Trader (finance)
Encyclopedia
A trader is someone in finance
who buys and sells financial instruments
such as stock
s, bond
s, commodities and derivatives
. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them. According to the Wall Street Journal in 2004, a managing director convertible-bond trader was earning between $700,000 and $900,000 on average. According to Bloomberg
, an oil trader with 10 years in the business is likely to earn at least US$1-million in 2011.
Traders are either professionals working in a financial institution or a corporation, or individual investors, or day traders. They buy and sell financial instruments traded in the stock markets, derivatives market
s and commodity markets
, comprising the stock exchange
s, derivatives exchanges and the commodities exchange
s. Several categories and designations for diverse kinds of traders are found in finance
, these may include:
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
who buys and sells financial instruments
Financial instruments
A financial instrument is a tradable asset of any kind, either cash; evidence of an ownership interest in an entity; or a contractual right to receive, or deliver, cash or another financial instrument....
such as stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
s, bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
s, commodities and derivatives
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them. According to the Wall Street Journal in 2004, a managing director convertible-bond trader was earning between $700,000 and $900,000 on average. According to Bloomberg
Bloomberg L.P.
Bloomberg L.P. is an American privately held financial software, media, and data company. Bloomberg makes up one third of the $16 billion global financial data market with estimated revenue of $6.9 billion. Bloomberg L.P...
, an oil trader with 10 years in the business is likely to earn at least US$1-million in 2011.
Traders are either professionals working in a financial institution or a corporation, or individual investors, or day traders. They buy and sell financial instruments traded in the stock markets, derivatives market
Derivatives market
The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets....
s and commodity markets
Commodity markets
Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts....
, comprising the stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
s, derivatives exchanges and the commodities exchange
Commodities exchange
A commodities exchange is an exchange where various commodities and derivatives products are traded. Most commodity markets across the world trade in agricultural products and other raw materials and contracts based on them...
s. Several categories and designations for diverse kinds of traders are found in finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
, these may include:
- stock traderStock traderA stock trader or a stock investor is an individual or firm who buys and sells stocks in the financial markets. Many stock traders will trade bonds as well...
- day traderDay traderA day trader is a trader who buys and sells financial instruments within the same trading day such that all positions will usually be closed before the market close of the trading day. This trading style is called day trading...
- pattern day traderPattern day traderPattern day trader is a term defined by the U.S. Securities and Exchange Commission to describe a stock market trader who executes 4 day trades in 5 business days in a margin account, provided the number of day trades are more than six percent of the customer's total trading activity for that same...
- floor traderFloor traderA floor trader is a member of a stock or commodities exchange who trades on the floor of that exchange for his or her own account. The floor trader must abide by trading rules similar to those of the exchange specialists who trade on behalf of others. The term should not be confused with floor broker...
- High-frequency traderHigh-frequency tradingHigh-frequency trading is the use of sophisticated technological tools to trade securities like stocks or options, and is typically characterized by several distinguishing features:...
- rogue traderRogue traderA rogue trader is an authorised employee making unauthorised trades on behalf of their employer. It is most often applicable to financial trading, and as such is a term used to describe persons - professional traders - making unapproved financial transactions....
See also
- Trading strategyTrading strategyIn finance, a trading strategy is a predefined set of rules for making trading decisions.Traders, investment firms and fund managers use a trading strategy to help make wiser investment decisions and help eliminate the emotional aspect of trading. A trading strategy is governed by a set of rules...
- Commodities exchangeCommodities exchangeA commodities exchange is an exchange where various commodities and derivatives products are traded. Most commodity markets across the world trade in agricultural products and other raw materials and contracts based on them...
- Commodity market
- Stock exchangeStock exchangeA stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
- Stock marketStock marketA stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
- List of trading losses
- Derivatives marketDerivatives marketThe derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets....