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Who Are The Retail And Institutional Traders?

Who Are The Retail And Institutional Traders?

There are different types of investors in the crypto and stock market. You have to know them so that by the time you see articles and posts on the internet, you could easily identify the terms and understand them. Knowing the types of investors also helps you determine what type you are once you start to invest.

Luke Evans
CryptoFinance
Last updated: Mar 10, 2022 | Jan 19, 2022

Table of Contents

There are different types of investors in the crypto and stock market. You have to know them so that by the time you see articles and posts on the internet, you could easily identify the terms and understand them. Knowing the types of investors also helps you determine what type you are once you start to invest.

Let's explain further what are retail and institutional traders and who they are really.

Who Are Retail And Institutional Investors

Traders like you, known as retail traders, make up the majority of the market. As long as you're not handling other people's money, you may be part-time or full-time traders. You are just a tiny fraction of the market's total volume.

Institutional traders, such as Wall Street investment banks, proprietary trading businesses (called prop traders), mutual funds, and hedge funds, are the other kind of traders that exist.

High-frequency trading and advanced computer algorithms account for the vast majority of their trades. Day trading for these enormous accounts is almost never done by a person. Institutional traders have a lot of resources at their disposal, which allows them to trade with extreme vigor.

instituional investors

How To Compete With Institutional Investors

Notwithstanding that fact, independent/retail traders have a great advantage over institutional traders. Financial institutions are obliged to engage in trading, frequently in high numbers and with little attention to cost. They are expected to be consistently engaged in the market. Individual traders, on the other hand, may determine whether or not they wish to trade, and they can bide their time until chances present themselves.

Overtrading, on the other hand, is a mistake that many individual traders make. To avoid losing, they succumb to the temptation of greed and trade carelessly and needlessly, instead of waiting for the right opportunity to arise.

Assault and evasion techniques, such as ambushes and sabotage, are used by small groups of fighters, including paramilitary soldiers or armed citizens. These groups are able to move around bigger and less mobile conventional military forces by using hit-and-run tactics. The United States military is regarded to be one of the most powerful combat armies in the world. However, they were severely harmed by North Vietnamese jungle warfare tactics. The European resistance groups that fought against Nazi Germany during World War II are a good illustration of this.

Guerilla Trading As A Technique

When you engage in guerrilla trading, you do it secretly, looking for a chance to enter and exit the financial jungle quickly and profitably while minimizing your exposure to risk. In the end, you don't want to beat or outwit financial institutions. In order to meet your daily profit goal, all you have to do is wait.

Exiting Losing Points Quickly Is A Good Advantage

It's one of the advantages of day trading for retail investors to be able to swiftly get out of failing positions. If a stock moves against you, you must have a strategy in place to get out of the market. One ordinary lot (100 shares) is a good starting point for beginning traders.

As low-risk as one hundred shares maybe for the trader, there's no shame in getting your feet wet. 100 shares is a good starting point for new traders. If their stop loss is reached, they have no justification for not getting out of the market. Even for a very low volume illiquid company, 100 shares is little. Illiquid stocks are those that are difficult to sell.

Retail Traders Profit From Volatility

When the market is volatile, you make money as a day trader. Nothing can be made while markets are flat; only high-frequency traders benefit from this situation. As a result, you need to look for companies that have the potential to move quickly in either direction in a predictable way. On the other side, institutional traders use very high trading frequencies and benefit from very minor price swings, which are referred to as "choppy price action."

Summary

It is critical to avoid equities that are often traded by institutional investors. As a retail day trader, you must stay inside the confines of your own market. When other retail investors aren't interested in a stock, you won't trade it. The fact that other retail traders are using retail day trading tactics adds to their usefulness. A greater number of traders using these methods will result in better results.

Luke Evans | My name is Luke Evans, and I work as a Web Developer. I am a professional coder and programmer who enjoys contributing to the exciting technical advancements. In 2016, I received a Bachelor's Degree in Software Development from California Institute of Technology. For my outstanding academic performance and leadership abilities while in school, I received the Edmund Gains Award in 2015.

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