Reviewed by Oct 05, 2020| Updated on
A desk trader refers to a financial trader who is limited to instituting trades for customers of a company and who is unable to trade with own accounts of his/her company. On behalf of investors, a desk trader will buy and sell financial products.
If a person calls up a brokerage firm to order shares in a company, he will most probably be chatting with a desk trader who will accept the order and send it to the market. Desk traders must be registered with the securities regulators, such as the Securities and Exchange Board of India. They are front-office professionals who work with investment analysts.
Desk traders seek opportunities by analysing financial as well as economic data. Often they have to make very timely decisions about when to buy and sell shares or other financial products based on stock price fluctuations. Traders want to make a significant profit with minimum risk to their clients. They may be specialised in the market of shares, bonds, options, and foreign exchange (Forex).
In general, desk traders analyse and look at the market, while investors evaluate the fundamentals of companies. With their investments, traders are more short-term and focus on trends and emotional market reactions.
1. Fixed-Income Trader
A fixed-income trader trades products of fixed-income or bonds, such as treasuries and short-term fixed-rate notes. Institutional investors or retail investors are their clients, and they work for banks, brokers, and like-minded institutions.
2. Arbitrage Trader
An arbitrage broker can buy and sell assets to profit from the price imbalance. They can buy a security in one market, and sell it at a higher price in another market. This type of trading has become increasingly challenging as technological advances have made profiting from errors in pricing challenging.
3. Noise Trader
A noise trader makes decisions about short-term buy-and-sell based on economic patterns. In their trading approach, some traders do not use fundamental research. Noise traders are reactive, which can lead to losses but is generally very common with this type of traders.
4. Sentiment Trader
Similar to a noise trader, a sentiment trader attempts to identify trends. They want securities that are moving along the market and use some fundamental analysis in their trading practice.