What is the difference? I searched for "trade ideas" on google and found a document written by JPM called "top trade ideas". It was quiet detailed, and said things such as:Country: Peru Instrument: FX optionsTrade: Buy USD/PEN 2-month(September 18)3.20-3.30 range binaryOpened: Jul-18-06 Entry level: (indicative20% of payoff,spot ref.3.2405)Last:- - 49%(indicative)Rationale: We see USD/PEN downside capped at 3.20 near-term. The BCRP hasintervened heavily in recent weeks (US$660 million in July andUS$800 million so far in August), and it has room to step up interventioneven more as its stock of CDs is not as high as it used to be in mid-2005and inflation is at the low end of its 1.5-3.5% target range (so the need tosterilize its intervention is diminished). One of the key goals of theincoming APRA administration is to integrate farmers in the highlands tothe network of export-oriented agribusiness of the coast. Enrique Cornejo,one of the potential new BCRP board members, was quoted by the pressas saying that a USD/PEN level below 3.20 could hurt exporters. This document was written by strategists however, not traders.Now as a noob I have no idea what the above means but that's why I'm learning. But it sounds awfully like what a trader should be doing according to me - a noob. My question is then, what is the difference between a trader and a strategist? How would a trader fit into the above JPM trades? What role would he be playing amongst that?

Traders and strategists have very similar jobs, so it's not a bad question. On the sell-side, strategists generally sit on the trading desk, making trade recommendations, watching for macro events, and telling traders and salesmen what those events mean to various markets. Strategists also do some research, publish their ideas/trade recommendations, and attend client meetings to speak as an expert on the topic at hand.Traders actually price financial instruments for the market. They are the guys who actually manage the risk associated with whatever products they are trading. They make prices for people on the sales force, deal with brokers in the market, and run risk. Depending on the bank, strategists can also run risk, though they don't price anything for the market. They generally take longer-dated risk, with more fundamental views, and run their books like PMs on the buy-side.On the buy-side, the difference between the roles is blurred. Strategists are more like PMs. Traders become more like execution guys.Hope this helps.

QuoteOriginally posted by: brotherbear1220Traders and strategists have very similar jobs, so it's not a bad question. On the sell-side, strategists generally sit on the trading desk, making trade recommendations, watching for macro events, and telling traders and salesmen what those events mean to various markets. Strategists also do some research, publish their ideas/trade recommendations, and attend client meetings to speak as an expert on the topic at hand.Traders actually price financial instruments for the market. They are the guys who actually manage the risk associated with whatever products they are trading. They make prices for people on the sales force, deal with brokers in the market, and run risk. Depending on the bank, strategists can also run risk, though they don't price anything for the market. They generally take longer-dated risk, with more fundamental views, and run their books like PMs on the buy-side.On the buy-side, the difference between the roles is blurred. Strategists are more like PMs. Traders become more like execution guys.Hope this helps.Yes it helps a lot, however when you say pricing, again I'm a little confused. My understanding was that quants worked on pricing models, so is a traders job literally to stick some numbers into a spreadsheet and click "calculate"? Obviously they have to manage risk and stuff like you say, but it seems like much of their job is pretty trivial. It sounds to be if strategist would be a far more interesting job to do, particularly on the buy-side.

searth the forums. this has been discussed at length

QuoteOriginally posted by: rmb623searth the forums. this has been discussed at lengthI tried to but unfortunately the search function isn't working for me at the moment, hasn't for some time now actually. Not sure if it's a site problem or just me.

