How Do Retail & Institutional Traders Differ? | Secrets of the Institutional Trader | Part 1

[Music] so what have you not got if you're a retail trader I'm talking about a s in the market a person with finite capital relatively small amount of capital you're not perhaps doing it all day long you look at the market when you can all those sort of things so what have you not got what's your disadvantages or what number one a is money it is a big boys game and if you think about it you know if you have a small amount of money it's relatively easy to lose the lot and and for many people is game over when you've lost a lot of it and so and people do feel that they can make a living and give up their day job and this sort of thing and and with my money and they say well I've done well we're trading and so I'm going to give up my income and exchange it for trading but think about this and and do this little calculation in your head think about okay I'm going to give up my job and I'm going to become a trader what do I need to live and keep my family and to pay my rent and all those kind of things and have that the not a improvement in my lifestyle just the same lifestyle hopefully I'm going to improve it but let's just say the same lifestyle and say say it's X amount of money now let's say then what returned I need to generate X and don't forget X is only to be the same as I am now and let's just take some round numbers it just say say a hundred thousand pounds only because it's a big you know it's a easy number for me to work with and so um less I need a hundred thousand pounds to pay my mortgage put my kids through school and all those things which I'm happily doing with my existing job as a property developer or as or whatever I'm doing and I'm going to swap this for this other risky job where I won't get paid every month if I'm ill and get the flu but you don't have to stop working nobody pays me nobody looks after me all those sort of things but let's say I've got this amount and I've said it's a hundred thousand so what it would be a reasonable expectation of return for me as a trader so do you think it's reasonable to feel comfortable that if I trade it for myself with my experience as I've been doing you know as part time and I'm going to want to do it now full time that I could make a return of twenty five percent fifty percent something like that I feel comfortable that I could I could do that now that's a very big return isn't it those sort of numbers but let's say you do feel confident that you can do that then you must also look at the draw downs that you've seen in order to get that kind of comfortable 50 percent presumably sometime you made more than 50 percent because that's just an average number for you so what sort of draw downs could happen how many months were you not positive did you have to sit through negative returns in order to that finally eventually end up with this really large number of fifty percent so then to get let's say that you're happy and you've convinced and your confidence that you are that sort of person and that is a tall order incidentally I hope you realize that so it's very difficult to make fifty percent believe me it is and to feel confident I'll do it next year and the year after and the year after that it's a tall order to do that but let's say you think you confidently you will be able to do that so then you say well 50 percent is now a hundred thousand so how much do I need capital in order to produce the hundred thousand so what's the answer to the question two hundred thousand so I need two hundred thousand now but hold on to the hundred thousand and but that won't be enough because what about the drawdown and so I will need some multiple of two hundred thousand if I for example the drawdown was a fifty percent or something like that on it so I might need twice 200,000 so let's say it's four hundred thousand five hundred thousand so people really really underestimate what they need to start with and they say but I've really worked hard and doing my job every day and I turned ten thousand into fifty thousand and now I'm ready to go no you're not ready to go and one thing is actually very certain is you're gonna lose all your money that's it you are you'll lose your money before you get into the profitable run it's it's most likely not enough money to become a professional trader and in my experience and I have been a broker this is the main reason it's not to do with people not being good traders I'm not learning not working hard enough not any of those things it's being undercapitalized and it's just too near not you know you're just too near naught you're trading in the big you're in a big best boys game this everything's big and and so you have not got many chances of losing not compared to an institutional trader who's got many more chances of losing and it's still game on for him so the number one cause I think of disappointment disillusioned giving up all that kind of thing is actually there was no chance in the first place and of course the people were undercapitalized in the first place so and it's a big shame because a lot of people also let's say you might start with 50,000 which is a quiet is a lot of money truthfully is a lot of money to have spare to speculate with it so you know you have to be quite a wealthy person to actually have 50,000 to speculate with that term people often it don't realize how long it takes to learn how to trade and they start trading and of course if you've got you want to trade and you want a profitable trade to be meaningful to you and losing trade to actually hurt a bit as well and otherwise what's