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【Types of Traders and Their Salaries】What Do Traders at Investment Banks and Hedge Funds Actually Do? Contact Alpha Now!
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Hello! This is TJ, the CEO of Alpha Advisors.
In this article, I’ll give you a comprehensive overview of traders in the finance industry. Among global finance careers, trading is one of the most sought-after paths due to its high income, technical depth, and fast-paced environment. But did you know that the term “trader” actually refers to several distinct roles—including sell-side, buy-side, and proprietary (prop) traders—each with very different responsibilities, career trajectories, and hiring processes?
Trading can be an extraordinarily lucrative career, with top performers earning anywhere from hundreds of thousands to millions of dollars per year. However, the path is extremely competitive: in most cases, only one or two candidates are hired annually. For mid-career professionals, opportunities are typically limited to those with a proven track record as a trader. Switching into trading from an unrelated background is exceptionally difficult.
That said, for those who succeed, the rewards are massive. Successful traders often transition into buy-side roles, launch their own hedge funds, or rise to become portfolio managers—potentially earning tens of millions annually.
At Alpha Advisors, we provide personalized guidance to over 500 university students and young professionals each year, helping them land offers at world-class firms such as Goldman Sachs, Morgan Stanley, Bank of America, Mitsubishi Corporation, Itochu Corporation, McKinsey, BCG, Bain, Google, Amazon, and many more. We are proud to have the strongest track record in Japan when it comes to global finance, strategy consulting, tech, and trading careers. Many of our alumni are now thriving as traders and investors on the global stage.
If you’re thinking “I want to be a trader,” “I want to earn $500,000+ a year,” or “I want to dominate in global finance”, then this article is for you. And when you’re ready to take the first step, reach out to Alpha Advisors. With our custom one-on-one support and exclusive training programs like the Alpha Career Bootcamp, we’ll guide you on the fastest path to building a top-tier global career!
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Types of Trader Roles and Career Paths in Finance
Trader roles in the finance industry can broadly be divided into three categories: sell-side traders (investment banks and brokerages), buy-side traders (asset management firms and hedge funds), and proprietary traders (those trading the firm's own capital). Each of these roles comes with distinct responsibilities, career tracks, compensation levels, ideal candidate profiles, and recruitment methods for both entry-level and experienced hires.
1. Sell-Side Trader
Overview & Responsibilities
Sell-side traders work in the trading divisions of investment banks and brokerages, where they handle order execution and market making for clients such as institutional investors and high-net-worth individuals. Their role falls under the broader category of "Sales & Trading." They execute client buy/sell orders in the market or provide liquidity using the firm’s own capital.
As intermediaries between clients and the market, they may temporarily absorb large trade orders with the firm’s balance sheet before unwinding them in the open market. Sell-side traders are often specialized by product: equities, fixed income, FX, or derivatives. Each area requires domain-specific knowledge and a firm grasp of market trends.
For new graduates, this role is the most common entry point into trading. Unlike portfolio managers, sell-side traders do not make investment decisions based on their own views, but instead execute trades that fulfill client demand, adding a markup for services provided. Therefore, saying “I want to become a trader because I love investing” may be seen as a red flag in interviews, as it reveals a misunderstanding of the role.
Career Path
The typical career path begins with joining as an Analyst (Junior Trader), followed by promotion to Associate, then Vice President (VP), Director (SVP), and ultimately Managing Director (MD)—though titles and hierarchy may vary by firm.
Junior traders usually begin by supporting senior traders and handling logistics (e.g., trade processing and order management). With experience, they are gradually entrusted with risk-taking responsibilities and their own trading books. Senior traders often lead specific desks (product teams) and oversee trade execution strategy and team management.
In many cases, successful sell-side traders later transition to buy-side firms, including hedge funds, for more autonomy and performance-based upside.
Compensation
Sell-side trader salaries start on par with other investment banking roles. In the early years, total compensation (base salary + bonus) usually falls in the JPY 5–10 million range, with bonus amounts increasing based on performance. For example, Associates at top U.S. investment banks may earn a base salary of JPY 13–15 million plus bonuses.