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QuoteOriginally posted by: barnyQuoteOriginally posted by: brotherbear1220Traders and strategists have very similar jobs, so it's not a bad question. On the sell-side, strategists generally sit on the trading desk, making trade recommendations, watching for macro events, and telling traders and salesmen what those events mean to various markets. Strategists also do some research, publish their ideas/trade recommendations, and attend client meetings to speak as an expert on the topic at hand.Traders actually price financial instruments for the market. They are the guys who actually manage the risk associated with whatever products they are trading. They make prices for people on the sales force, deal with brokers in the market, and run risk. Depending on the bank, strategists can also run risk, though they don't price anything for the market. They generally take longer-dated risk, with more fundamental views, and run their books like PMs on the buy-side.On the buy-side, the difference between the roles is blurred. Strategists are more like PMs. Traders become more like execution guys.Hope this helps.Yes it helps a lot, however when you say pricing, again I'm a little confused. My understanding was that quants worked on pricing models, so is a traders job literally to stick some numbers into a spreadsheet and click "calculate"? Obviously they have to manage risk and stuff like you say, but it seems like much of their job is pretty trivial. It sounds to be if strategist would be a far more interesting job to do, particularly on the buy-side.Quants work on pricing models in conjunction with traders. The more quantitative the product, the more involved quants and structurers are going to be in the actual trading side of the business. Generally, quants lack a feel for the market, so their sanity checks on their pricing models are never very good. At the same time, most traders don't have the time to build their own pricers from scratch, so they pay a desk quant to develop a pricer/risk management tool. It's important to remember the difference between theory and practice when it comes to pricing. In theory, everything fits nicely into a model, whereas the situation can be very different in practice.In any case, actually managing risk in real time is much more difficult than you seem to appreciate. The sort of intelligence that can think deeply about a difficult problem for hours at a time is not necessarily of the kind needed to react quickly to changing market conditions. It's not necessarily the sort that can focus on the markets for 10-12 hours per day, knowing what liquidity looks like at all times, if there are big deals going through the market, or if there has been an event that will impact the product you're trading. Whilst it is the case that you need a more mathematical background to be a quant, it's not the case that quants are 'smarter' than the traders they work with. It takes a different sort of intelligence to be a trader. And there is a lot more pressure associated with the role than a quant ever experiences. As a reformed math geek myself, I can appreciate the hubris associated with mathematicians. We think we're smarter than everyone, and look down upon them accordingly. In turn, they look at us like we have 3 heads and no manners. People think they can't bring us to client meetings, and that we have no capacity to actually sell anything. In the end, all businesses are people businesses. At some point, if you want to continue up the management chain, you need to be a hand-shaker. You can teach anyone to program a spreadsheet, but you can't teach all of those people how to be likable. And the latter is BY FAR the more valuable skill.That said, 'quants' and 'strategists' are not necessarily the same thing. In truth, quantitative models sometimes just complicate things unnecessarily. As mathematicians, we sometimes make situations more difficult than they need to be to feel better about ourselves. If other people can't understand it, they must be morons (at least, they're dumber than us), and we have reaffimed our intellectual pre-eminence. That, though, isn't really what a desk strat does. A desk strat will look at a variety of signals from the market, and craft a story to explain the current market climate. When events occur to shock the market, the strategist (and the trader) need to be the first guys to understand the impacts. Further, since the strategist doesn't have to spend his whole day providing prices to the market, he can actually look more deeply at problems, and come up with sexy solutions. Most of the time, those solutions are simple. The more complicated the trade recommendation, the less likely it is for anyone to actually adopt it. And the less likely it is for a salesman to understand it (so he can pass the idea off as his own, and sell his clients on it).At any rate, to appreciate the difference between various front office roles, you need to sit on the floor. If you have (at least) a master's in a quantitative subject, and think strategy is for you, go for it. If you want to develop pricing models and risk management systems, become a quant. If you actually want to run risk right now, become a trader. If you want to develop a network of contacts in the financial markets, manage those relationships, and occassionally sell them new products, become a salesman. If you want to become a PM in the long-run, and don't want to deal with facing the market right now, become a strat.

