What Is a Desk Trader?

A desk trader is a financial industry professional who buys and sells assets such as stocks or bonds on behalf of clients. Desk traders are not permitted to make any trades on behalf of the companies that employ them.

Desk traders are front-office professionals who work with investment analysts. They are required to be registered with relevant securities regulators, including the Securities & Exchange Commission.

A desk trader is an employee of a bank or brokerage house who processes buy and sell orders for the firm's clients.


Understanding the Desk Trader

If you have ever telephoned a brokerage firm to order to buy shares of stock, you probably talked to a desk trader who took the order and sent it to the market. Most also have their own lists of regular clients.

Desk traders look for possible opportunities in the markets by analyzing financial and economic data. They sometimes have to make extremely fast decisions on when to buy and sell stocks or bonds based on current price fluctuations in the market.

Desk traders aim to make significant profits for their clients with minimal risk. They may specialize in shares, bonds, options, or the foreign exchange (Forex) currency markets.

Trader vs. Investor

Desk traders are professionals employed in the investment industry, but traders, in general, may be individual investors. The word encompasses any investor who aims for short-term gains rather than long-range goals.

A trader analyzes the market on a minute-to-minute basis, looking for opportunities in price fluctuations. Traders focus on market trends and emotional reactions.

An investor analyzes company fundamentals in order to identify stocks that have the potential for long-term growth. Investors focus on the stocks of well-run companies that are gaining market share.

Types of Traders

Traders, professional or not, tend to stick to the niches of the market that they are most comfortable with.

Fixed-Income Trader

A fixed-income trader buys and sells corporate and government bonds and other debt instruments such as U.S. Treasuries and short-term fixed-rate notes.

Their clients may be retail or institutional investors. Fixed-income traders work for banks or broker-dealers.

Noise Trader

A noise trader makes short-term buy-and-sell decisions based on current economic trends and the news of the day.

These traders do not use fundamental analysis to create a trading strategy. They react in the moment.

Noise traders are generally frowned upon by others in the industry, and get much of the blame for spikes in trading volume.

Sentiment Trader

Sentiment traders are similar to noise traders, but their attitudes are different. Noise traders want to latch onto the trends. Sentiment traders want to exploit the trends.

A sentiment trader tries to identify stocks that are currently moving with the market and buy them just long enough to make a quick profit.

Unlike a noise trader, a sentiment trader will use some fundamental analysis to aid in decision-making.

Arbitrage Trader

An arbitrage trader simultaneously buys and sells assets in two or more markets in order to profit from the momentary differences in their prices.

This type of trading has become increasingly difficult, as technological advances have made it more difficult to find and exploit these ephemeral price differences.