Careers in Trading

Careers in Trading

For starting career in trading, one is required to get the required degree from the reputed university, after which the person can build up his career by working in the various organization like insurance companies, asset management companies, private equity firms, mutual fund companies, and the other firms involved in providing the financial services.

Getting a degree in finance and accounts is just a beginning step, and the next major step involves finding the right field in the finance sector for your career and explore options that interest you and also get you good financial stability in life. Often finance degree holders want to explore job opportunities in the field. Trading is a field that has many job avenues to venture into, and if the field of trading suits your interest, then you are at the right place. In this article, we will elaborate on the different types of careers in trading that a financial graduate can get.

In order to establish your career in the trading field, you need to understand what is trading, the nitty-gritty involved in trading, and how it is done.

What is Trading on Wall Street?

Trade refers to buying and selling goods to gain money. Trading not only earns you money but also serves the purpose of providing services to various consumers. Trading plays an important role in the global economy by creating liquidity in the financial marketFinancial MarketThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces.read more. Trading is the chief source of profits for investment banks, and it is also done by many other institutions like hedge fundsHedge FundsA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging techniques.read more, commodities companies, etc. Trading, generally, uses scientific methods and extensive research to predict the future of the financial market.

Types of Trading

There are three major ways in which trading can be done:

#1 – Market Making

Market making is when a trader buys a product or asset from a buyer and then sells the product to a seller at high prices, thus making his profit in the deal. This gain in profit is called market making. To be a good market makerMarket MakerMarket makers are the financial institution and investment banks which ensures enough amount of liquidity in the market by maintaining enough trading volume in the market so that trading can be done without any problem.read more, you need to observe the market closely and complete both sides of the deal before the price of the asset goes up or dips down.

#2 – Agency Trading

In agency trading, you perform trading for your client. An agency trader has a list of clients who contact him for buying assets at a specified amount, and the agency trader executes the request. Agency trading involves many restrictions as compared to other ways of trading.

#3 – Proprietary Trading

Proprietary tradingProprietary TradingProprietary trading refers to the process adopted by the commercial banks and financial institutions to earn profits by investing their funds in the financial instruments rather than making commission by trading on behalf of their clients.read more is the riskiest of all types of trading, but it is also the most profitable way of trading. Prop traders work according to the theories and assumptions about the working of the market and open positions according to it. If they are correct, they make a large amount of money; otherwise, they lose the money. Most investment banks have dedicated desks for prop trading, and we even have many firms dedicated to propping trading.

Top 5 Types of Trading Careers

Careers in Trading

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#1 – Equities Trader

  • Here the traders trade on publicly listed stocks and shares
  • Generally, traders look for large short-term gains, and Equities do not provide such opportunities.
  • This is the reason Equity Trading has lost much of its popularity.
  • However, please note that Equity Trading is the least risky of all trading areas.
Equity Trader Career
Buy Side Trading Job

source: efinancialcareers.co.uk

#2 – Fixed Income Trader

Fixed Income Trading Career
Fixed Income Trader

source: efinancialcareers.co.uk

#3 – Forex Trader

  • This includes Trading on Currency Movements and fluctuations
  • Generally, forex traders trade on currency pairs – USD/INR, EUR/USD, etc
  • Trading calls depend on country performances, GDP, macroeconomic outlook, and how the currency is going to perform in the future.
  • Trading calls are taken depending on its Depreciation/Appreciation Potential.
Forex Trading Career
  • Below is a snapshot of Forex Trading Job
  • Forex Traders are responsible for executing FX transactions.
  • Their primary role includes monitoring of Total Forex exposure, identifying hedging opportunities, short-term funding, rebalancing requirements, etc.
  • They are expected to stay most up to date with Macro trends.
Forex Trader

source: efinancialcareers.co.uk

#4 – Commodities Trader

  • This includes Trading on Crude, Gold, Metals, etc
  • These include almost every tangible natural assets like Oil, Copper, Gold, Wheat, Corn, etc
  • Commodities are usually traded in futures (meaning you can exit before the maturity date).
Commodities Trader Career
  • Below is a snapshot of the Commodity Trading career profile.
  • Commodity trader is expected to keep himself abreast of the latest in the commodities market.
  • We should be able to track the commodities and form views on the commodity pricing forecasts.
Commodity Trader

source: efinancialcareers.co.uk

#5 – Derivatives Trader

Derivatives Trader
Derivatives Traders

source: efinancialcareers.co.uk

Careers in Trading – Pre-Requisites

To make a career in trading, the first and foremost step is to get a degree from a reputed university and, after that, pursue an internship at any commercial bank or hedge fund to get the nitty-gritty of the trade and have hands-on experience. Being a graduate is sufficient for getting a trading job, but with the growing competitions, you will be a much-preferred candidate you have financial degrees like CPA, CFACFAThe Chartered Financial Analyst (CFA®) Program offers a graduate-level curriculum and examination program designed to expand your working knowledge and practical skills related to investment decision-making. read more, and MBA. Since trading is all about math and statistics, therefore, candidates who have done postgraduate or doctorate in mathematical and statistical fields. In the USA, it is compulsory to clear Series 7 and series 63 exams to be a stockbroker.

