Retail vs. Professional Client Status: Which is Right For You?

in this video traders we look at the pros and cons of trading under professional

status stay tuned

hey traders a warm welcome to you all right so

if you are to open a pepper stone account by the way the link to those guys in the description below cf the account or spread that account you’re going to default to a retail trader status and retail trader status several years ago esma directive said hey you guys are providing brokerage services for leverage financial products the cfd

cfd spread bets that came under that umbrella you need to restrict the amount of leverage

that you offer retail clients so basically that means that

with a you have to put up more money and a larger deposit a larger margin deposit to control

the money that you used to be able to control so no short value of 100k maybe before you could have a thousand uh dollars up to control that a thousand pounds now you might have to put up ten thousand now you might have about five thousand so it depends on the asset you’re trading or kind of go through at the moment but the point is is you now have to have more money in your account to control bigger position sizes but

the problem is for the prudent trader for the trader who’s you know very sensible to risk management all this stuff

leverage is a nice tool to have sometimes the trade is going your direction

you want to push a throttle a bit sometimes a risk reward ratio isn’t is quite compelling and quite high you say well yeah the risk is high enough i’m gonna have to dial the size up on this but actually the risk on the trade isn’t really that much because my stop is here so i’m risking x amount but the trade side is going to be quite high you get the idea so that was kind of removed from people uh who are trading under the retail umbrella however

you can trade as a professional trader there’s some qualification criteria like at a moment

that actually now then opens that leverage up again so let’s look at the pros and cons and leverage is the main one of trading under retail or pro and by the way you know if you do open a pepper pepperstone account guys you can apply for professional trader status at any time to get the benefits

of a professional trader but you lose some of the benefits of being a retail trader just look at the kind of different options and perhaps the right one to suit you and also if you qualify so you know the pro account if you’re a professional trader you get more leverage so you now get up to 501 on fx 201 and indices you know a significant improvement from retail now this might be

an advantage shoe if you’re more experienced and obviously you this is the kind of qualification criteria we’ll look at in a second if you’re more experienced you will kind of feel more comfortable with leverage you can use it if you want it it’s there

most of the time you’re not going to be using this kind of leverage but if you want to press the throttle you feel like kind of pressing a trade a little bit harder you’ve got the ability to you know it’s like having a car with a

powerful engine right you’re always going to go around flat out all the time but when it’s there we’re going to squeeze the throttle a bit it’s nice able to have the opportunity and back off and on and off when needy for driving around in a and a car is pretty low horsepower you haven’t got the opportunity to do it you don’t have the opportunity to to squeeze a throttle and get a little bit more juice from it when you want so leverage it a little bit like that now you might not want that you might be like okay i’m gonna get myself into trouble if i’ve got more leverage in which case stairs retail you know you get the leverage protection in other words they restrict your leverage and so you can’t trade too much size you of course you you steal the damage guys the leverage product is a leveraged product you know you’ve got risk inherent risk with it but it’s a reasonable level that maybe you’re not going to go too crazy and end up wiping yourself out blowing yourself out um you know just with a few trades still the risk there still the risk of course with leverage

but uh with a little bit more protection so pro

uh if the advantage you get more leverage so you get you know that tool to use if as and when you want to use it um with pepper stone you join the active trader program uh go and check that out guys a link in description below just look for the active trader program that’s a rebate based program certain terms and conditions obviously apply with all these kind of things you get a relationship manager so if you’re professional status you get a person you can speak to you regularly um about your account all this kind of stuff nice single point of contact there you trade bigger size as well uh different from retail restricted on trading size

you can trade bigger size uh with the professional account now to qualify for a professional account you have to match uh two of these three criteria and number one ten or more large trades in the last quarter and number two more than a 500k uh financial instrument portfolio i can’t include real estate or some of the other illiquid assets got to be kind of in a nicer or stocks or shares etc number three worked in the financial sector with a good understanding of leveraged products and derivatives uh for at least a year so you can take two of those you may well qualify and it’s a very simple application process you just go into pepperstone once you’ve got your retail account sorted which will be the default account you apply apply professional status and they’ll change you and put you into professional um under professional trader umbrella now

the other advantage that you have on retail which you will lose if you’re a pro trader is the negative balance protection so in other words what this means is your balance can’t go below zero if it does it’ll be reset to zero so when might this happen let’s say you have a position on and the market gaps massively over the weekend let’s say there’s some good global news you’ve got a few fx positions and in exposition some share positions huge gap and you end up you know being in a massive negative

balance in because the gap has just happened you’ve lost 10k you’ve lost 5k here 300 quid here

you will never go below zero you’ve got a negative balance protection pepper stone will put you back to zero so you can never lose more than your deposit whereas before you could do that you would be on the hook for that and actually if you look back to kind of some of the big events like the smb moving the peg and the big currency movements um many traders were on the hook

for some of the losses that went below zero so only did you lose your account but you also have to pay now this is rare and of course this is why you need to be sensible and careful and understand the risk of the product you’re trading and use the sensible leverage etc but negative balance protection does apply retail trade

if you go under the professional trader status you lose that

so you gain the advantage of the added leverage but you lose the negative balance protection

so something for you to um consider another thing is guys if you’re a new trader obviously you’re

probably going to be under retail you probably wouldn’t even qualify for this anyway but

they’ll talk to you in simple language that helps you understand the product you’re trading and kind of walk you through stuff um if a professional trader they might kind of well they will assume because obviously you qualify for this you know you’re doing it’ll talk to you in the language of in the more professional uh traders use and it’s kind of worth thinking about even if you do qualify whether you want to go to pro status the biggest one is the leverage now the other thing actually guys when i think about it

is a lot of people say well i don’t go pro because does that change the tax status

and that’s a common question and actually as far as pepper stone are concerned

uh it doesn’t change the chapter tax status of the products

at all so you know if you’re looking at a cfd regular kind of taxable product you’ve got capital gains tax to pay by the way not accountant guys never uh don’t listen to me in terms of tax advice obviously speaking to your own tax advisor et cetera in personal circumstances but broadly speaking cfd taxable the capital gains spread bet has no capital gains tax to pay it’s considered a bet there might be some slight nuances and circumstances where that changes but the actual tax status of the products peppers don’t tell me don’t change so whether you go to pro or retail they are still remaining under the same umbrella uh for all the pros and cons that come with that all right guys so that is retail versus pro

specifically if you’re trading a cfd account or a spread bet account a pepper stone allows you to choose the account you want you’ve also got some other account options as well which you can check out your leisure links in the description below i take care and i’ll see you in the next video bye-bye


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