Many Indian investors look upon the stock market as a slot machine where Lady Luck calls all the shots. They hesitate to invest even a part of their savings into it, for fear of losing money. Yet, here is a set of qualified young people who have opted out, in the prime of their careers, to take up equity investing as a full-time profession. They swear they will never go back to nine-to-five jobs. We spoke to them to find out how they made the transition and how they manage the risks of equity investing.

Paying the ‘tuition fee’ None of the successful investors we spoke to made a beeline for the market straight from college. They invested for several years before taking the plunge. On the way, they lost a packet too!

Numbers or ‘quants’ were Pawan Arora’s passion right from school and this prompted him to write the IIT-JEE just after his 12th. He didn’t crack it, instead he acquired a computer engineering degree before taking up a career with a multinational IT firm. It was from his colleagues there, that he acquired an avid interest in the markets.

Initially, his trades went badly and Pawan even “blew his account” twice. “But I kept reminding myself that CAT/JEE aspirants have to wait for one year to write the exam again. I had this market open everyday and could learn from it.” He kept at it for six years and finally developed his own system of trading.

After a particularly long winning streak in 2013 when he managed to multiply his capital five-fold, he decided to take up equities trading full-time.

He signed up with discount broker Zerodha, where flat brokerage structures helped him breakeven fast.

Pawan strongly believes that no one can be a successful trader without paying their ‘tuition fees to the market’ – taking losses and learning from it.

Madan Kumar, an engineer from Madras University and an MS from Virginia Tech, got interested in equities while working as a software engineer in the US. His friend was active in earnings-based trades. Madan dabbled in equities, soyabeans and the S&P index where he “lost a packet”.

He soon realised that trying to predict the markets was a mug’s game. Reading John Carter’s Mastering the trade taught him about the mindset one needed to win at trading. He moved to India and decided to take up full-time trading. Madan’s trades on the Nifty and Bank Nifty futures saw him notch up a 300 per cent gain on his account in 2013.

Priyanka Betrabet, armed with an MBA and a diploma in treasury management, shuttled many jobs over 13 years, before deciding to become a full-time equity investor. Her interest in fundamental investing was acquired in college when both her father and grandfather were avid investors. Her father chipped in with the initial capital in 2000 to get her started.

Priyanka did lose money on stocks like Educomp Solutions and BHEL, but developed the knack of spotting winners. “It was a lot of common sense. I looked for companies with big brands, which were monopolies in their market or close to it and had zero debt.”

This strategy led her to buy stocks like P&G India, ITC and MRF, which turned out to be multi-baggers. “I had made decent money on my portfolio and decided to invest full-time. Equities have helped me pay back my father and fund my UK degree. Frankly, I am making far more than I did when I had a job,” says Priyanka, who says that she doesn’t rely on her husband for her expenses.

Perfecting a system After many years learning the ropes, each of these investors actually attained stock market success due to one thing — focusing on a single strategy that they understood well. Madan owes his big wins to what he calls a “laser-sharp focus” on trading just two instruments — Nifty futures and Bank Nifty futures. He initiates or closes trades based on breakouts in the price chart. He doesn’t set price targets but uses stop-losses without fail. “I don’t use any fancy technical indicators — only the supports and resistances. Today, there’s a lot of noise in the markets and your success depends on filtering it out,” he explains.

Pawan’s strategy relies mainly on positional trades on Nifty futures using pivots. “Initially, I found that I was making the mistake of booking out of positions too early. So, I decided not to set any targets. I let the profit making positions run on until I could see clear signs of reversal. That helped me maximise my profits.” Pawan also tries to be in the market at all times irrespective of whether the trend is bullish or bearish. Between April and June 2013, as the Nifty moved up and down 600-700 points, he made a killing.

As a fundamental investor, Priyanka has found that avoiding less known stocks and holding on through bear markets paid off for her. She picked up ITC at ₹180 because she had many friends who could “never give up smoking”, no matter how much cigarette prices soared. Not one to worry about absolute prices, she also bought P&G India at ₹1,900 (₹7,200 now) and MRF at ₹20,000 (₹38,000) because of their strong brands.

Each of these investors has a capital cushion to handle risks too. Madan is particular about ensuring that a drawdown (losses) doesn’t decimate his capital.

“I make sure that I don’t risk more than 1 or 2 per cent of my account balance on any trade.” He has some money stashed away in a long-term portfolio and FDs for cash flows. He also believes that if you are keen to make a living as an equity trader, you need to deploy substantial capital. “Sometimes, you find people wanting to make ₹50,000 a month with an account size of ₹5 lakh! This is simply impossible.” Pawan ensures he reduces his leverage with higher volatility.

Finally, apart from a winning strategy, there’s one other thing that ties together these full-time equity investors — a mindset that allows them to take losses in their stride. Pawan says it helps to treat your profits or losses as ‘just numbers’.

“Not giving up and not letting your emotions overrule your discipline is the key to making money,” he says.