the multiplication factor

How much time does it take to make 1 lac in stock trading?

How much time for 10 lacs?

1 crore?

Would u believe me when i say it is the same?

Well,it is all a matter of principal amount

along with

the multiplication factor.

e.g. 3 lacs x 0.33 = 1 lac

30 lacs x 0.33 = 10 lacs

3 crore x 0.33 = 1 crore

Here 0.33 (1/3 rd) is the multiplication factor.

One good swing / positional leveraged trade can yield 33%!

So, it is just a matter of what principal amount got the previlege to be zoomed by the multiplication factor!

the multiplication factor depends upon the technique and the opportunity.

The wealth growth is generally at compounding rate courtesy - the multiplication factor.

Only the first lac is crucial, as they say.

Now comes the difficult part of the discussion.

Traders keep the multiplication factor constant even when they have reached quite high altitudes!

They have to be disciplined and lucky all the time to maintain that growth rate

but misfortune and indiscipline need just one chance to destroy the wealth by that much factor.

The multiplication factor now becomes - the dividing factor.

The accumulated wealth comes down as fast as it goes up

but since the bad trade is generally the last one

the amount lost on the last principal is also big enough to unsettle any super rich!

Once I saw a beautiful TV ad in one of the business channels which said

"Sawaal ye nahin hai ke kaun banega karorpati, sawaal ye hai ke kaun rahega karorpati!"

(It is not a quesition of who will be a millionaire, question is - who will remain a millionaire?)

I know a civil contractor who rose like a pheonix with his sheer hardwork and business sense.

But as he rose, he started leveraging his position more and more.

The % risk he used to take on a 10 lac project was same even when he undertook a 100 crore project.

One day, something went wrong and the same %age hit put his survival at stake!

Many similar stories can be read or heard everyday wherein a businessman or gambler keeps betting the same % stakes at the increasing principle!

Just like the "kaun banega karorpati" ("Who wants to be a millionaire") show

where the last correct question gives you the max!

while the last incorrect question takes away the max!!!

So, what to do?

Just keep decreasing the multiplication factor as you go up

keeping in mind that the multiplication factor is also the default dividing factor.

Don't put all your wealth on the trading table

Keep reducing the stakes.

As they say,

till your 1st million, be a trader

thereafter, be an investor

reducing the stake continuously as Mt.Everest gets nearer!

Even the reduced stake will leave you with much more than you would ever need?