What does a financial trader do?
A financial trader is best known for buying and selling stocks, futures, forex and other securities on behalf of investors. These investors can be wealthy individuals or large corporations and banks. Typically, a financial trader will intend on making frequent but small profits over time.
However, there are so many different specialties within the financial trading niche that is difficult to pin down an exact definition. So, let’s take a look at the different methodologies and types of financial traders – and how you too can establish a career in this lucrative market.
About financial traders
Financial traders have the freedom to choose where to work: they can either work independently from their own home, or within a business. Either way, traders are responsible for huge sums of money in shares, contracts and securities, and carry the burden of making expert financial decisions throughout each trading session.
Traders who work on behalf of clients obtained through the bank are referred to as ‘flow traders’. Flow traders tend to deal with securities, options and commodities trading.
‘Sales traders’, on the other hand, are intermediaries and work directly for their own clients. Sales traders will place orders that is in the best interests of their clients’ financial goals, and may even personally advise them with expert insight on market developments and scope for new ways to make money.
Meanwhile, ‘day traders’ make money for themselves in a high-risk environment. Throughout the duration of the trading day, a day trader will enter and exit by using short-term trading strategies. These types of traders rely on marginal price movements in stocks or currencies throughout a 24-hour window and need to be well trained or talented in order to make substantial gains.
But that’s not all there is to financial traders: some can take their speciality even further by offering a unique service in a specific arena. For instance, a trader might specialise in foreign exchange (FX) markets or shares.
Responsibilities of a financial trader
Dealing with other people’s money, especially large sums of it, can be stressful and risky in equal measure. The responsibilities which fall on the shoulders of a financial trader should not be underestimated.
However, the responsibilities can vary and depend on the specific type of trader. Sales traders, for example, tend to avoid risk while flow traders make moves to profit from the risk that they take.
But generally speaking, the responsibilities of a financial trader include the following:
- Communicating with fellow traders and colleagues
- Understanding the psychology of trading – such as how to prevent greed and fear from influencing decisions when risk is a factor
- Closing trades (either over the phone or digitally)
- Liaising with sales traders and/or clients
- Studying market movements to make predictions
- Gather information on competitors (if applicable)
- Establish relationships with clients
What skills are needed?
It is no secret that in order to become a financial trader you need to accumulate a specific skill set. You also need to have an enhanced understanding of what makes you tick. You need a calm and collected head on your shoulders which an established mental discipline which most other people in the financial industry perhaps don’t need.
To name just a few, the skills a financial trader will need are:
- Numeracy skills
- Ability to work independently
- People skills (communication, interpersonal and teamwork)
- Mental discipline to understand and identify risk and where greed or fear may be a factor in the decision-making process
- Ability to work in a high-pressure environment
- Full knowledge of the trading lingo
It is also a benefit if you have a natural interest in finance and the financial markets. Find out what skills you’ll need to learn to be a financial trader here.
Day-to-day activities of a financial trader
The daily life of a financial trader clearly involves buying and selling. However, in-between this process, they are also monitoring the market, researching new prospects, reading financial news and gaining insight from other traders/colleagues.
The day-to-day activities of a financial trader might include the following:
- Constant communication with clients/the bank/all relevant parties about the trades of the day
- Sell accordingly based on market fluctuations or predictions
- Study missed opportunities and mispriced assets
- Analysing the market
- Filing in-depth market reports
- Addressing any issues affecting clients and present new ideas to relevant parties
- Obtain market prices from market-making traders and executing the trade
- Read financial press
- Attend presentations
Who hires a financial trader?
In the UK, most traders can be found working in what is called The City – London’s financial hub which is comprised of various major institutions like the Bank of England, Lloyd’s, the London Stock Exchange (LSE), the Intercontinental Exchange (ICE) and the London Metal Exchange amongst thousands of other firms and financial advisers.
Some specialist traders also work for investment banks which share the responsibility of conducting all the commercial activities and financial and trading activities of key offices all over the globe. This job is considered extremely high profile: only the ‘best and brightest’ candidates with a promising portfolio are considered for the role. Candidates are sometimes selected based on word-of-mouth recommendations and referrals.
What is the financial trading career path?
The financial trading career route can look as follows:
- Graduate trainee
- Analyst or trader
- Senior associate
- Vice president or executive director
- Managing director
How to get a job as a financial trader
The key to landing a job as a financial trader is patience and persistence. It can be in ordinarily difficult to walk into a financial trading career without the right qualifications, experience and dedication.
Although trading is often done on the job where juniors and graduates will shadow their established peers, you also need to be an approved trader with a certificate proving your knowledge of the financial markets. Due to the nature of the job, most traders have a degree in a financial-related or STEM subject. However, a diploma can fast-track your way to the trading floor – and don’t rule out how much knowledge can be gained through independent learning.
Is financial trading right for me?
Whether financial trading is right for you or not depends on what kind of person you are. You have to be willing to put in a lot of work, research, study and long hours in order to get your foot in the door, and the job itself is not particularly flexible as the financial market runs in a rigid daily timeframe (for example, 9:00 am to 18:00 pm, if not longer).
However, financial trading might be stressful and hectic, but with the right training and experience, it can be enormously advantageous. You can soon build up your own wealth and live a luxurious lifestyle once breaking through in the industry.