In any career in trading, one begins as an intern in any financial organization and then moves up to the level of an assistant trader and then subsequently to the position of a senior trader. It is observed that many experienced traders start their own company after gaining considerable experience.

Where to look for a career in trading?

Now that you significant information about a career in trading, the next question that arises is where to look for a trading job. You can pursue your career as a trader by working with various organizations like investment banks, asset management companies, hedge funds, and other financial firms. As a trader at an investment bank or a commercial bank, you focus on earning profits by providing liquidity for your clients. Whereas, as a trader working in an asset management companyAsset Management CompanyAsset Management Company is a company that takes the financial assets of a person, company or another asset management company (generally this will be high net worth individuals) and use the assets to invest in companies that use those as a operational investment, financial investment or any other investment in order to grow the investment.read more, you need to search for the best prices of the financial tools which are part of your client’s portfolio. On the other hand, in a hedge fund, you will work as a proprietary trader and will earn profits from the changing trends of the financial market.

Buy-Side

The buy-side of trading career involves working with various institutions like commercial banks, mutual fund companies, hedge fund companies, pension fund companies, and insurance companies, which tend to buy financial tools to serve the purpose of money management. A good buy-side analyst always invests in the financial tools which tend to meet the expectations of his client.

Under the categories of buy-side, there are many financial institutions one can choose from. For example:

You can work as a buy-side analyst at institutions like mutual fundsMutual FundsA mutual fund is an investment fund that investors professionally manage by pooling money from multiple investors to initiate investment in securities individually held to provide greater diversification, long term gains and lower level of risks.read more, private equity, and hedge funds, and asset management organizations. You can also work as a portfolio managerPortfolio ManagerA Portfolio Manager is an executive responsible for making investment decisions & handle investment portfolios for fulfilling the client’s investment-related objectives. Also, he/she works towards maximizing the benefits & minimizing the potential risks for clients. read more where you would buy and sell financial tools for your clients, and you can also counsel senior traders whether to buy or sell financial security or not who would perform the task. At buy-side firms, there are restrictions in the job as compared to other firms as in the role of a trader as you would mostly follow the orders of a portfolio manager, but you can also exercise control by taking the important decision of the perfect time and the best price to buy a financial instrument. However, a career in trading at an asset management company can be less demanding and competitive as compared to jobs at other institutions.

Sell-Side

Sell-side usually involves working with institutions like investment banks, asset management companies, and hedge fund companies. A sell-side analyst is the one who prepares an equity research report to advise whether to buy, sell, or hold the financial tools and thus counsels the clients and investors.

Under the categories of sell-side, there are many financial institutions one can choose from. For example:

  • Investment Banking
  • Sell-side Research
  • Trading at banks

Conclusion

We have thoroughly explained the details of careers in Trading that you can get as a degree holder in any finance. If reading this has made you excited and motivated, then a trading career in Wall Street is the right choice for your career. Trading jobs exist at almost all financial companies in the industry, and you have to choose the best suitable role for yourself on the basis of the potential you possess. Different careers in trading require different skills, and you should enter the field after considering the talent required. You should always look forward to your long-term interest so that you can retire in style with sufficient money in your bank account. You need to research and talk to various persons to find the right type of trading career for yourself and perform in order to get that job.

This has been a guide to careers in trading. Here we discuss the top 5 trading careers in Wall Street, including Equity Trader, Fixed Income Trader, Commodities Trader, Forex Trader, and Derivatives Trader. You may also learn more about Trading from the below articles –

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Comments

  1. Skyler Cukor says

    Once again you came up with a great blog. Thanks a lot Sir for posting this blog. It was quiet useful to me. And I found it very interesting. Sir also if you can tell me what commodity trading is? and how does it works?

    • Dheeraj Vaidya says

      Commodity trading is an investment strategy that includes the buying and selling of goods called commodities. Commodity usually starts when you buy a futures contract of any of the commodity being traded on the exchange. Here you don’t need to pay the entire amount of the commodity but you have to pay the fixed percent of the cost which is also called as Margin. Hope this little information will help you. Good luck!!

  2. Frank Meachum says

    Wow this was really a complete beginner’s guide especially it was helpful for me. I was also searching for the differences between investment and trading. How they are different from each other. Any case study related to this or if you could share the other article on investment and trading. Thanks in advance.

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