What’s Needed for A Successful Career in Financial Trading?

If you are someone with an eye for numbers and a passion for the global economy, a career in financial trading could be just the calling for you. As a professional financial trader, you will make investment decisions based on technical and fundamental analysis, designed to grow the portfolio of the bank you represent or your clients. It’s your responsibility to execute market orders and manage exposure to risk in line with the risk appetite of your bank or clients.

The two types of financial trader

If you want to work on a trading floor, you’ll need to decide what type of trader you’d like to become. The two most common types of traders are flow traders and sales traders:

Flow trader

A flow trader is entrusted to buy and sell assets on the financial markets on behalf of the clients within the bank you work for. Typical assets traded on a daily basis include precious commodities, options and futures markets.

A flow trader will typically begin by researching real-time data to gauge the sentiment within the markets. They’ll monitor the performance of target assets, and liaise with colleagues and clients before contacting sales traders to keep track of market movements. The number-one role of a flow trader is to generate volume through the markets, executing trades with lightning speed and precision. Flow traders embrace risk and see risk and volatility as an opportunity to turn a profit.

Sales trader

A sales trader is the middleman between clients and market makers. Sales traders take direction from their clients on investment decisions and action them by communicating these to the team executing the market orders.

Sales traders will focus largely on researching and recommending new financial offers that could provide a beneficial return to clients. The role of a sales trader is to find the least risky option, underpinned by data analysis and comprehensive market reports.

Is your personality well-suited to this industry?

Before you delve too deeply into training to become a financial trader, you should carry out some frank and open self-assessment of yourself and the world of trading. Will your personality and your work-life balance thrive off being a financial trader?

It’s a career that demands intense levels of focus day in, day out. You need to be bold enough to accept the element of risk that’s involved with every decision you make. Our brains are not hard-wired to accept losses easily. Traditionally, our income is very linear and moves up and down in line with job positions and inflation. However, trading income can be very different, as returns can fluctuate from month to month and even year to year.

Basic qualifications needed to become a trader

In decades gone by, professionals on the trading floor used to learn on the job. Nowadays, newcomers are usually armed with a four-year degree in business or economics, and even a master’s in a specialist field of business or micro/macroeconomics.

There’s also the small matter of getting a license to trade. At least in the US, new financial traders are required to pass exams and secure a license from the Financial Industry Regulatory Authority (FINRA). The Series 57 exam is the pinnacle for would-be traders, with students required to achieve a score of 70% or better to pass.

Those wanting to become a broker will also need to take the General Securities Representative Examination, which demands a score of 72% or better to pass.

Where to find work as a financial trader

To get employment as a financial trader, you’ll want to look at financial services hubs in your respective countries. In the US, that would be New York, where its stock exchange reigns supreme for the American economy. In the UK, that would be the City of London, where major institutions like the London Stock Exchange and the Lloyd’s exist. These hubs comprise all manner of financial service organisations, ranging from banking and hedge funds through to insurance.

Graduates may wish to consider enrolling in recruitment agencies that specialise in trading positions. Meanwhile, many investment banks and investment management firms also recruit many graduates and apprentices when the economic cycle is at its peak.

Alternative avenues for those looking to trade the markets for a living

There is always the flexibility to work away from busy trading floor environments too. In fact, you can become your very own trading fund by developing your own portfolio as a retail trader. Once you’ve developed your skills and mindset in the markets, you may wish to go it alone and trade with your own money.

There are plenty of instruments you can trade as a retail client. Contracts for difference (CFD) trading is one potential route you could go down. Many online brokers now offer CFD trading alongside the ability to buy stocks outright. If you’re wondering what is CFD trading and how it works, essentially you speculate on the future price movement of an instrument, without owning the underlying asset. It’s known as a derivative of an asset class, allowing retail traders like you to trade on margin.

Brokers allow you to take positions on both sides of the order book. That’s the real flexibility with CFDs. You can go long (buy) if you feel a price will rise or go short (sell) if you feel a price will fall. Essentially, you can profit regardless of whether the markets are bullish or bearish.

Financial trading: The bottom line

Trading the financial markets is not for the faint of heart. Trading requires immense dedication, perseverance and mental toughness. Half of the battle is with your own mind as a trader, with the key being to have a regimented trading plan that makes investment decisions a robotic, emotionless process. It can be a thrill to grow the portfolio of your clients and earn a commission for taking that calculated risk.

The global economy and the financial markets never sleep, so if a fast-paced working environment gets your juices flowing and you have an innate head for numbers, trading could well be the career for you.