The rapid world of trading involves the sale and purchase of financial instruments either in a market or over-the-counter.
What Traders Do
Financial traders do the legwork for various investors by buying and selling financial products, such as shares, bonds, derivative products, commodities or currencies, on behalf of investors.
Traders make deals for various reasons, with the main two being either they are carrying out a customer request, or they are trying to profit from expected market movements. Customers typically include funds, investment banks, large companies or wealthy individuals.
Trading jobs are usually found at commercial and investment banks, asset management firms, superannuation companies, hedge funds, and many more places.
In modern day finance, much of the trading that takes place in the market is done by computers, at what is called ‘high frequency’ levels. These trades are done in milliseconds to capitalise on potential arbitrage opportunities in the market.
Many traders specialise in a particular area, for example a trader will only focus on stocks or bonds and even more specialised they might only focus on a particular industry when they trade.
Sell side traders are market makers. These traders usually work for banks or exchanges and they set a market price for other investors to buy and sell at.
As a Sell-Side trader you would be given a broad idea of what type and amounts of holding you can trade between for your particular focus area, and from there you quote prices to inbound traders who can buy and sell at your asking prices. Sell-Side traders can quote attractive or unattractive prices to entice or repel action. Further, they can remain neutral and let the market dictate their holdings.
Working as a sell-side trader is about achieving the objectives of the company who you work for as well as visiting clients and providing answers to buy-side customers.
Buy-side traders are the market takers. These traders usually work for portfolio managers at hedge funds, mutual funds, superfunds or private equity firms.
Buy-Side traders try to get the best price for a particular sale or purchase of financial instruments and are in charge or executing the strategies timing.
Buy side traders usually work under strict parameters and execute plans that come from portfolio managers, although there is some autonomy with how the plan is carried out. A Buy-side trader’s aim is to create value buy buying low and selling high.
Agency traders trade on behalf of a client buy carrying out requests for purchase or sale of financial instruments. The aim of agency traders is not to make a profit.
Agency traders earn a commission on the trade and charge fees. Agency trading has some autonomy as success in fulfilling any buy or sell request will be determined by the market.
Proprietary Traders are traders at financial institutions who trade of their own volition using the firm’s capital. They take positions in the market to try to earn a profit. They do not earn the commission or fees that agency traders do but try to make their money of the particular trade.
Proprietary trading usually involves speculation, so it is riskier than agency trading but can be more rewarding financially if done successfully.
Cryptocurrency Traders are early adopters of a risky class of assets known as Cryptocurrencies. Cryptocurrencies are tokenised digital assets such as Bitcoin, Ethereum and Ripple, that serve a range of different purposes, but are not controlled, sold or distributed by any single centralised party (e.g. a bank or government).
Crypto Traders are concerned with buying and selling digital tokens in order to make the most of a highly volatile (up and down) market.