The Retail Forex Trader

Updated by Jonbert Davidsen ∴ Friday, March 17, 2017

“If you're new to trading, the first thing you need to know is that the retail Forex industry is largely filled with unrealistic promises... and if you're not careful, it's easy to buy into the whole "trade with a laptop on the beach" dream.”

The quote is from Chris Lee’s valuable blog. Chris Lee has been in the retail Forex industry for 11 years. He helps people avoid the Forex-illusions.My blog post explains some challenges the average retail trader experiences, when he lacks industry-knowledge. With industry knowledge, he’ll get a clearer picture on how to approach the markets.

I'm not an affiliate with any broker!

Trading Should be a Good Experience

Retail traders are small fish in a BIG bowl. By understanding this, it's easier to take advantage of this position.
Retail traders are small fish in a BIG bowl.

In What’s Realistic to Expect on Returns I suggested, it’s individual how to define a Forex trader. As Christopher says, it’s important to be careful in this industry.The trade with a laptop on a beach dream appeals to many because it’s a story about free money.Stories about free money are powerful. Marketers use them to recruit new people every day. But professional Forex traders do has little with the promises in Forex commercials. It’s good to be critical when people try to sell the idea how professional Forex traders approach the markets. The broker, the trader, the marketer have different interests. The conflicts of interests between these are crucial understanding before participating. Some say, professional Forex traders hold positions for one to three months. That’s longer than most retail traders since the majority are day traders. They open and close a trade within a day. Professional Forex traders focus on diversity and risk management, while the retail trader takes concentrated risk, with higher leverage than the professionals.Leverage is what attracts retail traders to the Forex markets. It’s possible for the trader to leverage his money without debt. Some professional traders use a leverage 1 to 2 or 1 to 5. The retail trader uses a leverage up to 1 to 400 or more, but some countries limit the leverage. The retail trader takes higher risks, cause his trading is concentrated and involves higher leverage.

If a retail trader has money problems, he tends to trade too high leverage. To prevent the pressure of earning money from trading, I suggest, it’s better creating a basic income outside the markets. Few have the opportunity to reach lifestyle freedom through retail trading.

Trading is About the Next 870 Trades

Some who fall for the trade with a laptop on the beach dream do it because of money problems. Rob Colville’s 5 Reasons Why Trading on the Beach is Overrated is fun. It’s fun because it highlights how dream-based Retail Forex Marketing is.It’s easier to trade big accounts than small accounts. To go into trading with $100 or $500 and trade like the professionals is impossible. The trader can choose a platform, where it’s possible to trade small positions. Then he can learn valuable lessons. But only after practice on a demo account, as I’ve written about in I'm New to Trading, Where Do I Start? Professional trader have more capital and hold more positions than retail traders. It’s easier to diversify with more position, but to do this properly, the trader needs access to capital.The professional trader’s job is to secure capital than growing it with steady long-term returns. If he’s good at it, he’ll get assets under management, because the investors believe he’s skillful. The professional trader uses the trading book when he pitches investors. When the trading book has between 100 and 1000 trades, it’s interesting because it shows the traders behavior over a period. Investors want trading books with few ups and downs. Professional traders reduces ups and downs by: Increasing risk when they earn money Reducing risk when they lose money

The Forex Myth

It’s helpful to think more aligned with how the professional approach risk. With big ups and downs, chances are too big; the trader blows his account. It’s common to underestimate how difficult it is to come back from a drawdown. Some, who experience a account blow, avoid a comeback. Trading should be a good experience, without roller coaster moves. By ensuring a salary outside trading, the trader prevents the pressure from making quick money to influence his trading. Full-time is OK while learning to get a salary from an online business. Trading with a laptop on the beach is different from this. It’s hard work and a long-term activity.
If the retail trader grows his account with 5% per month on average, the result is $1.030.348,58 after eight years. It’s important to remember, the trader avoids to take a salary from the account in this example. he Forex myth about the smart fast daytrader urges to trade for income. But just by refuse to withdraw from the account, the retail trader improves his chances of reaching his goal. If the trader takes money from the trading account when he wins, he does the opposite of what the professionals do. If he seeks more risk when he loses, he also does the opposite of what the professional do. The odds are stacked against him. He will blow his account sooner or later. If he, on the other hand, understands the differences mentioned in this blog, he has a choice to trade another way. It’s a way, where becoming rich is a valid possibility. Traders have ups and downs. Some begun as terrible traders, but learned it as they practiced. Others learned it faster because they focused on learn instead of earn.See: Vladimir Ribakov: Feel Proud Trading Ultraconservative See: Philosophy and Forex Trading See: Tools for Lifestyle Freedom

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