What is the definition of trading?

Trading is one of the key features of the global financial economy. It creates liquidity across the financial markets, is one of the main sources of profit for investment banks and is done by many institutions (investment banks, hedge funds, commodity companies etc.). Traders tend to use technical and fundamental analysis to price assets and to attempt to predict future movements. If a trader is trading in large enough quantities, their trades can actually move the market, thus giving them a comparative advantage over smaller traders.

As opposed to investment banking, trading tends to be extremely performance orientated and if you perform well, you will be promoted quickly whereas if you consistently lose money or are risky, you will not last long. The most common way to break into trading at an investment bank is out of undergraduate study with a quantative degree and having completed a trading internship.

Types of Trading

Trading can be done in three main forms:

• Market Making
• Agency Trading
• Proprietary Trading