Forex trading is a relatively popular way of making money online. It involves buying and selling currency pairs with the goal of making a profit through an online broker. In this article, we will explore the concept of team trading and compare it with that of trading alone.
What is sole trading in forex?
Most forex traders fall into this category. This is where they open a personal account with a regulated forex broker and then start implementing trades on their smartphones and desktop computers. They apply their trading strategies and use personal funds for these trades.
Solo trading is also widely used in other assets. Indeed, in the past few years, many people in the United States have become stock traders through companies like Robinhood and Webull. As we will see below, solo trading has its own benefits and cons that can be solved by being part of a team.
What is team trading?
Team trading is a trading strategy that involves more than one person. The concept is more common among investment companies like hedge funds and investment banks. It is also a common practice in proprietary trading companies like Day Trade the World (DTTW) and City Traders Emporium.
Proprietary trading firms are businesses that fund traders from around the world to trade diverse financial products. At the end of every week or month, the company distributes the profits to these traders.
A prop trading firm like DTTW encourages its traders to form a trading floor with several traders. The floor owner acts as the chief trading officer and is responsible for coming up with a good strategy. He is also responsible for hiring and training other day traders.
The benefit of prop trading is that the company will provide the floor owner with the financial resources to trade with. It will also provide the required technology and training that is required to run the floor.
Meanwhile, investment banks and hedge funds have their own team trading strategies. In most cases, these companies have a manager who is responsible for hiring talent and ensuring that they trade well. The team tends to meet every morning to discuss the prevailing market conditions and to identify opportunities.
Another way of team trading is where a group of friends come together and start implementing trades. This can be done at home, work, or in a dedicated office.
Benefits of sole trading
Now that you understand the difference between solo trading and team trading let us look at the two benefits of being a sole trader.
First, as a sole trader, you can do it at any time and any place because you don’t have any limit. In fact, this is the primary reason why you will find many people trading in their Uber rides, beds, work, and even in their worship places. It gives you freedom on when and where to trade. Most importantly, it helps you even to stay away from the market.
Second, sole trading gives you complete control over what you do with your trading career. For example, if your goal is to make money trading exotic currencies, you will not have anyone to question you about that. Similarly, no one will prevent you from using a strategy that you feel is right for you. Some of the most popular trading strategies are scalping, swing trading, and algorithmic trading.
Finally, sole trading is relatively cheap than team trading. For one, with sole trading, you don’t need vast investments like the latest computers and television sets. Instead, you can be a good sole trader with just your phone. Personally, I have not made any major investments in my trading career. I still use my phone and a regular laptop.
Benefits of the team trading
Team trading has several key benefits. First, it is an ideal way to boost your trading discipline. For example, if you work in an investment bank or hedge fund, you will need to maintain maximum discipline, such as arriving early. This discipline can help you become a better trader.
Second, team trading is a good way in terms of idea generation. For one, there are hundreds of currency pairs in the market. As a sole trader, it is not possible to keep track of all these pairs.
Therefore, being part of a team can help you identify these opportunities. For example, as you focus on the EURUSD, a colleague can tell you when an exotic currency pair is having a bullish breakout.
In most cases, teams trade on a single trading floor. At other times, they do it remotely through chat applications like Slack and Microsoft Teams. It is not uncommon to receive notifications on key happenings through these mediums.
Third, team trading can help you handle the stresses that come with day trading. For example, many young traders go into stress or depression when they lose a substantial amount of money. Therefore, when you embrace the concept of team trading, your teammates will often encourage you when you have made significant losses.
Further, as a sole trader, you can only trade for a certain amount of time every day even though the market is usually open 24 hours, five days per week. Therefore, when you are part of a team, you can allocate time in such a way that some members trade at night while others trade during the day. This can help you optimize activities that come up when you are asleep.
Another benefit of team trading is that you can leverage the strengths of team members to amplify your results. For example, a team member can be skilled at trading during volatile markets, while another one can be good at trading during trending markets.
In this article, we have looked at the pros and cons of trading as part of a team or individually. We have seen that being part of a team is often better than being a sole trader. Still, the biggest challenge is that of finding a team where you share the same goals.