A Retail Trader refers to an individual trader who trades with personal wealth rather than on behalf of an institution.
A retail trader is someone who trades with their own money, but not to make a living. They buy or sell securities for a personal account (PA).
They are considered non-professional market participants.
Nowadays, it is possible for anyone with a computer or smartphone and an internet connection to become a retail trader
A professional trader is someone who gets paid to trade other people’s money, usually for an institution.
Institutional traders buy and sell securities for the group or institutional accounts they manage.
Pension funds, mutual fund families, insurance companies, and exchange-traded funds (ETFs) are common institutional traders.
Institutional traders have the ability to invest in securities typically not available to retail traders, such as forwards and swaps.
The complex nature and type of transactions often hinder or prohibit individual traders.
By definition, the SEC considers retail traders to be unsophisticated investors who are subject to certain protections and prohibited from making certain risky, complex investments.
Retail traders typically have less capital, fewer analytical tools, and limited access to advanced trading techniques compared to institutional traders.