Unvalidated Ideas #026
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Here's a fresh idea you can take out there and validate.
Risk Management for retail traders (+/- AI)
Investing is one thing, trading is another. Trading the market is a three way knife fight with yourself (patience, judgement, emotions) and the biggest hedge funds and banks on Wall Street.
Once you survive the first couple rounds of the knife fight you learn the phrase "risk management". Firms have huge risk management teams, but the retail trader has no such luxury.
Brokers are all too happy to provide retail traders "education" but they stop short of risk management. Should you have scaled into your heavy stock position by shorting puts for downside protection? Millions, maybe even billions of dollars are lost by retail traders executing trades poorly.
Build a tool for retail traders to bring their risk management skills from zero to one.
Right now, the average retail trader has nothing. Even just basic risk checks and a prompt to rethink a trade would pay for itself (especially if you reminded the users of bad trades they avoided).
The real way to hit this out of the park is to provide the user with a completely different interface for trading that offers insights, and cautions against risky trades.
A bolt-on automated SaaS (the APIs are out there!) could bring just some of the power and control available to the pros down to the retail trader, and smarter retail traders will recognize the value.
And that's just the beginning -- because once you have trading data you can use it to train machine learning models and start to really find signal in the noise.
Read my raw notes >
NOTE If you build this right, you'll be a tasty acquisition targeet for the large brokerage firms out there that cater to retail traders.
Even if the initial idea of democratized risk management absolutely fails, creating a community for retail traders who care about trading safely is quite the lucrative spot to be in.
What was in this week's uncut edition?
In this week's uncut edition:
- Risk Management for retail traders (+/- AI) (see above)
- There's one thing you shouldn't be wasting your time on (I do it too).
Just your weekly infuriating reminder that there's 3x more in every edition for paid subscribers 😉.
Thanks for reading!
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