Investing in today’s financial markets: How retail investors can survive

BY OLUMIDE ADESINA 

The popularity of investing applications has grown over the past few years. Their appeal is clear due to their consumer-friendliness and accessibility. Experts predict that the current retail trading boom will last longer than previous ones as the emergence of free trading, the capability to trade fractions of shares, improved user interfaces and connection speeds, less expensive and simpler access to leverage, and the expansion of social media taken together, are likely to have far-reaching effects beyond the pandemic.

This year, non-institutional market participation surged amid positive stock market conditions, surpassing 2021’s meme-driven day trading boom, according to JPMorgan data.

There is indeed a possibility of profit for retail traders. Retail trading is not easy, however, and you’ll need patience, time, and a plan to succeed. You can develop into a reliable retail trader over a number of years, but once you do, you’ll be glad you did

We’ll look at why most traders lose money in the market and how you can succeed. In this article, we’ll examine why most traders lose money in the market and what you can do to succeed.

Trading strategy: Make sure your trading method is profitable and then confirm it. It’s important to choose a strategy that suits your personality.

You can create your own trading system or take someone else’s guidance. When losses occur (and they will), you are more likely to remain with your plan if you are at ease and sure that it works.

Professional traders don’t make an effort to minimize losses. Losses are reduced, but they are not prevented. Amateur traders are always looking for trading systems with a high win rate because they think they can outsmart the market.

Never question your plan of action. Get the hell out of a position if your trading rules advise you to! Keep in mind that the market knows more than you do. Don’t hold off to see if a terrible trade will work out for you. It might, but it might also keep working against you and result in bigger losses.

On the other hand, a professional trader is prepared with a trading strategy. He is instructed on what to do and when in the plan. It explains to him the requirements that must be satisfied before a trade is opened.

If the criteria are satisfied, the trader will initiate a position, establish the stop losses and take profits, and then exit the trading area.

Trading newbies can also take private online lessons from experienced traders, watch YouTube videos, and access a wide range of industry-experienced authors’ manuals and courses that can be found with a quick internet search.

How professional and retail traders respond to losses differs significantly. After a string of defeats, novices become fearful and helpless. Professionals, on the other hand, can tolerate losses.

Chasing returns frequently results in severe volatility and the possibility of disproportionate losses. Additionally, it erodes self-assurance and planning skills. Furthermore, over the longer run, less disciplined investment strategies often benefit from the strength of compounding returns than high volatility ones, such as buying meme stocks.

Losses can be managed: This point needs to be known by a lot of novice traders. The ability to effectively manage losses can have a profound impact on both trading success and mindset.

Even still, a lot of individual traders lost money. Particularly those who purchased shares at a high price, believing they could profit quickly and easily at the expense of hedge funds. People that bought at the height of the stock price lost a lot of money when the price eventually dropped since every bubble eventually bursts.

In day trading, risk management is the most crucial idea. Identifying possible risks, minimizing them, and ultimately optimizing profits are all part of it. Unfortunately, a lot of newcomers lack a solid understanding of how to lower their possible hazards.

Leverage:  Retail traders most often make their first mistake by ignoring the effect leverage has on their investment longevity. Leverage, to start, is a loan that a broker gives you to assist you to increase your returns. Greater leverage will subject you to greater earnings but greater risks.

Amateur traders lose a lot of time that may be prevented by taking certain precautions. For instance, a novice trader will spend hours studying charts before deciding what to do. Before starting the transaction, they will examine charts, skim the news, and perform other tasks. They also take a lot of time to examine various assets.

Nigerians were forewarned by the Nigerian Securities and Exchange Commission not to engage in leveraged online retail currency trading that was suggested by fictitious investors.

“The public is now informed that retail forex trading conducted over the internet is currently unregulated and may therefore be exploited,” SEC said.

The SEC stated on its website that anyone engaging in such investing activity “does so at his or her own risk” until a framework for regulating online retail FX trading is devised by the agency.

Olumide Adesina is a France-born Nigerian, and a certified investment trader, with more than a decade of working expertise in investment trading.