One who buys and one who sells:a trader acts on what price tells.
An individual or institution that buys and sells financial instruments such as currency pairs in the forex market.
Traders range from retail individuals to large institutional participants.
In plain words
A trader is anyone who buys and sells financial instruments with the aim of gaining from changes in price, as opposed to holding them for the long term or needing them for business. Traders range from individuals with small accounts, called retail traders, to banks, funds and companies dealing in very large amounts.
See it move
Buyer and Seller are in balance
Why it matters
Every trade has two sides: for each trader who buys there is a counterparty who sells. Most of the volume in currencies comes from institutions and not from individuals, which puts a retail trader’s own orders in proportion.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
A retail trader buys 0.1 lots of EUR/USD while a bank deals 50,000,000 euros in a single trade.
- 1Retail trade0.1 × 100,000 = 10,000 euros.
- 2Bank trade50,000,000 euros.
- 3Ratio50,000,000 ÷ 10,000 = 5,000.
The bank’s deal is 5,000 times the size of the retail one, which is why a single retail order has no noticeable effect on the price of a heavily traded pair.
A common mistake
Trading is not the same as investing, and it is not a dependable source of income. Regulators in several jurisdictions require brokers to state what proportion of their retail clients lose money on leveraged products, and the published figures show that most do.
Check yourself
Educational information, not investment advice or a recommendation to trade.