Types of Trading Jobs on Wall Street
Over the last several decades, the amount of trading firms and opportunities on Wall Street has exploded. Due to new technology, new derivatives and increased leverage, a multitude of job opportunities have become available. While some professions, such as the pit trader seem to be going extinct, new opportunities greatly outnumber those lost.
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Single Asset or Technical Traders
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One of the most common types of traders are technical analysts that focus on a single asset or group of assets using charts to predict price movements. These traders take a large, highly traded stock, such as Microsoft (MSFT), and buy or sell shares each day based on chart patterns. They may use the company's earnings release or new product launches to inform their trading, but are overall focused on the technical analysis of the stock price to make their bets.
Stock Pickers or Fundamental Traders
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Stock pickers are more focused on the health of a company to determine whether to buy or sell it for the long term. These investors use traditional metrics, such as the profit margin, earnings growth, debt to income ratio and other financial statement line items. In addition, they compare several companies valuations to determine the relatively cheap company in which to invest. Fundamental traders may also pick mutual funds or baskets of stocks that diversify risk and provide a more stable return.
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High Frequency Traders
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High Frequency Traders, called HFT, are a new breed of investor focused on speed, computer programming and liquidity. These traders profit off the minuscule spread between the bid and offer and profit 1 cent per share. However, the large HFT firms can trade millions of shares a day, racking up impressive profits. Due to the technological innovation of these traders, they have only existed on Wall Street since the early 2000s.
Derivatives Traders
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Derivatives traders are highly quantitative traders that bet on the direction the market will value the loans or underlying assets of their investments. These investors buy and sell securitized products, such as home mortgages, auto loans, FOREX or commodity options. During the 2010 housing crisis, derivatives traders were the focus of much scrutiny due to their highly leveraged bets on housing that came crashing down, throwing several large financial institutions into turmoil.
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References
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