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Trading vs. Investment Banking: Which Career Suits You?

Updated September 11, 2024

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If you're trying to determine whether to choose a career path as a trader or an investment banker, you have several factors to consider. These roles occasionally intersect in similar market places, but they have very distinct responsibilities.

Many financial services roles play a key part in ensuring 澳洲幸运5官方开奖结果体彩网:capital markets run smoothly and efficiently. Investment banking and trading, are components of most large Wall Street investment firms. Learn what these professions do𒆙 and how ♎they compare so you can make the right career moves for you.

Key Takeaways

The financial services industry includes professionals with varying roles, such as traders and investment bankers.
A trader is a person or entity that buys and sells securities and other financial instruments in capital markets on behalf of clients.
An investment banker is a similar profession, but investment bankers help clients access capital through investments.
There are no legal academic requirements to practice as an investment banker or trader, although some employers establish minimum education standards.

What Is a Trader?

A trader is a financial services intermediary who buys and s൲ells securities and other financial instruments in the capital markets (e.g., stock markets, commodi♎ty markets, and derivatives markets) on behalf of clients.

There are many types of traders, but some of the 🦄most common are:

Flow traders: who use client funds to trade
Agency traders: who act as intermediaries and place trades on behalf of clients

Other traders act as proprietary traders, engaging in trades on behalf of their firms, or take the other side of a trade when no buyer or seller is available. The duties of a trader are not limit🦋ed to buying and selling. Th♓ey also include researching economic trends and developments, reviewing reports, and analyzing market data.

Traders can have varying academic backgrou🎉nds. Many firms require their day traders to have undergra🐈duate degrees in finance, mathematics, and accounting. However, there are no legal academic requirements to qualify a trader. Requirements for getting hired will depend on the firm.

Note

Most trading firms require their traders to hold the 澳洲幸运5官方开奖结果体彩网:Financial Industry Regulatory Authority (FINR🍒A) Series 7 and 澳洲幸运5官方开奖结果体彩网:Series 63 licenses.

What Is an Investment Banker?

Investment banking is the financial services sector in which professionals help clients raise money/capital through investments. Similar to traders, 澳洲幸运5官方开奖结果体彩网:investment bankers connect buyers with sellers. Like traders, investment bankers are involved in the bond and 澳洲幸运5官方开奖结果体彩网:stock markets.

However, investment bankers' often have more duties. They bring together buyers and sellers via 澳洲幸运5官方开奖结果体彩网:mergers and acquisitions (M&A), or they might raise money in the capital—debt (bond) or equity (stock)—markets when they sell a company to the public in 澳洲幸运5官方开奖结果体彩网:an initial public offering (IPO) or when restructuring existing companies.

The background of investment bankers may vary significantly, but most have a mathematics foundation. Also, many hold advanced degrees, such as an MBA, with concentrations in finance, math, or accounting.

Important

To work as an investment banker, many professionals and employers of these professionals require formal training and the completion of continuing education requirements.

Trader vs. Investment Banker

Traders and investment bankers have similar jobs in that they are both involved with finance and securities. However, these two professions do have some significant differences. Let's review how they compare.

Traders	Investment Bankers
Develops relationships with clients cultivated over a short time span, after which trades are usually quick to develop and execute	Works on deals that may take months or years to develop a relationship and get the deal done
Typically are at their trading desks early in the morning prior to the market open and don’t leave their desks until the markets close. (They may not work after the markets closes or on weekends and holidays)	澳洲幸运5官方开奖结果体彩网:Work extremely long hours, including weekends and holidays
Needs to have a keen understanding and reading of markets and patterns. Described as bold and decisive, with natural instinct about how the markets work	Play a dual role of relationship builder with good 澳洲幸运5官方开奖结果体彩网:interpersonal skills and a financial expert who constructs a plan that is tailored to the client’s needs
Usually specializes in one 澳洲幸运5官方开奖结果体彩网:asset class (typically, stocks and bonds). They may also work with 澳洲幸运5官方开奖结果体彩网:derivatives in the commodities markets (such as wheat or oil) and in currency markets	Tends to specialize in one area and operate within their expertise

What Education Do You Need to Be an Investment Banker?

Generally, you should have a bachelor's degree in business or a math-related field like accounting to become an 澳洲幸运5官方开奖结果体彩网:investment banker. Having an MBA, or master of business administration, can also help you advance in this career.

How Much Do Investment Bankers Make?

The average pay for an investment banker was $395,741 as of June 2024, according to Glassdoor estimates. The average range was about $297,000 to $554,000, which includes additional pay like bonuses and commission.

What Is the Series 7 Exam?

The 澳洲幸运5官方开奖结果体彩网:Series 7 exam is a test you must take to get your Series 7 license, which allows you to sell securities products. However, it does not license you to sell bonds or commodities. The Series 7 exam, also called the General Securities Representative Qualification Examination, assesses your basic knowledge of securities.

Bottom Line

Both investment bankers and traders work in stressful environments in which an enormous amount of capital is at risk and the overall firm counts on the fees to grow revenue. Although closely related and within the same financial services industry, each has a distinctive role and requires different skills and personal🦩ity characteristics.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

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