With promotion to VP or above, annual compensation often exceeds JPY 20–30 million, and it’s not uncommon for senior traders at global banks to make over JPY 50–60 million, including bonuses. Traders often contribute more than half of a trading division’s revenue, and those who consistently deliver strong performance are richly rewarded.
In contrast, domestic (non-global) financial institutions tend to pay less, often around 80% of the compensation offered by global banks for the same role. However, domestic firms generally offer greater income stability and benefits, with less volatility in annual bonuses. At the same time, sell-side traders’ bonuses can fluctuate dramatically based on performance and market conditions—strong years can bring massive payouts, while in weak years, bonuses may drop close to zero.
Ideal Candidate Profile & Skills
Successful sell-side traders exhibit strong market intuition, quick decision-making abilities, and client service orientation. They must constantly monitor rapidly moving markets and execute trades within tight timeframes. Information-gathering, analytical thinking, and numerical fluency are essential.
Because they work closely with internal teams and clients, communication skills and coordination abilities are also crucial. Traders must interpret client intentions accurately, explain complex financial products clearly, and negotiate effectively.
In addition, mental resilience and risk control are vital. As traders handle high-value positions, even minor execution errors can result in major losses. The ability to stay calm under pressure, objectively assess market conditions, and make sound risk-on/risk-off decisions during volatile periods is a must.
Recruitment Paths: New Grads and Mid-Career
Landing a sell-side trader role as a new graduate requires breaking into one of the most competitive tracks in global finance. In particular, trading divisions at global investment banks are notoriously difficult to get into, with candidates typically facing intensive application processes including 30–50 rounds of interviews, especially at top-tier international firms.
Offers are often extended after candidates successfully complete summer internships, which serve as pipelines into full-time hiring. During these internships and subsequent interviews, it is critical for applicants to demonstrate a deep interest in financial markets and articulate their own investment experience or trading ideas. Interviews may include market-related questions, brainteasers, and mental math tests.
In Japan and other competitive markets, only a few full-time seats are available each year at global banks. These are typically won by the very top candidates from elite universities. On the other hand, domestic financial institutions may hire traders through generalist recruitment programs, where candidates express a preference for trading and are later assigned to dealing desks. Although departmental hiring is becoming more common, assignment risks remain, especially at traditional firms.
Mid-career hiring for sell-side traders is limited to candidates with a strong track record and relevant trading experience. A common case is a trader with a proven book at another firm being headhunted for a specific product desk. As such, almost all traders start as traders from day one. Transitioning into a trading role mid-career without prior experience is virtually impossible.
2. Buy-Side Trader
Overview & Responsibilities
Buy-side traders work at asset management firms and hedge funds, executing trades based on instructions from portfolio managers (PMs). Often referred to as execution traders, they play a critical role in implementing investment strategies developed by their firm.
To visualize the distinction: if a sell-side trader is like a wholesaler at a fish market, the buy-side trader is the fish buyer from a restaurant. The PM decides “what type of tuna to buy, how much, and at what price”, and the buy-side trader executes the actual purchase. Meanwhile, sell-side traders package the tuna with fees—sometimes reshaping it into sashimi or sushi (known as structuring or product design)—to meet client needs.
In some funds, buy-side traders are expected to go beyond trade execution by analyzing market trends and proposing trade strategies, acting as strategic partners to the investment team. In traditional asset management settings, however, the role may be more operational and support-focused, with decision-making authority resting fully with PMs.
The key distinction is that buy-side traders use the firm’s capital and directly impact portfolio performance, unlike sell-side traders who facilitate transactions for clients.
Career Path
Career progression for buy-side traders varies by firm type and size:
・At large asset management firms, new grads or early-career professionals start as traders and can progress to senior trader, and eventually head of the trading department.
・At hedge funds, where teams are smaller and flatter, traders often begin as analysts and later take on dual roles as traders and PMs.
