Trading Versus Investment Banking: Which Career Is Right For You?

Many financial services functions play a key role in ensuring that capital markets run smoothly and efficiently. Two of these roles, investment banking and commerce, are components of most of the large investment firms on Wall Street, where these comprehensive roles are counted on to provide most of the income. These roles occasionally intersect in similar markets but have very different responsibilities.

What is a merchant?

A trader is a financial services intermediary who buys and sells securities and other financial instruments on capital markets (eg, equity markets, commodity markets, and derivatives markets) on behalf of clients. There are many types of merchants, but some of the most common are flow merchants, who use client funds, and agency merchants, who act as intermediaries and transact on behalf of clients.

Other traders act as proprietary traders, engaging in trades on behalf of their companies or taking the other side of a trade when no buyer or seller is available. The duties of a merchant are not limited to buying and selling; They also include research on economic trends and developments, review of reports, and analysis of market data.

Traders come from all walks of life with varying academic backgrounds. Many businesses require their day traders to have college degrees in finance, math, and accounting. However, there are no formal academic requirements to qualify as a merchant. Most commercial companies require their merchants to have Series 7 and 63 licenses from the Financial Industry Regulatory Authority (FINRA).

Key takeaways

  • The financial services industry is full of professionals with different roles, such as traders and investment bankers, who balance the capital markets system.
  • A trader is a person or entity that buys and sells securities and other financial instruments in the capital markets on behalf of clients.
  • Like a trader, an investment banker helps clients access capital through investments.
  • There are no strict academic requirements to practice as an investment banker or merchant, although some employers set minimum standards of education for employment.

What is an investment banker?

Investment banking is the financial services sector in which professionals help clients raise money / capital through investments. Like traders, investment bankers connect buyers with sellers and, like traders, participate in the stock and bond markets.

However, the duties of investment bankers are expanded. They bring buyers and sellers together through mergers and acquisitions (M&A), or they can raise money in the equity, debt (bonds), or equity (stocks) markets, when they sell a company to the public in an initial public offering (IPO). or when restructuring existing companies.

Investment bankers’ backgrounds can vary significantly, but most understandably have a solid mathematical foundation. Additionally, many have advanced degrees, such as an MBA, with concentrations in finance, math, or accounting. 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


Investment bankers

Developing cultivated customer relationships over a short period of time, after which operations typically develop and execute quickly

Working on deals where it can take months or years to develop a relationship and close the deal.

They are usually at their trading tables very early in the morning before the market opens and do not leave their tables until the markets close (but they generally do not work after the markets close and on weekends and holidays ).

Working extremely long hours, including weekends and holidays.

You need to have a deep understanding and reading of the markets and patterns. Described as bold and decisive, with a natural instinct for how markets work and which way the market will go.

Play the dual role of a relationship builder with good interpersonal skills and a financial assistant who is able to build a plan that is financially savvy and often creative, and tailored to the client’s needs.

They specialize in one asset class (typically stocks and bonds), but they also participate in derivatives in commodity markets (such as wheat or oil) and currency markets.

They tend to specialize in one area and operate within their expertise

Needs to be mathematically inclined

You need to be financially smart with a strong background in math.

Bottom line

Investment bankers and traders alike work in stressful environments where a huge amount of capital is at risk and the overall company relies on the fees to increase revenue. Although they are closely related and within the same financial services industry, each has a distinctive role and requires different skills and personality characteristics.

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About the author

Mark Holland

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