Why Pundits are wrong about DIY Traders

You’ll often hear in the media or from professional market participants that retail clients “shouldn’t try to compete with the professionals”.

Ignoring the condescension here for a moment (“the adults will take it from here”) it is my firm belief after ten years of trading that this isn’t always true.

Sure, any beginner will find it challenging at the beginning to trade successfully, but you can’t expect to play like Roger Federer after one match of tennis, can you?

Charlie Ellis, the man who oversaw the $24 billion Yale endowment fund in the US once, said “watch a pro football game and it’s obvious the guys on the field are faster, stronger and more willing to bear and inflict more pain than you are. Surely you would say ‘I don’t want to play against those guys.”

But Charlie is wrong in a few ways.

Yes, professional traders and institutions have many advantages at their fingertips. They get news faster than you do. Their trades go faster than yours. They pay far less than you do. You get the picture.

But it’s not all doom and gloom. Here are a few reasons why:


No, not in the sense that you have more actual time to trade than them.

You probably don’t.

You’ve probably got a full-time job.

You might have kids or ailing parents to look after.

Trading is like a side hustle for you.

BUT your time horizon is different from theirs. You can hold a trade for days or weeks without a Manager yelling at you “Why the hell are you selling euros, you dummy… the market is going up”. You might enter a trade on gold and plan to hold it for months. A professional fund manager or trader might not have that luxury due to quarterly reviews, investor pressure or whatever else.

Professional Risk

Professional or Career risk is one I picked up from famed value investor, Howard Marks. In his book “The Most Important Thing” (one of my favourite investing/trading books of all time – buy it!) he talks about how in the GFC there was so much pressure on investors to not look silly by calling the bottom of the market or “catching a falling knife”. No one wanted to be the guy in the office who was buying Citibank at $1 per share!

Similar to my time point above, you don’t have that problem.

You don’t have your colleagues questioning you why you’ve bought or sold some instrument. Or a boss that is screaming at you and putting you into an emotionally defensive position trying to justify your actions.

Will you lose your job for selling USDJPY? No.

Does a professional trader get fired for constantly missing targets or taking on too much risk? Yes.

You need to work out what you’re happy with in your trading goals and go for them.

It’s completely up to you what you define as success. The Pros don’t have that luxury.


Which brings me to my next point.

Most professional traders and investors have a benchmark. If you’re a fund manager you’ll send out your monthly report to your investors saying “here is how much we made/lost.. and here is what the benchmark did”.

If you miss that benchmark, get ready for investor withdrawals. As a professional, you’re judged on your performance. Simple as that. The more investors leave. The more you have to sell. The more you sell, the worse your performance!

What’s your benchmark? You get to set your own. Happy with 1% a month? Awesome.

What about $100 a month so you can buy your wife dinner? Happy days.

Or $5,000 a month so you can pay off your mortgage? Even better.

It comes back to autonomy and your desires. No one else decides that but you.

Fees and Expenses

Believe it or not, you do have a HUGE advantage here, especially if you’re trading with a low-cost broker (hello, Fusion Markets!)

If you’re a professional investor/manager, you’ll often have a big research team, a very fancy office with lovely views, staff bonuses, visits to various investment conferences etc.

Not to mention all that travel to see your clients and investors!

Putting that aside for a moment, if you choose a good broker, you’ll pay zero spread and a small commission that is not far off what the pros trade. They’ve got $100,000,000 though, you’ve got one thousand!

So, ignore the haters telling you to stay out of the market because its only for the big boys.

However, let me be clear.

I’m not saying trading is easy and (unlike some)and that you can soon retire on the beach.It’s not. Trading FX, in particular, is a highly challenging exercise.

But don’t just assume because there are so many professionals in this that you can’t succeed or you’ll never be good enough. You have to play your own game, and for me that’s the best part. I set my own rules as to what I consider success. That’s something the pros will never get.

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