Forex Retail TradersYour Strengths and Weakneses

By: Harold Hsu
Successful Forex trading requires you to understand your strengths and weaknesses as a retail trader, so you can best exploit your strengths and avoid the weaknesses.

Weaknesses The weaknesses of retail traders are:

Time – Compared to (full-time) institutional traders, you’ll have less time to analyze and track market price movements without sacrificing a large part of your social and/or work life.

Capital – Most retail traders don’t have sufficient capital to affect market prices when trading, and are thus price takers.

Knowledge – Retail traders generally have limited access to the latest economic news and happenings around the world. By the time retail traders receive news reports, the institutional traders would have already heard about it, and would have already placed their trades before the retail traders can act.

Cost – Transaction (i.e.

trading) fees are the highest for retail traders.

Strengths The strengths of a retail trader are:

Risk – Unlike the institutional traders, retail traders are not pressured meet profit targets set by upper management. This gives retail traders the luxury of cherry-picking the best trade setups with the lowest risk-to-reward ratio.

Time – Similar to the previous point, retail traders can take their time to identify the best trades. There is no pressure to make profitable trades every single day.

Slippage – A retail trader’s trades are generally not large enough to affect market prices, and so there will be little slippage when placing trades.

Summary

Generally, retail traders are at more of a disadvantage than institutional traders. However, if you plan your trading strategy according to your strengths and weaknesses as a retail trader, you chances of being consistently profitable will be much higher. This is because it’s harder for the institutional traders to work around their weaknesses – their bosses are constantly breathing down their necks!

As a retail trader, you don’t have to answer to anyone but yourself. All you need is to plan your trading strategy according to these strengths and weaknesses, and you’ll be able to limit the effect of these weaknesses.

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