Buy-side traders are most commonly recruited from the sell-side—firms typically poach experienced traders rather than develop them in-house. That said, some domestic asset managers do conduct new graduate hiring for trader roles, although positions are limited.
As for career development, top traders often advance to PM roles, where they are entrusted with making investment decisions and managing capital. Some also transition to other hedge funds or launch their own funds as entrepreneurs.
Those who remain in trading may eventually be promoted to Head of Trading, overseeing execution across multiple portfolios. Overall, buy-side trading teams are lean, meaning that high performers often gain greater responsibility and title advancement at a faster pace.
Compensation Levels
Buy-side trader compensation varies widely depending on performance and firm-specific pay structures.
・At hedge funds, performance-based bonuses make up a significant portion of pay. In strong market years, traders may earn far more than investment bankers at comparable seniority levels.
・In extreme cases, top managers at U.S. hedge funds have reportedly earned hundreds of millions of dollars annually, and some small fund managers in Asia have reached the JPY 10 billion (approx. $70M+) mark in yearly compensation.
That said, more realistic figures are:
・Top-performing portfolio managers (PMs): Hundreds of millions of yen annually
・Average PMs: Tens of millions of yen
・Analysts or junior traders: JPY 5–20 million
Even at junior levels, compensation remains competitive. For example:
・Large domestic asset management firms often advertise trader roles paying JPY 8–14 million
・Foreign asset managers and hedge funds commonly offer JPY 20–60 million
As a result, there is a general trend of higher upside at global hedge funds compared to domestic firms. Those aiming for top-tier pay typically pursue careers in international buy-side environments.
Ideal Candidate Profile & Skills
Buy-side traders, like their sell-side counterparts, need to be highly proficient in financial markets and capable of executing large orders with speed and precision. Because they often handle massive trades, they must also minimize market impact through strategic execution planning.
Traders with a deep understanding of market microstructure and algorithmic trading expertise are particularly valued. Beyond simply following instructions from PMs, strong traders also provide market feedback and may suggest improvements to execution strategies.
While they rarely interact with clients directly, buy-side traders carry significant internal responsibility and must possess both a deep commitment to results and high professional standards.
Hiring Paths: New Grads & Career Transitions
Entering the buy-side as a new graduate is even more difficult than entering the sell-side. In Japan and other major markets, the typical routes are:
・(1) Start at a domestic asset manager as a new grad, gain experience, and transition to a hedge fund
・(2) Start at a global investment bank on the sell-side, gain front-line trading experience, and later move to the buy-side
Route (1) involves building a long-term career focused on asset management: domestic AM → global AM or fund → hedge fund. However, lateral movement from domestic to global firms is rare, and global buy-side firms usually do not offer new grad trader roles, making Route (2) the more viable option.
Those who take Route (2) gain valuable early experience at global banks and often get headhunted by funds based on their trading track record.
In either case, building a foundation at a global investment bank is the most strategic way to eventually enter the buy-side. Completing an MBA or overseas graduate program can also significantly enhance transition opportunities, especially for those coming from domestic institutions.
3. Proprietary Trader (Prop Trader)
Overview & Responsibilities
A proprietary trader is someone who trades with the firm’s own capital to generate direct profits. Unlike sell-side traders, they are not involved in client execution and instead develop and execute strategies with full autonomy.
Historically, many investment banks had internal "prop desks" trading the firm’s capital, but this was largely restricted after the 2008 financial crisis due to regulations like the Volcker Rule. Today, most prop trading activity takes place in independent prop firms (including high-frequency trading firms and day trading companies) or in hedge funds running internal capital strategies.
The prop trading world is highly meritocratic: "If you don’t make money, you don’t get paid". However, the upside potential is enormous. Prop traders employ diverse strategies such as high-frequency equity and futures trading, arbitrage in options, commodity spread trading, or FX speculation.