QuoteOriginally posted by: brotherbear1220QuoteOriginally posted by: barnyQuoteOriginally posted by: brotherbear1220Traders and strategists have very similar jobs, so it's not a bad question. On the sell-side, strategists generally sit on the trading desk, making trade recommendations, watching for macro events, and telling traders and salesmen what those events mean to various markets. Strategists also do some research, publish their ideas/trade recommendations, and attend client meetings to speak as an expert on the topic at hand.Traders actually price financial instruments for the market. They are the guys who actually manage the risk associated with whatever products they are trading. They make prices for people on the sales force, deal with brokers in the market, and run risk. Depending on the bank, strategists can also run risk, though they don't price anything for the market. They generally take longer-dated risk, with more fundamental views, and run their books like PMs on the buy-side.On the buy-side, the difference between the roles is blurred. Strategists are more like PMs. Traders become more like execution guys.Hope this helps.Yes it helps a lot, however when you say pricing, again I'm a little confused. My understanding was that quants worked on pricing models, so is a traders job literally to stick some numbers into a spreadsheet and click "calculate"? Obviously they have to manage risk and stuff like you say, but it seems like much of their job is pretty trivial. It sounds to be if strategist would be a far more interesting job to do, particularly on the buy-side.Quants work on pricing models in conjunction with traders. The more quantitative the product, the more involved quants and structurers are going to be in the actual trading side of the business. Generally, quants lack a feel for the market, so their sanity checks on their pricing models are never very good. At the same time, most traders don't have the time to build their own pricers from scratch, so they pay a desk quant to develop a pricer/risk management tool. It's important to remember the difference between theory and practice when it comes to pricing. In theory, everything fits nicely into a model, whereas the situation can be very different in practice.In any case, actually managing risk in real time is much more difficult than you seem to appreciate. The sort of intelligence that can think deeply about a difficult problem for hours at a time is not necessarily of the kind needed to react quickly to changing market conditions. It's not necessarily the sort that can focus on the markets for 10-12 hours per day, knowing what liquidity looks like at all times, if there are big deals going through the market, or if there has been an event that will impact the product you're trading. Whilst it is the case that you need a more mathematical background to be a quant, it's not the case that quants are 'smarter' than the traders they work with. It takes a different sort of intelligence to be a trader. And there is a lot more pressure associated with the role than a quant ever experiences. As a reformed math geek myself, I can appreciate the hubris associated with mathematicians. We think we're smarter than everyone, and look down upon them accordingly. In turn, they look at us like we have 3 heads and no manners. People think they can't bring us to client meetings, and that we have no capacity to actually sell anything. In the end, all businesses are people businesses. At some point, if you want to continue up the management chain, you need to be a hand-shaker. You can teach anyone to program a spreadsheet, but you can't teach all of those people how to be likable. And the latter is BY FAR the more valuable skill.That said, 'quants' and 'strategists' are not necessarily the same thing. In truth, quantitative models sometimes just complicate things unnecessarily. As mathematicians, we sometimes make situations more difficult than they need to be to feel better about ourselves. If other people can't understand it, they must be morons (at least, they're dumber than us), and we have reaffimed our intellectual pre-eminence. That, though, isn't really what a desk strat does. A desk strat will look at a variety of signals from the market, and craft a story to explain the current market climate. When events occur to shock the market, the strategist (and the trader) need to be the first guys to understand the impacts. Further, since the strategist doesn't have to spend his whole day providing prices to the market, he can actually look more deeply at problems, and come up with sexy solutions. Most of the time, those solutions are simple. The more complicated the trade recommendation, the less likely it is for anyone to actually adopt it. And the less likely it is for a salesman to understand it (so he can pass the idea off as his own, and sell his clients on it).At any rate, to appreciate the difference between various front office roles, you need to sit on the floor. If you have (at least) a master's in a quantitative subject, and think strategy is for you, go for it. If you want to develop pricing models and risk management systems, become a quant. If you actually want to run risk right now, become a trader. If you want to develop a network of contacts in the financial markets, manage those relationships, and occassionally sell them new products, become a salesman. If you want to become a PM in the long-run, and don't want to deal with facing the market right now, become a strat.Thank you brotherbear, very nice reply. I wasn't suggesting trader's weren't as bright as quants, after all the difference is simply who put the time in to learn the math rather than who had the ability to learn the math. I don't actually want to be a quant. I'm just trying to understand the sort of roles available in financial markets because as a noob I haven't yet sat on a trading floor and figured out what the hell goes on. It's extremely difficult to figure out what goes on from the internet. I'm just trying to figure out what I might like best and then focus my learning/experience towards that route. As far as sell-side flow traders go, my impression is it goes something like this: Client wants to buy/sell something. Trader quotes them a price which can be immediately sold/bought for more/less in the market - this is the bid/ask spread. As a trader, it's in your interest to keep this spread as large as possible to give you a margin for error, but if it's too wide the client won't trade with you. The trader then has the risk on his books. He then hedges the trade depending on where he perceives the risk to be. He adjusts the hedges as if sees fit according to market movements. Dynamic hedging results in a profit or a loss depending on whether you hedge optimally and/or how the market has behaved for the duration of your trade. Now as far as I understand sell-side traders don't usually have a mandate for prop, though some have a limited prop mandate. So in the above example, it would seem the strategists were devising trades on behalf of the CIO of JPM? Alternatively, which is what I think you're saying, those strats sit with the sell-side traders and work with the traders to come up with trades based on market conditions/fundamentals. The strats then pass the ideas onto the salesmen who try and sell it to the clients. The clients then book (or might not) a trade with the trader and the above paragraph happens all over again?Now my goal is to be a prop trader/PM in the long-term, so I struggle to see how being a sell-side flow trader is useful at all, and it seems as you say, that a strat is a far more useful preparation, though I'm a little unnerved by your "can't face the market right now" comment. As a buy-side trader you surely won't be dealing with risk in the same way a sell-side trader is (eliminating it), in fact your idea is to take risk in order make money, so it seems the conviction and quality of your ideas is the most important factor, and knowing how good your ideas are surely comes from coming up with ideas and testing them in the market - as a strat does? It just seems to me as if sell-side trading isn't all that interesting? I once spoke to a sell-side trader and he told me that if you read Hull cover to cover you would know a good deal more theory than most traders. It begs the question of why so many people want to do it, and why it's the most prestigious role in the bank, because it certainly doesn't seem to be the most interesting. Is it purely the money that draws people in?

There are more flavours than in your view of the trading world;being a market maker in equities might not be the most interesting thing in the world (to me that is; and I'll even readily accept that it I might be wrong there) but being on the sell side of exotic derivatives is to me much more interesting then what happens on the buy side in that area...

Well barny, as everyone's been trying to tell you and as I'll also try, is that it's not as black and white as you feel it is. But you probably know that, but don't really know how grey the grey really is.The thing with any role is that you become narrowed and a little specialised in it. It is inevitable. So knowing Hull cover to cover doesn't mean a great deal cause firstly it's hull's theory, which might be miles away from practicality and secondly, in your job you'd be more interested in a few chapters of the book. My point being, reading hull cover to cover might be better than most traders know but that's a conscious choice they make. And you will too once you pick and start a role.Also each role has it's pros and cons. But ofcourse. Traders in buy side firm are mere executioners. Unless you're a PM that trades his own book. That would take a while to step into. Traders on the sell side see much more than traders on the buy side. They're the bellwether of the bank, or the canary if you will and hence have a little prestige attached to them. And so can move to the buy side PM role easier.