that you know what's the point of it so you might let's say that a winning trade the meaningful to you might be to three thousand dollars or pounds something like that and a bad trade might be five seven hundred pounds or something that sort of trade if it's if it's 20 pounds or will gets but you know it's got a hurt a bit now the problem is you don't get many of those type of trades before and you don't have to have an unusual bad run in order to run out of money and it's a big shame because the beginning is the learning process and I've watched people learning and getting better but their capital has been so depleted and fifty has become ten and now they're beginning to get a hang of it and actually understand it but of course from getting ting back up even to fifty where they started five times as much is very tough proposition if they double their money that'd be terrific but they've only got time is only twenty thousand so I think if I you know I know this is maybe disappointing news to a lot of people you know but this is real world you know the fact is that the size of the business you're in here is large and it's unforgiving and if you don't start with enough or start small enough that's the other thing and you see people as want to trade bigger particularly at the beginning because they bought the money so I'm a ten lot trader or 20 lakh trader but you can unlearn as much from trading one long two dots and start small and realize that most likely in any business when you're learning at the beginning it's a learning process there's a cost in it and the learning in this business is to lose money really that's how you get the experience and skill from it and you need lots of opportunities there and if you keep at it it is possible to come out the other side as a winner but not possible to come out the other side as a winner if it's if you run out of money okay so if you are one of those people starting this game have a pot of money trade small they're really trite old trade for real I'm not a big fan of practice trading because you've got to feel it it has to leave your account and yeah you know but you know it's too easy when it's just a pretend trade you can just ignore it because it never really happened there so it's got to be real but you know losing a hundred pounds and then making 500 pounds and losing 150 and making 300 you can learn a lot from that sort of operation then basically we realize that you're on a learning game and you've got to go through the apprenticeship and there's the if you happen to be lucky and win a lot at the beginning you know be smart and realize that that's just the run of things you know you could have started badly or you could have started well but these are sort of random events there it means nothing it doesn't mean you're a great trader you just started with a good run there that's another thing so the second the second thing is that the the typically in these institutional operations where you have got proper traders are genuinely people trading like you with larger scale and though what happens is that people are given an amount of money or amount of credit to trade with and their job is to trade it's not to protect the money and come back and say I I you gave me half a million to trade with and here is I've looked after it and you've got half a million back now that's not what they want they want you to go and put the money at risk and and and trade large and trade aggressively and make significant amounts of money with it they understand that you may lose the half a million but then they'll give you another half a million if they if they still feel that you will do it now that isn't the case with a private investor so they'll be recharged they'll probably be recharged every year unfortunately for many people they're given more money so there was half a million this year they did well they made two million with their half a million then then the institution will give them another 5 million and now go do it the same bigger there and this causes big problems for people because people can be good at one man of money and not good at another it's you think it should be in your head just multiple but did you know you say well a normal loss for me with my half a million is thirty fifty sixty thousand but then you make it ten times bigger and it's three hundred to six hundred thousand it doesn't feel proportionally the same it feels a lot lot more in you know human minds can't think proportionally like that so a lot of traders come and stall unstuck because of the level that there are these changes of levels which often the boss will Sabri set you at a new level of money so so they've got if you like that advantage but they're under a lot of pressure of course their job is to make money people want to sit in their seat there are other people and if you're not doing it somebody else will be sitting in your seat and you'll be gone that's how it is but you can make unusual amounts of money if you do well in it [Music]

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Keywords: trading, stocks, stock trading, stock market, events, london events, london, interviews, swing trading, finance, finance events, financial markets, trading psychology, trading strategy, learn, education, psychology, stock price, share price, opto knowledge, opto, opto opportunities, asset management, investor, investing, investment, listen, business, expert, #OptoTradingInterviews, opto investing, learn trading, learn investing, strategy, investment strategy, global markets, investment outlook

Id: UMmrNdTw3a8

Length: 12min 2sec (722 seconds)

Published: Fri Mar 20 2020