect, added up. Our note on trades placed to fill an empty week describes how this starts.

3. There is no exit plan

Many traders decide when to enter and never decide when to leave. Without a loss limit written down beforehand, a losing trade becomes something to defend, and a defended loss tends to grow. The pattern in revenge trading is the usual result.

4. Decisions come from tips, not process

Tips arrive with confidence and without context. You cannot know the tipster's entry price, exit price or reason, and you cannot judge a view you did not build. Confirmation bias then does the rest, by making the supporting news easy to notice and the contrary news easy to skip.

What a trader can control

None of this makes trading impossible. It shows where the danger sits. Before your next trade, ask yourself:

• What is the most I can lose on this trade, in rupees, and have I written it down?
• Is my position size small enough that a full loss does not matter to my month?
• Where will I exit if I am wrong, and why that level?
• How many trades did I take last month, and what did they cost me in charges?
• Am I trading because I have a plan, or because the market is open?
• Do I keep a journal that shows me the answers?

Common questions

Does this mean investing in shares loses money?

No. The studies cover derivatives traders. Long-term investing in shares carries its own risks, but it does not involve leverage or the cost of constant trading.

Is F&O always a mistake?

It is a tool with high risk. The data suggest that most individuals who use it without a clear process and strict limits do poorly. Anyone who still wants to learn it should begin by understanding the risk before any reward.

Is it just luck?

Luck plays a part in any short run. Over a year, with large samples, the results reflect behaviour: size, frequency and discipline.

Sources: SEBI press release of 20 August 2026 on individual traders in the equity derivatives segment, as reproduced by TaxGuru; Business Standard on the FY25 study. Check the SEBI website for the original documents.