There are two types of traders: retail and institutional. Each has its pros and cons.
I’ve been fortunate enough to have experience as both.
For some insight, my trading career started off with about $60,000. I had just quit my cushy corporate gig and liquidated all the stocks I received as bonuses.
A few years later, I was part of a three-man trading team that was managing millions of dollars.
I quickly discovered there are as many ways to trade the market as there are traders…
A hedge fund will run their money very differently from how most individual traders go about it.
But I realized that different doesn’t necessarily mean better.
Hedge funds and other institutions have the kinds of resources at their disposal that most retail investors will never have. But retail traders have an enormous advantage…
Their smaller size makes them more nimble and agile.
When you’re a hedge fund, overseeing millions (or billions) of dollars can make it tough to deploy all that money quickly and quietly. And it can be tough to get out of a trade.
For instance, in 2018 I was running a U.S. dollar (USD)/Japanese yen (JPY) currency trade that was worth about $200 million.
When it was time to take my profit, I couldn’t close out the entire trade at once. So, it took almost the whole trading day to unwind the entire position.
However, I don’t think retail traders need to try to go toe-to-toe with the big guys. In terms of resources, it’s almost impossible to compete.
Instead, we should trade in a way that plays to our strengths and not to our weaknesses.
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For example, too many retail traders try to make tons of trades each day.
Even if they win more than they lose, they’re likely paying a huge amount of money to their broker in spread and commission fees.
But I like to keep things simple. Think of trading like hunting…
Don’t shoot at everything that moves. That’s a good way to quickly run out of ammo.
Instead, I’m only going after the biggest game in the wild.
But you don’t do this without meticulous preparation.
I typically plan my trades days or weeks in advance. I stalk the market, wait for it to make a misstep, and eventually get the trade within my sights.
And once I’ve considered every variable and planned for every contingency… I’m ready to pull the trigger.
So far, every trade I’ve been testing with my latest strategy has been a winner. That’s 13 for 13 trades.
Tomorrow, I’ll break down a recent trade that Jeff Clark Alliance members had the opportunity to access so you can see exactly how it works.
Happy trading,
Imre Gams
Analyst, Market Minute
Reader Mailbag
In today’s mailbag, subscribers share their thoughts on forex and on Jeff’s new, Forever Portfolio service…
Living in the UK, trading FX is what I periodically do. The UK brokers aren’t allowed to trade options or futures, so FX is preferable to me. I think all strategies should also be a formula… this would strengthen a trader’s ability and confidence when placing a trade.
– Carol C.
Well for me, I’m buying! I’ve learned from bitter experience that selling when stocks are down only locks in your paper losses. And that’s a main reason why I’m now a subscriber to Jeff’s The Forever Portfolio.
– Robert R.
Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming – and send us any questions – [email protected].