The difference between retail traders and institutional traders

There are two basic types of traders: retail and institutional.

Retail traders, often referring to individual traders, buy or sell instruments for their personal accounts.

Institutional traders are people who buy and sell instruments on accounts they manage for a group or organization.

There are many key differences between the two transaction groups. These differences revolve around the cost per trading and the level of information and analysis each party receives.

Institutions maintain an advantage like the approach to larger position size, they can also negotiate a lower trading fee and ensure the order is executed at the best price.

Steps to becoming an institutional trader ...

According to the media, if you want to become an organizational trader, you will have to start by earning an undergraduate degree in something like finance, IT, math, or accounting. You will then get a job in a bank and work on an exchange before entering an institutional trading career.

Today, however, getting started as a retail trader can still give you the basics of learning the following steps faster!

Know the rules of the game

Trading for organizations is a game and you must know the rules of the game.

When the market falls, retail traders panic and sell-off. Meanwhile, institutional traders are aggressively buying!

While catching a falling knife is dangerous, a pull-back/correction / sell-off is a great opportunity to buy an asset at a sale price. You wouldn't buy a car today if you knew you could get a 10% discount on the sale next week, right?

Don't wait for confirmation.

Everyone, everyone wants to see confirmation. They are willing to increase its risk and reduce its rewards.

Retail traders often want different indicators to take turns giving confirmation signals for what they want to see. So are institutional traders waiting?

No, they are not waiting! When the price falls to a threshold that banks and institutions are buying into, hesitation is not an option.

If you wait for confirmation or reversal, all you are doing is increasing your risk and losing your rewards.

Major investment banks do not wait for prices to rise before they buy. They adopt a famous quote from Warren Buffett: "Be greedy when others are afraid."

Organizational traders are tired of leverage

Institutional traders focus primarily on risk management and rarely use leverage.

If they used leverage, they would be extremely cautious not to risk more than a very small percentage. Meanwhile, retail traders look for brokers that offer 200x, 500x, or even 1,000x leverage trading accounts!

Why so? Because retail traders have an idea that if they really capitalize on their trades, they can turn something like $ 500 into $ 100,000 in no time.

However, the truth is, a newbie retail trader needs the necessary skills and training to achieve that. Meanwhile, retail traders often use indiscriminate leverage without considering that they can lose $ 500 much faster with high leverage.

Information advantage

Institutional traders are willing to spend their money prioritizing the fastest news feeds and audio services available, such as Bloomberg or Reuters.

They do this to get news and information that can move the market faster than their competitors.

Meanwhile, retail traders often avoid news events and pay little attention to economic data releases. But, trading only on technical systems and models is unlikely to be successful during this time.

Apply for institutional funds

Today, banks only recruit a very small part of traders, so with a limited opportunity through bank traders, retail traders are the next generation of institutional traders waiting.

Some companies will provide a link between talented retail traders and institutional trading. They provide professional funding, advisory, and networking to help top retail traders reach their level of organizational performance and pursue a trading career.

Control your mind and emotions

Institutional traders focus heavily on developing and maintaining a healthy trading mentality. This helps them focus on the things that matter most to their transaction in real-time.

In fact, many organizations have paid for their traders to be consulted on-site, to keep their minds sharp and focused.

Meanwhile, retail traders are focussing on systems, trying to eliminate trading sentiment, and hope for a 100% win rate.


The trading advantage that institutional traders had over retail traders seems to have been narrowed by the advancement of technology. This includes the accessibility of complex online brokers and trading a wider variety of assets.

The ability to receive a wealth of real-time information and the wide availability of investment data is now a practice. Therefore, the distance between retail traders and institutional traders is not too far away.

For retail traders who want to stand on the same playground as the "big boys", learning the basics and developing skills as an institutional trader will help you become a better trader. everyday!