What Is A Trader And Why Types Exist
What is a Trader
Day-Trading-Pattern
A trader is someone who places buy and sell orders in the financial markets. They are creative thinkers with decision making flair, often involving the need to act in a split second that can either earn thousands of dollars or send someone bankrupt. As a trader you will experience the highs and lows of good or bad positions and of trades executed well or missed opportunities. You will be on an endless learning curve, always learning something new in the days ahead.
Some of the Types of Traders Out There!
In the Derivatives Markets
Hedgers: use derivatives to reduce risk that they face from potential future movements in a market variable such as the price of an asset.
Speculators: use derivatives to bet on the future direction of a market variable.
Arbitragers: take offsetting positions in two or more instruments to lock in a profit.
Market Maker
The role of a market-maker involves quoting a buy and sell price for financial instruments and commodities, making a profit on the bid/offer spread. The bid is the price at which the market maker is prepared to buy, and the offer is the price at which the market maker is prepared to sell. Since the offer is always higher than the bid, what they do can be described as arbitraging.
The existence of the market maker ensures that buy and sell orders can always be executed at some price without delays. Therefore they introduce liquidity and depth into the market. The market maker alternatively takes on big risks, but they hedge this through the use of derivative instruments.
Disciplines targeted: Mathematics, Finance, Economics, Commerce, Engineering and/or Actuarial Studies.
Wholesale Trader
A Wholesale trader is responsible for trading in the Wholesale market. Wholesale traders maintain key international relationships, manage large portfolios, make fast trading decisions and trade high volumes over the telephone in the professional trading market.
Disciplines targeted: Mathematics, Finance, Economics, Commerce, Engineering and/or Actuarial Studies.
Quantitative Trader
Quantitative trading relies on statistical techniques to identify trading opportunities in the markets. Quantitative trading can be applied to quantifiable information, for example such as price data of securities and macroeconomic events. Quantitative techniques can vary a lot from one another. Statistical arbitrage is a popular technique that identifies and trades upon statistical relationships between a pair of securities and a statistical mispricing of one or more assets based on the expected value of these assets.
Disciplines targeted: Mathematics, Statistics, Engineering and/or Actuarial Studies.
Sales & Trading
Sales and trading is a symbiotic relationship. Salespeople need traders and traders need salespeople. Salespeople work with customers/clients on the buy-side selling them large amount of securities like stocks, bonds and currencies. The largest customers on the buy-side are typically institutions (such as mutual funds) that manage assets for others.
Traders watch the market and trade orders for customers, but they do not talk directly to them. The trader uses an array of computer systems to track the market and to execute orders.
Disciplines targeted: Mathematics, Finance, Economics, Commerce, Engineering and/or Actuarial Studies.
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