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Why You Are Always At A Disadvantage When Trading In The Market As A Retail Trader

The financial markets are competitive, and often cruel. Here are some disadvantages of retail trading.

The financial markets are competitive, and often, cruel. When a person enters the market, he (or she) finds himself in a playing field filled with competition from around the globe. Any mistakes made would result in monetary losses.

In today’s global market, a retail trader entering the market is like Han Solo steering his Millennium Falcon towards the Imperial Death Star.

For retail traders to even have a small chance of being successful, they first have to know the disadvantages that they face. Below are some of the disadvantages retail traders experience when stepping into an uneven playing field of trading.

Traders’ Mentality

A normal human mind is not programmed to take frequent risks and losses.

As mentioned in John M. Coates’s book, The Hour Between Dog and Wolf, despite trading not being a life endangering activity, when we trade, we threaten our wealth. This wealth holds some special significance in our lives. Hence, a profit or a loss in our trades can bring about a physiological response which makes financial risk even graver than a brief physical risk.

Some human behavior includes a trader taking up higher risk after making a profit, or traders trying to double up their investments in times of losses hoping to recoup their deficit. In other words, we become irrational when trading.

Professional traders, unlike retail traders, would have spent hours and hours in the market understanding their own human emotions. On top of that, the company they work for may even have a system in place to prevent them from making wrong decisions that are based on human emotions.


Technology may have revolutionised the world of trading. This gives anyone with a computer and internet connection the ability to trade. However, with great power comes great responsibility and in this case, possibly great losses. It also means that one can have an advantage over another person simply be utilising better technology.

Professional traders are always equipped with proper platforms and tools to assist them in their trades. These systems are usually costly. For retail investors, buying such systems and equipments usually make little sense.

In the financial market, every second counts. As a retail trader, these are the seconds which you do not enjoy.

Every Profession Requires Knowledge

Just like every other profession, knowledge and experience plays a critical role in your profitability and survival in the market.

Most professional traders have spent a huge chunk of their time understanding the products that they are trading prior to entering the market.

On top of that, they spend majority of their time watching and understanding the market movement on a daily basis. While you are at your day job getting scolded by your bosses, these professional traders are seating at their desk monitoring their screens.  This allow professional traders deeper understanding of the market’s mindset and behavior.

Most retail traders spend majority of their time on their job instead of watching the market. They tend to act on the information that they read up on to reason out every trades they place. Despite these information being important, the market may not necessarily move in the direction of the economic data and knowledge.

This makes understanding of the traders’ behavior in the market an important piece of information too. This information will only be available if one spends enough time staring at the screens. A luxury which retail traders do not have.

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