Desk Trader - Explained
What is a Desk Trader?
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Table of ContentsWhat is a Desk Trader?What Do Desk Traders Do?The Difference Between a Trader and an InvestorTypes of Traders
What is a Desk Trader?
In the financial market, a desk trader is a trader who is confined to trading for the clients of the institution or firm it represents rather than trade with his or her firms accounts. This trader takes orders to form a firms clients and execute the order in the market. A desk trader does not trade with his personal accounts nor the company's account. Shares, bonds, currencies, assets, among other items are traded on the trading desk, the desk trader has the responsibility of executing the orders of clients, whether it is a sale order or a buy order.
What Do Desk Traders Do?
Desk traders play important roles in the capital or financial markets. These are experts that have experience in executing a trade (whether buying or selling of securities bonds, shares, and currencies) on behalf of the clients of an institution. Desk traders receive orders from clients and send them to the market for execution. Desk traders are important for financial analysis in the market, they also conduct market risk calculations for clients. In the United States, the Securities & Exchange Commission must license an individual before he or she can become a desk trader.
The Difference Between a Trader and an Investor
Desk traders are different from investors, while desk traders are confined to trading on behalf of a company's clients, investors can trade on their own and with their own accounts. Using economic and financial data available in the market, desk traders carry out a market analysis while investors mostly analyze the company they want to invest in. Desk traders are professionals who want to make profits for their clients with little or no risks. While desk traders take a short-term approach to investment, investors often use a long-term approach.
Types of Traders
There are four major types of desk trades, they are;
- Fixed-Income Trader: Broker-dealers and banks often hire fixed income traders who specialize in the trade of fixed-income products. These traders focus on trading products that have fixed rates such as treasury bonds and others.
- Arbitrage Trader: As opposed to a fixed-income trader, an arbitrage trader seeks to make a profit by trading securities in a dynamic way. Such a trader can buy a security at a low in one market and sell for a higher rate in another market.
- Noise Trader: A noise trader is a desk trader that is controlled by market trends and economic patterns. This type of trader follows the noise around, without paying attention to fundamental data and statistics. Noise traders are quite a few, they are traders that are reactive rather than proactive and analytic.
- Sentiment Trader: This trader is a bit different from a noise trader because he uses a mixture of economic trends and fundamental market analysis.