Retail Trader: Advantages and Disadvantages If You Want to Become One

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As a retail trader, you can only target small and unregulated markets. It is far from what hedge funds, big trading firms, and institutional traders can do. 

As a retail trader, there is no pressure to trade. But what chance do you have? How can you become a successful retail trader?

Advantages of Retail Traders

Small Capacity

Because hedge funds have huge capital, some markets are too small to absorb their size. But, as a retail trader, you can trade in markets that don’t have enough liquidity to absorb the big players.

Small, Unregulated Markets

Big plates can only participate in regulated markets. Retail traders, on the other hand, can trade any products. You can trade in small, rare, and unregulated markets – from cryptocurrencies to the stock market to horse racing quant trading.

No Pressure to Trade

In the world of trading, don’t try to force a trade when there is none! 

As a retail trader, you can trade as frequently or as little as you like. No pressure at all! Unlike the big players who get in trouble with their investors if they don’t deploy the money, you can sit and wait for the perfect opportunity to come.

No Investment Mandate to Follow

Big trading firms and hedge funds have to follow certain investment mandates. Luckily, retail traders can adapt their play to varying market conditions.

Low Execution Risk

When big firms join the trade, they push the price higher and increase the fund’s entry price.

Retail traders, on the other hand, rarely move the market. People don’t care what they do, and thus, the execution risk is minimal.

No Capital Withdrawal

Investors withdrawing their capital tend to be disruptive to the investment strategy. As a retail trader, you can avoid having such problems.

No Disclosure Needed

Big firms that are regulated are required to disclose some information on their holdings. Fortunately, as retail traders, no one is going to care about our trades  unless we are consistently profitable over many years

Disadvantages of Retail Traders

Higher Fees, Spreads, and Interest

Big firms have higher bargaining power, and thus, they pay lower fees. On the other hand, retail traders generally pay higher commissions, fees, and spreads.

Limited Access to Services and Products

Retail traders don’t have the luxury of spending so much on researching and executing the best deals. They also have limited access to support services and financial products.

No Access to Information

Because big trading firms have access to important information quicker than retail traders, they have the edge.

No Access to Top Technology

Trading infrastructure is costly; they cost millions. Small-time retail traders have no access to the top technology in the market; thus, they cannot engage in complex trades.


Bigger firms have better credit ratings and, thus, better leverage. This helps them to survive tough times and increase returns with a smaller base capital.


To succeed as a retail trader, you need to look for new, exotic markets. You need also to find ways to evaluate opportunities that weren’t done or taught before.

Don’t compete with the big players. Instead, keep targeting these unregulated markets. Learn and grow. The time will come when you can finally play in the same playground as the big players.

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