What it means
Retail traders are many but small. Studies consistently show most lose money, mainly from too much risk, leverage and overtrading.
In practice
Retail traders have real advantages: small size means they can enter and exit without moving price, and nobody forces them to trade. They can wait days for one good setup, which a fund with money to put to work often cannot.
Using those advantages means risking a small fixed amount per trade, trading liquid markets, and keeping a record of every trade so decisions are judged on evidence.
What to watch for
The usual causes of failure are not a lack of indicators. They are oversized positions, too much leverage, trading from boredom and trying to win back losses, and all four are within the trader's own control.
Related terms
3 terms- InstitutionA large professional participant, such as a pension fund, hedge fund or bank, that trades huge size.
- Risk per tradeThe share of your account you can lose if a trade's stop is hit, usually 0.5% to 2%.
- OvertradingTaking too many trades, often low-quality ones; studies find the most active traders tend to earn the least.