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What is a Retail Trader? | +12 Things Every Traders should know

Last Updated on 10 February, 2024 by Trading System

Are you interested in learning more about what a retail trader is? Whether you’re a complete beginner or an experienced trader, this guide will teach you everything you need to know. We’ll cover the basics of retail trading, including what it is, how to get started, and the different types of strategies that are available. Plus, we’ll discuss the risks and rewards associated with trading, and provide tips for avoiding common mistakes. Discussed here are the 12 things you need to know about Retail Trading;

1. Who is a retail trader?

A retail trader is an individual or small business that trades securities intending to earn a profit. Retail traders typically trade in smaller amounts than institutional investors, and they often use different strategies. Something worth noting is that a retail trader does his/her trading using their own money but not for a living. What they do is sell and buy securities for what is known as personal accounts (PA). They don’t manage other people’s money.

2. What Is the definition of retail trading?

Retail trading is the process of buying and selling securities through a broker-dealer firm that specializes in working with individual investors. These firms are typically much smaller than the large investment banks that cater to institutional investors.

3. What does a retail trader do?

A retail trader is an individual who trades securities for their personal account, rather than for another entity. Retail traders typically trade through brokerages, either online or offline. Therefore the main role of a retail trader is to buy and sell securities, either for themselves or on behalf of another party.

4. How much can a retail trader make?`

Retail trading can be a lucrative business, but the amount of money that a retail trader can make is ultimately dependent on their skillset and the market conditions. In general, a retail trader can expect to receive an annual income that ranges from $16,500 to $137,500 which makes the national average to be around $55,794. This goes to show that retail trading can be a great career for those who focus and learn the ins and outs while perfecting their craft.

5. What are the different types of retail traders?

There are several types of retail traders, each with its unique strategies and goals. They include;

  • Day trader: A day trader is someone who buys and sells stocks within the same day. They aim to make small profits from the price fluctuations throughout the day.
  • Swing trader: A swing trader holds onto stocks for a couple of days or weeks, in the hope of selling them at a higher price than they bought them for.
  • Position trader: A position trader is a long-term investor who buys stocks and holds onto them for months or even years. They aim to benefit from the overall trend of the market, rather than from short-term price fluctuations.

6. What’s the difference between a professional trader and a retail trader?

There are three major differences between professional traders and retail traders. They include the following;

  • A professional trader is an individual who gets remunerated for offering the services of trading other people’s money.
  • A retail trader is an individual who trades for themselves with their own money. The important thing to note is that they do not primarily trade for a living.
  • To achieve success in retail trading, you cannot be doing it for income. What this means is that you should not be trading to pay your bills. Instead, you should have another source of income to supplement your trading. Trading should only be done with the surplus money that you have.

7. How many retail traders are out there?

As of today, the estimated number of retail traders out there is 13 million and above. The number keeps on growing because more and more people are getting interested in the possibility of making money from retail trading.

8. What is the volume of retail trading?

The volume of retail trading has been on the increase in recent times because businesses are recovering from the effects of the pandemic. Currently, the volume of retail trading is above the median which is a good sign for businesses with a percentage of increase of about 17%.

9. Who are some of the famous retail traders?

Some of the most famous and successful retail traders are;

  • Nicolas Darvas. He is one of the most successful stock traders of all time and made a fortune by trading stocks. At one time, his fund got up above $2 million and that goes to show you the potential of retail trading.
  • George Soros: With a net worth of about $8 billion, George Soros is one of the most famous and successful retail traders of all time. His name was in every media house after he broke the bank of England in the year 1992 when his position against the pound earned him a gross profit of over $1 billion and that resulted in the Black Wednesday crisis.
  • Jesse Livermore: He is one of the most famous retail traders in history and is known as the “Boy Plunger” because of his penchant for making huge bets. He made and lost several fortunes throughout his career but is still considered one of the most successful traders of all time.
  • Paul Tudor Jones: He is a highly successful retail trader with a net worth of about $5 billion. He is known for his successful predictions in the Dotcom bubble burst in 2000.

These are just some of the most famous and successful retail traders in history.

10. Which are the biggest retail platforms?

A retail platform can be described as a company that provides a service for retail traders to access the financial markets. This can be done through an online broker, a trading platform, or even a mobile app. The three biggest retail platforms in the world are eToro, Robinhood, and Coinbase. All three of these platforms offer different services and products, but they all allow retail traders to access the financial markets in some way.

  • eToro is a social trading platform that allows retail traders to copy the trades of other successful traders. This is a great way for retail traders to get started in the markets, as they can learn from the success of others.
  • Robinhood is a commission-free online broker that allows retail traders to trade stocks, options, and ETFs. This platform is great for retail traders who are looking to invest in the stock market without paying any commissions.
  • -Coinbase is a digital currency exchange that allows retail traders to buy and sell cryptocurrencies. This platform is great for those who are interested in investing in the new and exciting world of cryptocurrencies.

11. What are some popular retail strategies?

To be successful in retail trading, there are several tips and strategies that you should follow. Some popular strategies include:

  • Determining your risk tolerance. This is one of the most important aspects of trading. You need to know how much risk you are willing to take on before entering a trade.
  • Developing a trading plan. This plan should include your entry and exit criteria, as well as your risk management strategy.
  • Keeping a trading journal. This will help you track your progress and identify areas where you need to improve.
  • Building a support network. This can be done by joining a trading community or finding a mentor.
  • Staying disciplined. This is one of the major keys to success in trading. You need to stick to your plan and not let emotions get in the way of your trades.

If you follow these tips and strategies, you will be well on your way to becoming a successful retail trader.

12. When did retail trading start?

Retail trading began in the 90s after the emergence and development of forex trading platforms. This enabled small-time investors to trade forex without the need for a broker. Instead, they could open and close trades themselves.

Final Thoughts

This article has extensively addressed the issues that revolve around retail trading. With this knowledge, one can be able to venture into retail trading with much ease. Retail trading can be quite profitable if done correctly. However, as with any other form of trading, there are certain risks involved. These risks can be managed by following the tips provided in this article. All in all, retail trading is a great way to earn some extra income.


How much can a retail trader make?

The income of a retail trader varies based on skills and market conditions. On average, annual earnings range from $16,500 to $137,500, making it a potentially lucrative career.

What distinguishes professional traders from retail traders?

Professional traders trade other people’s money and receive compensation. Retail traders trade for themselves with their own funds, emphasizing the need for an additional income source.

What are popular retail trading strategies?

Successful retail trading involves strategies such as determining risk tolerance, developing a trading plan, maintaining a trading journal, and building a support network.

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