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The Differences Between an Institutional & Retail Day Trader

The Differences Between an Institutional & Retail Day Trader

There are two types of day traders when it comes to trading securities. There are two general kinds of day traders.

  • Institutional

  • Retail

But first, who is a Day Trader?

A Day trader remains permanently active in implementing urgent, daily strategies to make the most profit from fluctuations of the price of assets. 

Taking advantage of several loopholes and instabilities, day traders analyze assets and, with experience, can objectively make informed short-term decisions on the spot for profit. Day traders are commonly referred to as intra-day speculators rather than investors because they trade in the short-term, take each day as it comes, and try to execute as many profitable trades as possible on every given day. Investors are known to trade for the long haul.

Day trading was never popular before the early 2000s. At that time, traders were primarily employees of large broking firms and huge financial organizations. However, day trading has become popular due to unprecedented ease of access to information and the internet. It must, however, be noted that it is more tasking, riskier, and requires lots of competence.

So, what is the significant difference between institutional and retail day trading?

Simply put, retail day traders are individual traders who trade personally, while institutional day traders manage to trade for an organization. Naturally, institutional day traders have more influence and capital than retail day traders, who, on their part, are limited in the amount they can work with. However, the gap between them is gradually closing.

However, let's look at the significant differences between them.

  1. Institutional day traders have access to more resources.

Institutional day traders work with a large pool of funds, trading blocks of 10,000 shares and above at once, and can still reduce costs with several options available to them, including using intermediaries. Retail day traders, meanwhile, do not have such access to funds and only have to make trades in round lots of 100 shares. This means that retail traders would invest more in small-cap stocks.

  1. Institutional day traders have access to IPO offers

Institutional day traders are naturally contacted for interest in IPOs frequently. There's no chance that a retail trader would enjoy such privilege.

  1. More costly to make trades for retail day traders

Eventually, the cost of trading may be higher for retail traders, especially if they factor in charges they may have to pay, mainly if they use a broker. Institutional day traders have more options and only go for the most cost-effective option through the power of negotiation.

  1. Institutional day traders have access to complex securities

We mean customized and highly profitable securities like swaps and forwards by complex. These are specialized securities that are only available to traders with extensive resources.

  1. Institutional day traders can affect the share price of a security

Because of the share volume they trade with; institutional day traders can affect the share price of a security. To minimize this impact, they sometimes spread the deal over some time. The retail day traders trade-in too little volume to affect the share price of the commodity.


Retail trading is often the gateway to institutional trading. Some retail traders are also reasonably competent that, over time, they seamlessly slide into institutional trading by adding portfolios of other people who have come to trust their abilities. However, long-term trading is still seen as the more stable choice, especially for investors who do not wish to be affected by the daily shocks of a very volatile global world and economy.



Pat Raskob
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