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What Are the Differences Between Professional Traders & Retail Traders?

What Are the Differences Between Professional Traders & Retail Traders?
July 17, 2019 Martha Stokes CMT

What Are the Differences Between Professional Traders & Retail Traders?

Lists of Differences and Viewpoints

Many Retail Traders assume that they are learning how to trade from a Professional Trader and that they are trading like a Professional Trader. This can pose inherent problems for the Retail Trader who is actually simply mimicking another Retail Trader. The Securities and Exchange Commission SEC recently fined companies whose representatives claimed they were “Professional Traders” when they were not, to find out more about this go to their website.

Here are some of the differences between Professional Traders and Retail Traders:

1. Income and Profits

Professional Traders earn in the 6-7 digit figure incomes.

Most Retail Traders lose money year over year. A few make minimal net profits but do not pay themselves a wage for doing so.

2. Stock Analysis

Professional Traders who are proprietary desk or Buy Side Institution floor traders do not select stocks to trade. They are given a list of stocks to buy or sell, or sell short. This list is developed starting with Fundamental and Quantitative Analysis, followed by a screening of Risk Assessment and Risk Analysis.

The Portfolio Manager makes the final decisions before the list is handed over to a Professional Trader based on their expertise in specific trading instruments and stocks, as well as their talent for executing these trades to the benefit of the institution’s goals.

Retail Traders must do all 3 Analyses for themselves. They must first be able to quickly find stocks to trade using Technical Analysis that fit their personal Trading Parameters, Risk Tolerance, Trading Style, and personal Goals. Then the Retail Trader must determine risk factors based on the requirements and parameters to screen down to a few stocks. Finally the Retail Trader trades the stock using a complete Trading Process.

Unfortunately most Retail Traders skip performing these analyses and just use recommended stocks, stocks in the news or chat rooms, or StockTwits setting themselves up for predatory trading systems to take advantage of their lack of skill. Risk Analysis is rarely done by the Retail Trader who often chooses the highest risk stock pick to trade, ending with a huge loss.

3. Trading Styles

Professional Traders have learned more than one Trading Style, and have set up technical systems which are a group of Indicators, Chart Layouts, and Parameters for each Trading Style. This makes it easy and fast for the Professional to switch styles or technical indicators to fit the current Market Condition. Professionals often develop their own Proprietary Indicators and Period Settings that they do not share with anyone else. Unfortunately most Retail Traders use only a couple of Public Domain Indicators that millions of traders use, setting themselves up not only for predatory systems used by High Frequency Traders to find Cluster Orders and Retail Trading Systems Orders to move price ahead of Retail Small Lot Orders. Retail Traders unlike Professional Traders, do not like Proprietary Indicators. Professionals know that having for example Proprietary Indicators and Trading Styles ensures that no predatory trading system can track their activity. They are trading in a manner that best suits their style and goals instead of following the crowd mentality.

4. Data

Professional Traders spend anywhere from $5,000 a month to $50,000 a month on information, data feeds, analytics, etc. Even the independent Professional Traders trading alone for themselves spend enormous amounts of money to receive accurate and reliable data, news ahead of every retail news feed, and background information that help them make better trading decisions.

Retail Traders grumble about spending $100 a month or $30 a month for quality charts when the Professionals are spending $5,000 to $10,000 or more for technical tools.

Unfortunately Retail Traders, especially Hobby Traders want everything to be free. This means that Retail Traders and Hobby Traders are getting out of date information, unreliable data, and misrepresented information, gossip, chatter, and far less reliable news than the Professionals.

5. Success Rates

Professional Traders who are Floor Traders or Proprietary Desk Traders expect to have very high success rates of 90% profitable trades or higher.

Retail Traders are content with a 40-50% success rate, which guarantees a slow erosion of capital and potential risk of a catastrophic loss.

6. Habits

Professionals keep to themselves. They are loathe to share any of their proprietary tools, resources, strategies, etc. The true Professional maintains a very low profile, and is not in the news constant spouting off about the stock market.

Retail Traders are crowd mentality traders who follow the crowd, often spend enormous amounts of time wasted on chat rooms which are only good for grumbling unsuccessful Traders and huge quantities of misinformation.

7. Market Data

Professional Traders use all the data from the market, including Price, Time, Volume, Quantity, Market Participants, Cycles, and more.

Retail Traders just use Price.

8. Strategies

Professionals apply a strategy to one of their many Trading Processes and Trading Styles.

Retail Traders just use strategies without ever learning a Trading Process or a Trading Style, ensuring that they will be accidentally using the wrong strategy much of the time.


There are innumerable more cavernous differences between Professional Traders and Retail Traders. To trade like a Professional, you must first adopt the viewpoint of a Professional.

A Professional viewpoint would include the following:

1. It is going to take an Education, beyond the outdated free stuff on the internet.
2. It is going to require learning a complete Trading Process, choosing at least 2 Trading Styles and setting up different trading Chart Layouts to speed up the process.
3. It will require development of skills and the ability to make decisions without being part of a chatroom.
4. Excellent tools are not free. The best tools are not the most popular or common.
5. Choosing the best Stock Picks is crucial.
6. Understanding Market Conditions, Market Structure, and the Market Participant Cycle is essential.
7. Avoiding predatory trading systems is crucial.
8. Setting specific Goals and having a Trading Plan laid out increases profits.

Understanding these patterns with a Relational Technical Analysis™ method helps Technical Traders learn how sideways action is likely to end. Instead of guessing on which side the stock will break out, charts can reveal the dominant force behind the sideways price action.

Take your Technical Analysis to the next level to help improve your overall trading results by learning Relational Technical Analysis.

Go watch the TechniTrader Relational Technical Analysis™ webinar.

TechniTrader Relational Technical Analysis™ can be found in the Methodology Essentials Elite Course, for traders with more than 5 years of experience.

Trade Wisely,

Martha Stokes CMT

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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Martha Stokes, CMT is co-founder and CEO of TechniTrader. She is a retired professional Buy-Side Analyst and was awarded the Chartered Market Technician designation for her thesis, "Cycle Evolution Theory." Martha is a passionate teacher of the financial markets and a prolific writer, having created over 40 stock, option, and financial market courses.