3 Crucial Differences: Professional Traders Vs. Retail Traders

Apr. 25, 2018 3:05 PM ET1 Comment
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Macro Ops
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Summary

  • A professional trader is someone who gets paid to trade other people’s money.
  • A retail trader is someone who trades their own money, but not for a living.
  • To be a successful trader, you can’t be trying to trade for income.

Today we’re going to talk about 3 differences between professional and retail traders. To clarify, a professional trader is someone who gets paid to trade other people’s money. And a retail trader is someone who trades their own money, but not for a living. We’ll go over the differences to see what we can pick up from the pros that’ll help keep us ahead of the competition.

The first difference between retail and pros is that professional traders don’t trade for income. If you’re working at an investment shop you get paid like a 9 to 5 job. And that’s super important because it takes a huge psychological load off your head.

Trading is hard enough as it is. But trading to try to make your rent money is a recipe for disaster. That type of pressure, to either hit a winner or not eat, is going to have you making all the wrong moves. First you’re going to start forcing your trades. And second you’ll throw risk control out of the window. So remember, to be a successful trader, you can’t be trying to trade for income.

Now the second difference between the pros and retail is size. Pros trade millions while retail traders trade nothing close to that. Trading so much money comes with a lot of responsibility. When you’re swinging big that you can’t afford to get sloppy with your trade plan. Especially when you have to report to someone as a professional. You need detailed explanations of exactly what you’re doing and exactly why you’re doing it.

Retail traders sometimes are willing to break their trading plan because the amounts they’re trading are so small. But this causes the development of terrible trading habits.

The third difference between pros and retail is that retail traders have

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Macro Ops is a global macro research and education firm.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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