Retail Traders vs. Institutional Traders:
Retail Traders are individuals who trade their own personal accounts instead of for another company or organization. These traders are typically self-taught or find programs online in order to advance their trading education. A large percentage of these individuals trade in their spare time for supplemental income, but others pursue it on a full-time basis to capitalize on the freedom and flexible that the trading lifestyle can provide. Lower-priced, small cap stocks tend to attract retail traders thanks to their achievable price points.
Institutional traders, on the other hand, buy and sell securities for accounts they’re managing within large organizations like banks, insurance companies, retirement funds, and hedge funds. The typical institutional investor receives a formal college education by obtaining an economics, math, or finance degree before getting a job at a financial institution. Institutions have much more buying power than retailer traders, and as a result, have a greater influence when it comes to “moving the market”. In other words, they can greatly impact the prices of securities, both to the upside and downside. Together, both retail and institutional traders/investors help keep the markets liquid.