Traders are basically individuals who buy and sell securities on any financial markets either on behalf of a company or for themselves by making use of economic data and trends to predict the success or failure of the securities. Traders typically capitalise on the price fluctuations of securities.
The main job of a financial trader is to sell and buy financial products such as shares, assets and bonds on behalf of the investors such as investment banks, wealthy individuals and large companies. They are basically a bunch of dynamic front office professionals who liaise with investment analysis and use their own analytical skills as well as financial knowledge to survey the financial market and make accurate predictions.
Markets which trade commodities lend themselves well to traders. Working under the guidance of a Senior Trader role assists with client relations, reporting, risk mitigation and investment strategy. The roles and responsibilities of traders involve a huge range of duties that are usually stationed within the finance as well as the accounting department of an organisation.
Traders are often equated with short time punters who are purely in the market to make money. Like any investors, traders are in the market too to make money but you must remember that there is a vast difference in the method and the larger purpose to trading.
Roles played by traders in the commodity market
Here are certain roles that the trader plays:
- Reduce risk in the market through high volumes- While dealing with small and mid-cap stocks you might have faced the trouble of finding no buyers but while dealing with large cap stocks you haven’t faced this problem. This is due to the roles played by the traders. Traders are typically present in the market for short to medium term profits. These traders tend to be sellers at the higher levels and buyers at the lower levels. In this two-way approach traders basically make the market liquid and increase the volume in the market and make sure that your transaction gets executed with minimal execution risk.
- Help in interpreting the decision points- A very crucial role played by the traders in the market is interpreting the decision points. Most short-term investors are not very keen on short term trends. They usually trade in and out of the markets on the basis of market flows and news flows, the traders are pretty much instrumental in disseminating intelligence about a stock.
Clearly, both traders and investors are necessary in order for a market to function properly. Without traders, investors would have no liquidity through which to buy and sell shares. Without investors, traders would have no basis from which to buy and sell. Combined, the two groups form the financial markets as we know them today. Stock traders may advise shareholders and help manage portfolios. Traders engage in buying and selling bonds, stocks, futures and shares in hedge funds. A stock trader also conducts extensive research and observation of how financial markets perform. Contrary to a stockbroker, a professional who arranges transactions between a buyer and a seller, and gets a guaranteed commission for every deal executed, a professional trader may have a steep learning curve and his ultra-competitive performance-based career may be cut short, especially during generalized stock market crashes. Stock market trading operations have a considerably high level of risk, uncertainty and complexity, especially for unwise and inexperienced stock traders/investors seeking an easy way to make money quickly. In addition, trading activities are not free.
Traders who carry on their business with utmost efficiency are the ones who are awarded custom trading pins.