Leading firms include Jump Trading, Jane Street, Optiver, SIG, DRW, and even some divisions of large Japanese trading companies. Many operate more like tech firms than traditional finance companies, with a strong focus on algorithmic trading and data science. Ultimately, prop trading is distinguished from sell-side and buy-side trading by its risk ownership and autonomy.
Career Path
Prop firms tend to have flat, performance-driven structures:
・Most traders begin as analysts, progressing to junior trader, then senior trader, and potentially to partner or manager, depending on results.
・High performers can rise quickly—some achieve partner status and earn over $500,000 within a few years.
・Poor performance can result in loss of trading capital or termination.
・Many firms use apprenticeship-style training, giving junior traders small allocations at first and increasing them based on results.
・Top traders may also take on team leadership or revenue-sharing roles.
・Elite performers often leave to launch their own hedge funds.
Compensation
Prop trader pay is more performance-linked than in any other trading role:
・Base salaries are often modest, but bonuses tied to profits are substantial.
・At top firms, first-year compensation typically ranges from $100,000–$200,000.
・Breakdown: base salary of ~$100,000 + bonus of 50–100%.
・Strong performers may exceed $200,000 in their first year, while underperformers may receive base only.
・Within a few years, top traders can earn $200,000–$500,000 annually.
・Senior traders regularly make $500,000–$1,000,000+, especially in high-performing teams.
・Partners and revenue-sharing traders can earn multi-million dollar payouts in top years.
Ideal Candidate Profile & Skills
Success in prop trading demands a rare combination of market talent and mental resilience. Traders are accountable for their own risk-taking with the firm’s capital, and results matter immediately.
Many top firms are quantitative in nature, and employees often hold degrees in math, physics, or computer science. Strong analytical skills, coding ability, and a rigorous mindset are major advantages.
While prop trading is often individualistic, collaboration and communication are becoming increasingly important in team-based strategies.
Hiring Paths: New Grads & Career Transitions
Some top global prop firms (like Jane Street or Optiver) hire directly from university. These processes typically include math puzzles, logic tests, statistics problems, programming challenges, and real-time calculation assessments to evaluate reasoning under pressure.
Most hires come from STEM programs at top universities, often with proven track records in math competitions, trading games, or personal investing.
Some traders are also recruited internally within brokerages and assigned to proprietary trading desks. However, these roles are now rare due to post-2008 regulations.
Mid-career entry into prop trading requires a strong track record of P&L generation. Professionals from banks or hedge funds may switch to prop firms to escape regulatory restrictions or seek greater autonomy.
In summary, past results are everything in this world—whether joining as a new grad or as a mid-career switcher. The bar is high, but so is the reward.
Traders Hold the Highest Earning Potential in Finance
Throughout this article, we’ve explored the trader profession across sell-side, buy-side, and proprietary (prop) roles—including their responsibilities, career trajectories, compensation levels, ideal skill sets, and hiring paths. Among all roles in finance, trading is one of the few where exceptional performance leads to exceptional compensation, with the potential to earn tens or even hundreds of millions of yen annually within just a few years.
Thriving as a trader requires deep market knowledge, mental resilience, logical thinking, and relentless dedication. But for those who love investing and trading, it’s a deeply rewarding career both intellectually and financially.
Recruitment for trader positions is extremely competitive, with global investment banks hiring only a few candidates annually for trading roles. Mid-career transitions are also rare, as most hires are individuals who’ve been building trading careers since graduation. This makes early, strategic preparation and a strong track record essential for success.
That said, with the right strategy and targeted preparation, it’s absolutely possible to receive a trader offer—whether you’re a student or working professional.
At Alpha Advisors, we’ve helped countless students and young professionals land offers in trader roles at top global institutions. Backed by our proven frameworks and insider expertise, we’re ready to support your journey to success.
If you’re thinking, “I want to be a trader,” “I want to earn over $1 million,” or “I want to thrive in global finance,” then now is the time to contact Alpha Advisors. Start with a free consultation, and we’ll help you map the fastest path to securing a trader role.
Start Your Trader Career—Talk to Alpha Advisors Now!
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