1. Financial Careers: Introduction
  2. Financial Careers: Qualifications and Credentials
  3. Financial Careers: Finance Employers
  4. Financial Careers: Investment Banking Jobs
  5. Financial Careers: Trading Jobs
  6. Financial Careers: Financial Advisory Jobs
  7. Financial Careers: Analytical Jobs
  8. Financial Careers: Financial Media Jobs
  9. Financial Careers: Analyst Jobs
  10. Financial Careers: Portfolio Management Jobs
  11. Financial Careers: Conclusion

Next, we’ll examine trading jobs. These careers usually involve buying and selling investment instruments like stocks, bonds, currencies, commodities, and similar products. Traders usually make these deals for one of two reasons; either they are facilitating a customer need or request, or they are attempting to benefit from expected market movements. Trading jobs can be challenging and stressful, but they can also be exciting, and the potential for great reward is high.

Where the Jobs Are

Many different financial institutions employ traders. Trading jobs can be found at commercial and investment banks, asset management firms, hedge funds, and more. As a result of the 2008 financial crisis, the regulations which govern the average trading position have changed somewhat, but overall most traders at different types of banks work to provide liquidity for their clients and to earn a profit via a bid/ask spread. Traders for asset management firms seek the best price in a security when conducting trades on behalf of a client. Traders for hedge funds aim to take proprietary positions in an attempt to benefit from expected market movements. Note: the trading career is in flux due to regulatory changes. If you’re considering a career in this area, it’s a good idea to pay close attention to related news.

How to Get a Trading Job

Many traders have a background in a finance-related field from a strong university, but the career path tends to be somewhat less defined than for investment banking. It’s possible to be a trader without a college degree, for instance, while many also have advanced degrees like MBAs. PhD’s from a variety of statistical, scientific, and mathematics-related fields are increasingly common as well. It’s also common for traders to take the Series 7 & 63 exams early on in their careers. The typical trader career path includes an early position at the junior level, and then employees tend to work their way up as they build trust with their employers. Traders who perform will typically be allocated increasing amounts of capital. It’s not uncommon for top traders to break out on their own to form hedge funds.

Types of Trading Jobs

  • Sell-Side Trading Jobs

Many trading jobs are found at different types of banks. A new trader is usually placed in one product area to learn about the bank, the area, and the role. It’s not uncommon for traders to specialize in that area throughout the rest of their career. These areas can be quite broad and may include equities, commodities, fixed income, and more. At smaller institutions, a trader may have a great degree of autonomy and responsibility over an entire area of products. At larger institutions, traders tend to be highly specialized (for example, an individual might trade only ten-year Treasury bonds). Primarily, sell-side traders buy and sell products for the benefit of the bank’s clients. This marks a shift from earlier generations, in which traders utilized a bank’s capital to seek out direct profits. (For more, see Traders: Profit From Other Investors' Fear.)

  • Buy-Side Trading Jobs

Buy-side companies like asset management firms also employ traders. In some of these companies, portfolio managers may buy and sell products themselves. At others, though, traders conduct the buying and selling under the direction of a portfolio manager. It’s common for traders at buy-side firms to have less discretion in their activities because of their relationship with the portfolio manager. A portfolio manager may dictate that they want to buy a particular security, but it will then be up to the trader to determine the best time and price before executing the trade. Or, the portfolio manager may specify a desire to buy a certain type of security, but leave the decision of which specific security to the trader. Traders at buy-side firms aim to get the best price for the portfolio manager within the given parameters. This means that the job is somewhat less challenging than some other trading positions, and it also means that these positions tend to receive lower levels of compensation. (To learn more, check out Buy Side Vs. Sell Side Analysts.)

  • Hedge Fund Jobs

Trading positions at hedge funds are incredibly competitive. Like buy-side trading jobs, traders at hedge funds may take orders from a portfolio manager, or they may be able to use varying levels of their own discretion to decide on their buys and sells. Top traders who work fairly independently can make astronomical sums of money ranging into the tens or hundreds of millions of dollars. This is one reason why top hedge fund traders often set out on their own, starting their own hedge funds. One distinction between a hedge fund trader and a sell-side firm trader is that hedge fund traders are not working to satisfy client orders, but rather to maximize benefit from future market movements. This necessarily involves a higher degree of risk, meaning that the potential rewards are greater, but so too is the level of stress. Traders risk large amounts of money on a daily basis. Hedge funds are notoriously impersonal when it comes to their employees, and if a trader’s performance lags for a certain period of time, he or she may be fired. Nonetheless, the massive rewards that top traders earn virtually guarantees that competition for these positions will remain intense. (For more, see Can You Invest Like A Hedge Fund?)

Summary

Traders come by their careers by a somewhat more flexible path than investment bankers. Still, most traders have a strong aptitude for math, the confidence to withstand volatility and to make significant decisions quickly and based upon incomplete information, and comfort making quick reactions under changing and stressful conditions. Most traders are truly passionate about their jobs and spend off-hours studying the markets. If these qualities sound like a good fit, then a career as a trader may be right for you.


Financial Careers: Financial Advisory Jobs
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