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Topic: What's the difference between Trader and Quant Analyst?  (Read 7482 times)
LovePeace

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« on: September 05, 2009, 11:48:32 PM »

I am new to this forum.
 I wonder what's the difference between Trader and Quant Analyst? In terms of what they do, what education background or experience are required? As well as how their salary are structured and what their career paths are like?


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charles
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« Reply #1 on: September 06, 2009, 04:16:19 AM »

instead of having to dig through pdf's on that page - which imho does not really help the original question -

quant analysts are a broad description of someone who works with mathematics and other quantitative techniques to make decisions. "quants" typically work to support the traders by developing models, providing pricing for products and in some cases, develop the platform and systems/models to deal with advanced trading strategies like statistical arbitrage and other algorithmic trading strategies. you'd need to have a quantitative background to begin with, e.g. degree in mathematics, physics, computer science and many positions now require a PhD in a similar subject.

on the other hand, a trader is someone who typically makes the decision on whether or not to buy/sell a particular product based on informed decisions. These decisions can be self made and/or with the support of a quant analyst. traders are responsible for making money from the trades they put on whereas quant analysts (unless they are responsible for developing the trading strategies) are not. traders will come varied backgrounds from liberal arts to finance to mathematics but will normally need to have a decent understand of fundamentals (economics, markets, etc) in order to start out.

In terms of career and pay, i can only speak from the point of a trader, but in general, the path of a trader will start as a junior trader, working their way up within a bank or a fund of some sort, eventually running your own portfolio. because a trader has a role in P&L generation, pay is normally a % of how much you make and is on top of a basic salary which would rarely be seen below 6 figures unless you are just starting out. on the other hand, i believe that if you work as a quant in the 'back/mid office' developing pricing models and working in risk management, remuneration is normally a fixed sum with a bonus that is a % of your basic salary as opposed to any sort of P&L. Whereas if you work as a quant in a stat arb shop for example, the pay structure can be a % of the P&L.
michaelpage has a rough salary guide: here

hope this helps.
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LovePeace

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« Reply #2 on: September 06, 2009, 11:22:40 PM »

This is very helpful. Thank you
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liganizer

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« Reply #3 on: September 24, 2009, 07:52:06 PM »

Charles,

you mentioned that traders would eventually run their own portfolio. Would that be true for traders within Investment Banks or only Funds?

And could you please name some of essential advanced IT skills for traders?

Thank you.
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charles
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« Reply #4 on: September 25, 2009, 02:18:05 AM »

I should have been a little more clear and said that traders eventually look to run their own book.

It will obviously depend on what type of trader you are but for example, if you trade flow at a bank, unless you jump over to the fund side, the end of the line for a flow trader would be to be the head of the trading desk at the bank and essentially running the entire bank's flow book.

IT skills would also depend on what type of trader you are. most trading jobs require very little IT skills except having the ability to use the models, punch in parameters into a model and interpreting the output etc. Unless you work in quant trading where you are involved in the trading aspect and the model development (e.g. algorithmic trading) then you will need some pretty decent programming skills in something like C++.
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patbox
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« Reply #5 on: September 26, 2009, 06:31:04 PM »

Very intersting post. I have had a little different view of a trader. When I think about a trader I think of someone who
1) executes the orders of the customers,
2) creates a market on a certain asset and makes money on the spreads, or
3) once a complex trading strategy is developed the trader is responsible for implementing the strategy and getting the best price on the OTC market.

Prior to reading this posts, I did not think that most of the traders would actually develop their own trading strategies. I am sure each bank has a few traders putting the banks money at risk in their own strategies, but at the same time I expected that each bank has much larger number of traders who just execute the customers orders, or create markets for certain assets.

Could you please comment on this?
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charles
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« Reply #6 on: September 27, 2009, 09:16:22 AM »

Very intersting post. I have had a little different view of a trader. When I think about a trader I think of someone who
1) executes the orders of the customers,
2) creates a market on a certain asset and makes money on the spreads, or
3) once a complex trading strategy is developed the trader is responsible for implementing the strategy and getting the best price on the OTC market.

Prior to reading this posts, I did not think that most of the traders would actually develop their own trading strategies. I am sure each bank has a few traders putting the banks money at risk in their own strategies, but at the same time I expected that each bank has much larger number of traders who just execute the customers orders, or create markets for certain assets.

Could you please comment on this?

I agree on 1-3 above, and when most people talk about traders, more than often this refers to traders who work in 1) or 2) in the banks. This can be elaborated a little by distinguishing between sell side traders and buy side traders (the latter being the ones who trade on a particular strategy).

there are exceptions to the below but generally:

Sell side traders: make money from trading the bid-offer spread. refers to flow traders, market makers, who work at banks as you mention above. The primary mandate in this case is to earn a little money, a lot of times.

Buy side traders: make money from one of the many strategies out there whether it is speculative or opportunistic. refers to hedge fund managers (macro, arbitrage, long short, etc), algo traders, or prop traders within a bank. the primary mandate in this case is to make directional profits.

i'd say that the majority of traders probably lie on the sell side.
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