Banking

What Is a Trader?

A trader is a financial services intermediary who buys and sells securities and other financial instruments in the capital markets (e.g., stock markets, commodity markets, and derivatives markets) on behalf of clients. There are many types of traders, but some of the most common are flow traders, who use client funds, and agency traders, who act as intermediaries and place trades on behalf of clients.

Other traders act as proprietary traders, engaging in trades on behalf of their firms, or take the other side of a trade when no buyer or seller is available.The duties of a trader are not limited to buying and selling; they also include researching economic trends and developments, reviewing reports, and analyzing market data.

Traders come from all walks of life with varying academic backgrounds. Many firms require their day traders to have undergraduate degrees in finance, mathematics, and accounting. However, there are no formal academic requirements to qualify a trader. Most trading firms require their traders to hold the Financial Industry Regulatory Authority (FINRA) Series 7 and 63 licenses.

Key Takeaways

1. The financial services industry is filled with professionals with varying roles, such as traders and investment bankers, that balance the capital markets system.
2. A trader is a person or entity that buys and sells securities and other financial instruments in capital markets on behalf of clients.
3. Similar to a trader, an investment banker helps clients access capital through investments.
4. There are no strict academic requirements to practice as an investment banker or trader, although some employers establish minimum education standards for employment.

What Is an Investment Banker?

Investment banking is the financial services sector in which professionals help clients raise money/capital through investments.Similar to traders,investment bankers connect buyers with sellers, and like traders, they are involved in the bond and stock markets.

However, investment bankers' duties are expanded.They bring together buyers and sellers via mergers and acquisitions (M&A), or they might raise money in the capital—debt (bond) or equity (stock)—markets when they sell a company to the public in an initial public offering (IPO) or when restructuring existing companies.

The background of investment bankers may vary significantly, but most, understandably, have a solid mathematics foundation. Also, many hold advanced degrees, such as an MBA, with concentrations in finance, math, or accounting. To work as an investment banker, many professionals and employers of these professionals require formal training and the completion of continuing education requirements.