Market Participants — Overview
Market participants are the people and organisations that buy and sell in financial markets. They include individuals, banks, funds, brokers, market makers and more. Together, they create the liquidity and price movements you see on your charts.
Understanding the Full Landscape
Before diving into each type in detail, it's useful to see the full landscape: who is in the market, what they want, and how they interact.
💡A clear picture of market participants helps you understand where you fit in the bigger ecosystem.
The Main Groups of Market Participants
At a high level, most financial markets are made up of a few core groups:
Institutional Traders
Banks, hedge funds, asset managers, pension funds and other large organisations trading big volumes.
Retail Traders
Individual traders trading their own money through brokers and platforms.
Market Makers
Firms that quote continuous bid and ask prices and stand ready to trade, providing liquidity.
Liquidity Providers
Banks and specialised firms that stream prices and absorb order flow for brokers and venues.
Brokers & Intermediaries
Firms that connect end clients (like you) to the market, using different execution models.
Exchanges & Venues
Places (electronic or physical) where orders are matched and trades are executed.
End Users / Hedgers
Corporates, importers/exporters, issuers and others using markets to hedge real-world risk.
🔑Each group has different goals, time horizons, tools and constraints — and that diversity is what makes a functioning market.
Institutional Traders vs Retail Traders
One of the most important distinctions is between institutional and retail traders:
🏛️ Institutional Traders
Trade on behalf of organisations (banks, funds, corporations). They often:
- Control large capital and trade big ticket sizes.
- Have access to advanced tools, research and direct market connections.
- Operate under strict mandates (risk, compliance, investment objectives).
👤 Retail Traders
Trade their own money via online brokers. They:
- Typically have smaller accounts and trade part-time.
- Rely on public data, retail platforms and education.
- Have more flexibility but fewer resources.
💡You don't need to "beat" institutions at their own game — you need a strategy that fits your size, tools and timeframe.
How Orders Flow Through the Liquidity Chain
Behind a simple buy or sell click, there is a chain of participants:
You (Retail Trader)
Send an order via your trading platform.
Your Broker
Receives the order and either internalises it or routes it to external liquidity.
Liquidity Providers & Market Makers
Quote prices and take the other side of trades or pass them into the wider market.
Exchanges/Venues
Match orders between many participants, updating prices.
Institutional Players & Other Traders
Add their orders, constantly reshaping the order book and price.
🌐This chain is how your actions connect to the global financial system, even from a laptop or phone.
Different Objectives, Different Behaviours
Market participants are not all trying to do the same thing. Common objectives include:
- Speculation: Trying to profit from price movements (retail traders, prop desks, some hedge funds).
- Hedging: Reducing risk from real-world exposures, such as currency, interest rates or commodities.
- Investment: Building long-term positions based on fundamentals and valuation.
- Arbitrage and market making: Exploiting price differences and providing liquidity for small, repeated gains.
- Execution only: Buying or selling as efficiently as possible to implement a decision made elsewhere (e.g. index funds).
🎯Understanding who might be on the other side of your trade — and why — helps you interpret price action more realistically.
Where Do You Fit as a Retail Trader?
As a retail trader, you are usually:
- Trading through a broker that connects you to liquidity providers and venues.
- One of many smaller participants whose orders add to total market flow.
- Competing and interacting with other retail traders and institutions at the same time.
Your edge does not come from size or speed, but from:
- Choosing markets and timeframes that suit your schedule and capital.
- Using simple, robust strategies and risk management.
- Being patient and selective instead of trying to trade every move.
Key Insight: The goal is to operate intelligently within the ecosystem, not to outgun the biggest players.
Common Misconceptions About Market Participants
"Institutions always win, retail always loses."
Institutions can and do lose money, especially when crowded in the same trades. Discipline and risk control matter more than size alone.
"Retail flow doesn't matter at all."
Individually, trades are small, but in aggregate, retail can influence markets — especially in popular assets or during speculative episodes.
"Brokers, LPs and market makers are all the same thing."
They play related but distinct roles in routing, pricing and providing liquidity. Understanding the differences helps you assess brokers better.
Quick Checkpoint: Do You Understand Market Participants?
See if you can answer these in your own words:
- Who are the main groups of participants in modern financial markets?
- How do institutional traders differ from retail traders in capital, tools and objectives?
- What roles do brokers, market makers and liquidity providers play between you and the wider market?
- Where do you fit in this ecosystem, and what realistic edge can you build as a retail trader?
Tip: If you can answer these clearly, you have a strong foundation for the more detailed lessons on each participant type.
Summary: The Ecosystem of Market Participants
Financial markets are an ecosystem of different participants: institutions, retail traders, market makers, liquidity providers, brokers, venues and real-economy hedgers. Each has different goals and constraints, but together they create the liquidity and price movements you trade.
As a retail trader, your job is not to worry about every detail of every player, but to understand the overall structure well enough to: choose good brokers, respect liquidity, and design a trading approach that fits your position in the system.
Next Steps: In the next lessons, you explore each group in more depth — starting with institutional traders and then retail traders, market makers, liquidity providers and different broker models.
Continue Your Learning Journey
Ready to dive deeper into each participant type? Explore more resources or start your personalized trading course.