Debt Dictionary

Trader

Investment Dictionary -> Trader

In finance, individuals who buy and sell financial instruments such as bonds, stocks, and derivatives are called traders. Brokers, for example, are just executing traderís instructions so they are not considered to be traders.

Traders work in corporations and financial institutions or trade as individuals. They trade on stock, commodity, or derivative markets. In finance, there are several categories of traders:

- Stock traders are those firms or individuals who trade stocks on the stock markets. Short term price instability is what they try to profit from. They are professionals and may be part-time or full investors/traders, often maintaining other professions as well.

- The day trader works for a financial institution and is often referred to as an institutional day trader. He has obvious advantages over the other types of traders due to his access to more equipment, tools, resources, capital, and fresh inflows of funds, allowing him to trade continuously on the market.

- A trader who executes four or more day trades in five business days will be referred to as a Pattern day trader by the Securities and Exchange Commission. Special restrictions and requirements are applied when the trader is exposed to the intraday risks and the danger of day trading.

- Swing trading is a style of trading in which an attempt to capture the gains in stock is made within four days. The trader must act quickly in order to find stock with excellent potential in a short amount of time. The stocks must have short-term price momentum.

- A rogue trader is an employee of an organization who makes unauthorized transactions on behalf of his employer. He may be conducting a criminal act because as an employee of the organization, he executes transactions without its permission. Perhaps, the most famous rogue trader in history is Nick Leeson, whose activities bankrupted the Barings Bank in 1995.


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