Is my view of the financial market right ?
I've traded myself a few times, and I think I understand how the markets are working. But there is a big question that always bothers me : Why in the world do traders (in their stock market offices) talk on the telephone so much ?
Maybe it will be easier to give me an answer when I tell you how I believe it works:
1) I understand that the market the potential to increase your wealth, this is called investing. I could also put my money in the bank, but due to inflation it may decrease in value, and also the interest rates are pretty low.
2) There are companies which will take good care of your assets and invest the money in a product that will (hopefully) increase in value, making your own wealth grow.I believe the right term for these companies are "Financial Advisors".
Now to my first question: Investing = Trading ? I wan to know what exactly these Advisors do: Are they Analysts ? Are the Fundmanagers ? Are they Stock Brokers ? Traders? Whats the difference between a Trader an a Stock Broker? And to that, how do they "Invest" ? I assume they have a research team that observes the market to find potential opportunities. And when they found an asset, how do they buy it ? Via a Bloomberg terminal ? Then its just trading, the same thing I do in my apartment. But I wont believe that the whole thing about financial advisory comes down to a trade in the end.
Now to my second question : Why are they on their phones ? To talk to their customers ? I thought I only give them my money and then they will multiply it ? Why should I be in contact with them ? And why are they shouting anyway ? To buy or to sell ? They have an huge trade station, there are green buttons that write "sell" on their screens, thats the only thing they have to do, so why on earth do you still have to shout ?
I believe you understand that I may have a big misconception about how financial advisory works, and I would be incredibly grateful if you could help me out.
Why do you think traders are on the phone so much?
What kind of trader are you talking about (for example, bond traders have less technological infrastructure than equity traders)?
Investing = holding a position in a trade. Trading = making the trade happen. You can simultaneously be the trader and investor i.e. you go out in the market, find the seller, buy the asset and hold it. My guess is that your mental image of traders is closer to "market makers," who are the people connecting buyers and sellers.
With all due respect (honestly just trying to help here), I feel you have modeled your view of finance off of the 80s and 90s classic movies ("why do they shout so much). Have you seen what the Exchange looks like on the background of a CNBC program? It's a relatively quiet place these days.
I also think there's a lot of confusion, which you are trying to clear, regarding all the different "positions" in finance. I think the biggest issue you have right now is putting advisers as analogous to traders. An adviser is generally talking to clients and helping them with broad-ranging asset allocation / portfolio composition strategy. Advisers are rarely talking about individual stocks - and even more rarely would they be trading (be it over the phone or computer)
Thank you very much ! Yes indeed, I may have mixed up the traders and the market makers. And you are right, it seems like I am describing an office from the 80s, but that exactly is my point: I have seen how quiet and calm the offices are, but I sometimes still see other offices where the people are yelling in their telephone. I wanted to post a youtube video as an example, but the site did not allow it due to the fear of the video being spam.
And I wanted to know what kind of job these guys are doing. So the people on the phone are the market makers ? And if so, to who are they talking to ? To buy or sell something ? Couldn't they do it with the computer instead ?
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