Trading Dictionary

Who Are Retail Traders?



A retail trader is an individual investor who trades securities, derivatives, or other financial instruments in the financial markets. Unlike institutional traders, retail traders buy and sell these instruments for their own personal accounts, not for a company or organization.


Retail traders can trade a variety of instruments including stocks, bonds, options, futures, forex, and commodities. They typically use online brokerage platforms to execute their trades.


Retail traders are characterized by the following:

  1. Trading Capital: They trade with their own money, which is usually significantly less compared to the capital managed by institutional traders or hedge funds.


  2. Decision Making: Trading decisions are made by the individual based on their own analysis, intuition, or trading strategy.


  3. Access to Market: Retail traders typically have less direct access to markets than institutional traders, and they often trade through online brokers.


  4. Regulation: They are subject to different regulations compared to institutional traders. For example, in the U.S., retail traders are subject to the Pattern Day Trader rule, which requires maintaining a minimum account balance if executing more than three day trades in a five-day period.


  5. Information and Tools: Retail traders may have less sophisticated trading tools and less access to vital market information compared to institutional traders.


    It's important to note that while retail traders are often seen as less experienced, many are quite knowledgeable and successful in their trading activities.