Bank trading, often referred to as proprietary or "prop" trading, is a critical and dynamic function within financial institutions where the bank invests its own capital, rather than client funds, to generate direct profit. This high-stakes activity involves executing sophisticated strategies across a vast array of asset classes, including equities, fixed income, currencies, commodities, and complex derivatives. Traders and quantitative analysts leverage advanced algorithms, macroeconomic analysis, and real-time market data to capitalize on price discrepancies, arbitrage opportunities, and directional market movements. While potentially highly lucrative, this activity is tightly governed by stringent internal risk limits and extensive regulatory frameworks, such as the Volcker Rule in the United States, designed to mitigate systemic risk and separate speculative trading from core client services like lending and deposit-taking. Ultimately, successful bank trading requires a delicate balance between aggressive pursuit of alpha and rigorous, disciplined risk management to protect the institution's capital and ensure financial stability.