The good, the bad, and the ugly in retail trading
The market isn’t stacked against you. Only two things are in the way of your success — lack of knowledge, and trading discipline.
Like many of today’s 50 million retail traders, years ago I started off with a small $15K account all on my own, with no formal trading experience, and no one to guide me. Back then I was an ambitious novice eager to learn, and now I’m the Chairman of Kaiju Worldwide, part of the Kaiju family of companies.
Daily U.S. retail activity is now about $30 billion (or 1 billion trades), according to NASDAQ. Retail traders now account for about 20% of all trades.
Most retail traders initially think they can uncover the secrets of the “rigged system” and start living their best lives in a few months (I know; I’ve been there). I’m not going to lie to you: there is no “easy money” button or secret technical indicator that will help you. I’ll address what’s necessary to be a successful retail trader in upcoming columns, but here I want to dispel a few myths and explain the good, the bad and the ugly of trading education, chat rooms, and software tools.
How can you learn to trade like a pro? Which chat rooms have the best tips? What trading software has the best tools?
Ultimately, the market isn’t stacked against you. Only two things are in the way of your success — lack of knowledge, and trading discipline. Let’s start with trading education.
Professional traders know more than you, yes, but almost none of that additional knowledge applies to you or what you’re going to do; it’s for trading OTHER people’s money, within an institutional trading environment. You don’t need to know how to do that. As a retail trader, everything you need to know is at Tastytrade, Option Alpha, and TechniTrader. The first two are free, and focus on options trading (and honestly, that’s where you should start), and the third focuses on technical stock trading.
There is no better retail trading education. Period.
Take Tastytrade. You can watch on-demand videos and take free courses at all levels of sophistication, and they’re created by former professional floor traders, market-makers, and data scientists (Sos, The Bat, Liz, and Jenny are icons in this business, seriously).
At Option Alpha, Kirk Du Plessis put together about 40 video hours worth of pure information gold and provides free help support for any questions.
After about 80 hours of total training at Tastytrade and Option Alpha, you’ll be armed with an extremely solid foundation for options trading (which is by FAR the most capital efficient type of trading there is). Add another 10-20 hours from the Technitrader Methodology Essentials courses if you want to focus on stocks, and you’re GOLDEN.
Good: Invaluable information for everyone that’s (mostly) free.
Bad: Most don’t complete the 80+ hours of training.
Ugly: Without it, you will lose money consistently over the long-term.
Chat rooms are valuable for one reason - camaraderie. Let’s face it, retail trading is lonely and can sometimes seem scary. Having a place to talk with people engaged in the same activity can take the edge off.
Though useful for companionship, NEVER take any trading advice in a chat room. With certainty, I can say that following chat room advice will lose you money and anyone saying they are an “ex-professional trader” is lying to you (because retail chat rooms ain’t where they hang out). Assume everyone in the chat room is only looking after their best interests and not yours.
Even in more expensive, closed chat rooms, no one is offering an inside track to anything. If they do, they go to jail.
Bad: Information can seem valid, but there’s a ton of B.S.
Ugly: All tips are bad — if they were good, they’d either probably be illegal, or that person wouldn’t be sharing them with you.
No magic indicator, software tool, or information source exists that turns losses into wins. You can save yourself some time and stop looking. On the other hand, powerful tools exist that give you everything you will ever need to be as successful as a professional trader, and they’re not expensive.
The best tools for retail traders are TC2000 and Money.net.
TC2000 starts at about $9 and goes up to $75 a month for the platinum version. This is your stock scanning, charting and indicator package. It has hundreds of pre-built indicators, but you can very easily create your own (which is something I encourage you to experiment with). I can confidently say that TC2000 is equal or superior to tools that the biggest funds have spent millions of dollars to build, and professional traders do use it. The company also offers a brokerage service, if you’re looking for that as well.
Money.net is for financial tear sheets, fundamentals, tweets streams, news, etc., and has a variety of packages that run from free to $60 per month. You can customise all the news with filters and add subscriptions to various news sources, such as Bloomberg News or Sky News. This is your primary source for curated market news and fundamental information.
TC2000 and Money.net together give you nearly the same information base as is used by Wall Street’s top traders.
Once you have your tools up and running, give yourself $100,000 of fake money in TC2000’s paper trading account (it’s free, and comes with the software), and start paper trading. If you aren’t cash positive at the end of six months, then you want to spend more time studying, or perhaps this isn’t for you.
Good: Inexpensive and powerful.
Bad: Most don’t finish the six months practice.
Ugly: Result is negative cash balance (small though - the cost of the software licences).
Future articles will outline next steps to trading success. For now, sign up for the free education and begin practising trading with faux money. You’ll be swimming with the sharks in no time.
A version of this piece ran on Forbes.com on May 25, 2022.
Photo by Zhu Difeng
Ryan Pannell is the Chairman of Kaiju Worldwide