Smart position sizing & risk management

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Market Structure

Retail Trader

An individual trading their own money through a personal brokerage account, typically with smaller position sizes than institutions.

What is a Retail Trader?

A retail trader is an individual who buys and sells securities for their personal account using a brokerage app like Schwab, Fidelity, Robinhood, or Interactive Brokers. Retail traders trade their own capital and make their own decisions, in contrast to institutional traders who manage large pools of other people's money.

Characteristics

  • Smaller account sizes: typically range from a few hundred dollars to several million
  • Self directed: research, plan, and execute their own trades
  • Smaller position sizes: usually under 10,000 shares per trade
  • Use commercial brokers: rely on retail platforms with standard market access
  • Pay retail fees: zero commission on most stocks now, but still pay spreads and borrow fees

Advantages retail traders have

  • Agility: small positions can enter and exit quickly without moving the market
  • No mandate: free to sit in cash, take any setup, or skip a day entirely
  • No clients: no quarterly performance pressure or redemption requests
  • Flexibility: any timeframe or strategy without committee approval

Disadvantages

  • Less access to research, news, and proprietary data
  • Slower execution and worse fills than institutions
  • Pay full retail spreads and borrow fees
  • No team of analysts or risk managers backing them up
Retail trading volume has grown significantly since 2020 and now represents a meaningful percentage of daily US equity volume.

Related Terms

Institutional Trader

A professional trader employed by a firm to trade large positions on behalf of clients or the firm itself.

PDT Rule

FINRA's former Pattern Day Trader rule required a $25,000 minimum for active day trading. Overhauled April 2026: the $25K floor is gone, replaced by a $2,000 margin minimum and real-time intraday margin.