What is a trader? Definition and examples

A Trader is somebody, a firm, or any entity that buys and sells financial instruments. The term may also refer to a person who buys and sells products, such as fruit, vegetables, sugar, or wool. For example, somebody who buys and sells cattle is a cattle trader.

Trade (noun) – To Trade (verb)

The term comes from the noun trade and the verb to trade. Trade refers to the action of purchasing and selling products between individuals, companies, other organizations, and even countries.

When trade occurs between countries, we call it international trade. We could say that somebody who imports and/or exports is an international trader.

The verb to trade means to buy and sell products or services at either commercial, individual, national, or international levels.

Traders employ a variety of strategies, from day trading to long-term investments, each requiring different skills and levels of market analysis.

Floor traders NYSE

Trader (finance)

In the world of finance, a trader buys and sells financial instruments. Any monetary contract between two parties that we can create, trade, or modify is a financial instrument.

Shares or stocks, for example, which show evidence of ownership of part of a company, are financial instruments. So are bonds, futures, checks (UK: cheques), derivatives, options, and bills of exchange.

A forex trader buys and sells currencies, such as dollars, pounds, euros, yen, yuan, and Swiss francs. The term forex stands for foreign exchange.

Wikipedia says the following about the term:

“Traders are either professionals (institutional) working in a financial institution or corporations.”

“They buy and sell financial instruments traded in the stock markets, derivatives markets and commodity markets, comprising the stock exchanges, derivatives exchanges, and the commodities exchanges.”


Etymology is the study of the origin of words and how their meanings have evolved over time.

The term first emerged in the English language in the 1580s with the meaning “dealer, trafficker, one engaged in commerce.”

If came from the verb to trade, which appeared in the English language in the 1540s. At the time, to trade meant “to tread a path.” In the early 1600s, it also meant “to occupy oneself (in something.”

It wasn’t until 1793 that the verb acquired the meaning “to barter,” which is more or less how we interpret it today.

Owner of a market stall

Market trader image 38993993993Market traders sell goods from a stall in a street market. They might sell fruit, vegetables, clothing, electrical goods, bread, or cheese and processed meats.

Somebody who has a stall in a street market and repairs watches or mobile phones is also a market trader.

Some retailers say that a good and relatively cheap way to try out a business idea is with a market stall. According to startups.co.uk:

“Starting a market stall is one of the most popular routes into the permanent retail sector, and it’s not difficult to understand why.”

“Not only is market trading a great way to test your business’ potential in a high-footfall hotspot, it’s also cheap, with relatively low start-up costs.” (Footfall refers to visitor traffic volumes)

Sole trader

Sole traders are people who own 100% of their business, which is not a limited company. They can keep all their profits (after tax). However, they are liable for any losses.

If their business goes bankrupt, they might have to sell their home and use their savings to pay off business debts.

This does not happen in a limited company. The owners of a limited company, i.e., its shareholders, are only liable for the money they spent on their shares if the company goes bust.

Today, with the advent of digital marketplaces, the scope of trading has expanded, allowing traders to operate globally from virtually anywhere, leveraging online platforms for transactions in goods and financial securities.

Traders in Ancient China and Ancient Egypt
Image created by Market Business News.

Day trader

We refer to somebody who buys and sells securities on the same trading day as a day trader.

Any operation that they initiate on a trading day must close by the end of that same day. Day traders typically work in foreign exchange or stock markets.

In an article that this website published a few months ago, I wrote:

“One of the main objectives of a day trader is to exploit small price movements in highly liquid stocks. For them, the most favorable condition is when the market is volatile.”

“Trader’s” English root word is “trade”

From the English root word “trade,” there are many derivatives, including “trader.” Let’s look at some more derivatives and compound nouns, their meanings, and how we use them in a sentence:

  • Trader (noun)

A person who buys and sells goods, currency, or stocks.
Example: “The trader made a significant profit in the stock market today.”

  • Tradeable/Tradable (adjective)

Able to be bought and sold; having enough value to be traded.
Example: “The new edition of the smartphone quickly became a tradeable commodity.”

  • Trading (verb, present participle)

The action of engaging in trade.
Example: “She is trading shares on the stock exchange.”

  • Traded (verb, past tense)

The past form of trade, meaning bought and sold.
Example: “He traded his vintage car for a motorcycle.”

  • Trade-off (noun)

A balance achieved between two desirable but incompatible features; a compromise.
Example: “There’s always a trade-off between quality and cost.”

  • Nontrader (noun)

A person who is not involved in trade.
Example: “As a nontrader, she did not participate in the day’s stock market activity.”

  • Trade-in (noun)

A transaction where something is returned or given in part exchange for a new item.
Example: “He got a good deal on his trade-in when he bought the new car.”

  • Trade show (noun)

An exhibition where companies in a specific industry showcase and demonstrate their new products and services.
Example: “We’re planning to launch our new product line at the annual trade show.”

  • Trade secret (noun)

A secret device or technique used by a company in manufacturing its products.
Example: “The recipe for the sauce is a trade secret that has been passed down for generations.”

Two educational videos

These two interesting YouTube videos come from our sister channel, Marketing Business Network or MBN. They explain what the terms “Trader” and “Day Trader” mean using easy-to-understand language and examples:

  • What is a Trader?

  • What is a Day Trader?