DEFINITION of Desk Trader

A desk trader is a financial trader who is restricted to instituting trades for a firm's clients and who is unable to trade with his/her firm's own accounts. A desk trader will buy and sell financial products on behalf of investors.

BREAKING DOWN Desk Trader

If you telephone a brokerage firm to order shares in a company, you'll most likely end up talking to a desk trader who will take the order and send it to the market. Desk traders must be registered with the relevant securities regulators, such as the Securities & Exchange Commission. They are considered front-office professionals who work with investment analysts.

Desk traders look for opportunities by analyzing both financial and economic data. They sometimes have to make very timely decisions on when to buy and sell securities or other financial products based on price fluctuations in the market. Traders want to make significant profit for their clients with minimal risk. They may specialize in shares, bonds, options and/or foreign exchange (Forex) markets.

The Difference Between a Trader and an Investor

Desk traders generally analyze and look at the market, while investors analyze company fundamentals. Traders are more short-term with their investments, and focus on trends and emotional market reactions. Investors, on the other hand, usually buy for the long term and are concerned with the financial health of publicly traded companies. The actions of traders sometimes affect the activity of investors and vice versa.

Types of Traders

Fixed-Income Trader

A fixed-income trader trades fixed-income products, or bonds such as Treasuries and short-term fixed-rate notes. Their clients may be retail or institutional investors. Fixed-income traders work for banks, broker-dealers and similar institutions.

Noise Trader

A noise trader makes short-term buy-and-sell decisions based on economic trends. These traders do not use fundamental analysis in their trading strategy. Noise traders are reactionary, which can lead to losses, but this type of trader is actually very common.

Sentiment Trader

Like a noise trader, a sentiment trader tries to identify trends. They want securities that are moving with the market. Unlike a noise trader, they will use some fundamental analysis in their trading practice.

Arbitrage Trader

An arbitrage trader will simultaneously buy and sell assets to profit from the imbalance in price. They may purchase a security in one market and sell it in another market at a higher price. This type of trading has become increasingly difficult, as technological advances have made it challenging to profit from pricing errors.