The Struggle of Going At it Alone

Let's be frank - being a retail trader isn't easy. We do not have the advantage of the "hive mind" the immense amount of brainpower behind the trading desks at hedge funds. Are you aware that institutions control 85% of the volume in the stock market? That figure is absolutely staggering. Those figures have increased since Covid-19, but it does not make one feel any less like a rowboat in a league of battleships.

There are a lot of difficulties that retail traders must face, compared to a junior trader at a Hedge Fund. For one, retail traders have no one looking over their shoulder. As an institutional trader, according to Anton Kreil (who worked as a trader as Goldman Sachs) everyone in the office could see all of the traders' positions. When the team collectively made a bad call, or got too long or too short, they had a veritable peanut-gallery overlooking their every move. Although this would create an immense amount of pressure, it also gave them the benefit to which retail traders are devoid of - accountability.

As a retail trader, if you make a mistake, you are only responsible to yourself. Granted, you might be married, and be responsible to your wife (or husband), for most of us, we are only accountable to ourselves. When we make mistakes (even substantial ones) there is no one calling us out on them. This allows for one to remain generally undisciplined indefinitely. You might have a habit of moving stops, revenge trading, trying to make back losses, or overtrading, and the only consequence is the emotional pain of persistent losses.

The second-most cost comes at that of growth. As a trader, you may know - subconsciously - where your primary issues lie, but without the pressure of outside influence, you may feel resigned to addressing them with any seriousness. Furthermore, as it is considerably more difficult to identify our own biases, than for us to identify the biases of another, you may feel and know that there is a problem, but have little cognitive understanding to do anything about it. The way in which our personality and emotions influence our reactions is particularly hard to diagnose, making it extremely difficult to work on that side of your trading.

That being said, just because it's hard, it doesn't mean it's impossible. As a retail trader, you might consider forming what Annie Duke calls a "Truth-Seeking Group." This is a consortium of traders where you are dedicated to impartial, open-minded, and accurate analysis of the individual decision making progress. You can utilize these peers in order to break down your trades, step by step, so you can garner a better understanding of where things went wrong. Per philosophy is that we make hundreds of decisions per day, and a number of these are going to mistakes. If one can catch just 10% more of these mistakes than other traders' in your class, you are that much more likely to have an edge on the competition.

One problem with consortiums like this, however, is that it requires an absolute concrete commitment to transparency. For good analysis, "secrecy is the antithesis," meaning that if you are not forward with your errors, and progress (or lack thereof) then you hold little hope for improvement. Part of the problem is that we all want to promote a positive narrative for ourselves (that's your ego talking), and that we often resist the urge to disclose our errors because we don't want to be seen in a bad light. However, the more painful it is, the greater the likelihood it bears looking into (and we as group members can assume any resistance means it deems exploring as well).

It may be difficult, or even painful at times, but unless you make a total commitment to transparency, you are likely to keep making the same mistakes again and again. After a while, it's likely you will stop revenge trading, or putting more money into your account, because you know (at the end of the day) that you have to answer to your comrades, and that in itself will encourage growth. What's deliberate slowly becomes automatic, and eventually, the behavior is changed.

Keep at it comrade - there is hope for us yet.