Investment Banking Traders


Exploring this Job

Read books such as Investment Banking For Dummies (For Dummies, 2014) to learn more about the field. Participate in investment competitions during high school and college to learn more about the stock market and build your skills. The Wharton School at the University of Pennsylvania offers the Knowledge@Wharton High School Investment Competition (https://kwhs.wharton.upenn.edu/competitions), a free, global, online investment simulation for students, ages 14–18, and teachers. Other methods to explore the investment banking industry include joining business and finance clubs in high school and college and talking with investment banking traders about their careers. 

If you plan to become a quantitative trader and are good at coding, consider writing an investment algorithm and submitting it to Quantopian, a crowd-sourced quantitative investment firm. The firm licenses some of the submitted algorithms and compensates coders based on the algorithm’s performance. Visit https://www.quantopian.com for more information.

The Job

Traders play a vital role for the investment bank. They facilitate the buying and selling of stocks, bonds, and other securities such as currencies, futures, and derivatives, either by carrying an inventory of securities for sale or by executing a given trade for a client. A trader plays two distinct roles for an investment bank: traders give their clients the ability to buy or sell a security at any time the client needs to place a trade; second, they buy or sell securities on behalf of the firm using the firm’s own capital, expecting to benefit from the rise or fall in security prices. This is known as proprietary trading. In both the market-making function and in proprietary trading, traders are providing market liquidity. Most traders perform the following duties:

  • buy or sell stocks, bonds, commodity futures, foreign currencies, or other securities on behalf of investment dealers or their own firm electronically or by phone in accordance with established internal procedures
  • find buyers for securities and liaise with block traders, who are responsible for large-volume trades, and institutional sales workers at brokerage firms
  • discuss market trends with colleagues and industry analysts
  • gather and analyze information and market news and conduct detailed data analysis and valuation
  • monitor and analyze factors that affect price movement, such as weather conditions, political developments (elections, coups, etc.), trade policies, or supply and demand changes
  • update other traders, managers, or customers regarding market conditions, including price, competition, volume, or dynamics
  • interact with sales brokers and clients regarding transactions and market developments
  • set prices in their product areas, while ensuring that the bank is adequately compensated for the level of principal risk and the amount of its balance sheet it dedicates to specific transactions
  • devise trading, option, or hedge strategies
  • predict market trends (especially for derivatives) and buy and sell accordingly
  • record and enter all transactions into front office trading systems in line with applicable trading procedures