According to research, 25% of all adults with access to the internet in the US are retail traders. A further 6% are professional traders.

If you are one yourself, it can be very illuminating to dig into what differentiates retail traders from professional traders. As you can see from the data above, retail traders heavily outnumber professional traders.

So what does it take to be in this elite 6%, and how are these traders different? Read on to discover the answer. 

What Is a Professional Trader?

The definition of a professional trader is one who does not trade for income, but rather is paid a salary to trade funds for an organization or employer. 

Professional traders are in charge of assets such as hedge funds, retirement funds, forex accounts, etc. They do not trade their own money as their 'job'. 

What Is a Retail Trader?

A retail trader, on the other hand, uses personal funds to trade to make a profit or income. 

Retail traders do not work for anybody in a trading capacity. Anybody with internet access and a few dollars to spare can start retail trading. Many retail traders are beginners.

Are you a beginner trader? Start with the journey from newb to pro with this guide

Key Differences Between Retail and Professional Traders

Many people would say that the difference between retail and professional traders is that retail traders lose money, while professional traders make money. 

In some ways, this is true, as many retail traders have no experience or education in trading. This is why reports often show alarming statistics, such as that 3 out of 4 retail traders lose money.

At the same time, research has shown that 30% of high net worth investors define themselves as self-directed. Meaning that they manage their own funds and money.

The question to ask here seems to be: what can retail traders borrow from professional traders to increase profitability?

Let's take a look. 

Trading Strategy

Professional traders typically rely on fundamentals for their trading plans, and leverage technicals for determining when to time planned market entries or exits. 

Retail traders tend to predominantly rely on technicals and view fundamentals as secondary in importance. 


Professional traders plan their trades over the long term, with the shortest timeframe around 1 week, the medium roughly 3 months, and the longer timeframes more than a year.

Retail traders, on the other hand, are typically attracted to shorter time frames and often do day trading thanks to the 'easy' and 'quick' money. 

Risk Management

Most retail traders do not have a risk management plan in place. Traders will place positions, without anything to hedge against. 

This is something that professional traders spend a lot of time on. Because they are managing the finances of others, risk management is of greater importance than potential profits. For this reason, they will always have a risk management plan in place that will smooth out losses with countertrades.

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