If you possess an analytical mind and the steely resolve to read financial markets and make confident decisions, you will excel as a trader
As a financial trader, you will buy and sell shares, bonds and assets for investors, including individuals and banks. You'll make prices and execute trades, seeking to maximise assets or minimise financial risk.
Types of financial trader
There are three types of trader:
- Flow traders - buy and sell products on the financial markets for the bank's clients. Products include securities and other assets such as futures, options and commodities.
- Proprietary traders - trade on behalf of the bank itself.
- Sales traders - take instructions directly from clients, placing orders and advising them on market developments and new financial ventures. They are intermediaries between the client and the market maker.
Traders may specialise in a particular product, such as shares, fixed-interest bonds or foreign exchange (FX) markets.
Following the financial crisis in 2008, the Independent Commission on Banking issued the Vickers report, which recommended that banks should 'ring-fence' high street baking businesses from their investment banking arms, in order to prevent another taxpayer bailout of the system. This could curtail proprietary trading but banks have until 2019 to implement the changes.
While there are many similarities in the work of flow and proprietary traders and those working in sales, their roles differ substantially. The main difference is risk - sales traders do not take risk while flow and proprietary traders take risks seeking reward.
Work activities of a flow or proprietary trader typically include:
- speaking with colleagues, making phone calls and making instant decisions;
- making prices in their relevant products;
- executing trades electronically or by phone;
- liaising with sales traders or clients on market movements;
- predicting how markets will move and buying and selling accordingly (especially derivatives traders who try to predict the state of a market at a future date);
- informing all relevant parties of the most relevant trades for the day;
- gathering information - critically about mispriced assets, detailed data analysis and valuation.
Traders in sales are more focused on the relationships with clients. They analyse and market new financial offers that they believe will be attractive to their clients.
The day-to-day activities of a sales trader may include:
- gathering information and analysing the market;
- carrying out detailed data analysis and valuation;
- providing in-depth market reports;
- identifying issues affecting clients;
- developing client relationships and presenting ideas to clients;
- executing trades and securing deals with new clients;
- keeping market-making traders informed of relevant issues with their customers and products;
- obtaining market prices from market-making traders and executing the trade.
- Typical starting salaries for trainee financial traders can range from around £26,000 to £32,000, plus commission.
- The range of salaries for experienced traders is between £45,000 and £150,000+.
- An associate trader with experience selling credits could earn around £140,000 in a top-tier bank or £230,000 if they work in more lucrative derivatives.
Very high earnings are possible, especially for proprietary traders, who are often paid a bonus equivalent to a proportion of the profits made. However, EU regulations, which came into force in 2014, limit bonuses in banking to no more than 200% of salary.
Additional benefits, such as non-contributory pension schemes and mortgage subsidies, are common.
Income figures are intended as a guide only.
With experience, working hours are typically 7am to 6.30pm but may be considerably longer for newcomers. Foreign exchange (FX) is 6.30am to 5pm. Oil can be 8am to 6.30pm or 9.30am to 8pm.
Part-time work is not feasible, although job sharing is possible and career breaks are becoming more common.
What to expect
- The work is office based and the vast majority of opportunities are in London.
- Self-employment or freelance work is unusual without years of experience.
- The work is demanding and trading can be hectic. Managing large amounts of other people's money is not a career for the faint-hearted.
- Overseas travel is occasionally required and, depending on the client base, is likely at least once a month for traders in sales.
Although this area of work is open to all graduates, a degree in the following subjects may increase your chances:
Entry standards are high, usually requiring a minimum 2:1 degree, and the selection process is demanding. An assessment may include interviews and psychometric tests, sometimes all in one day.
Foreign language skills are an advantage as banks are expanding globally, not just in Europe but also in Asia and Latin America.
Entry without a degree or HND is difficult, although it may be possible to enter the industry in administrative roles, make contacts, and eventually move into trader positions.
You will need to have:
- strong numeracy skills;
- excellent communication and interpersonal skills;
- teamworking ability;
- physical and mental stamina;
- independent thinking;
- an interest in finance and the financial markets;
- alertness and decisiveness under pressure;
- ability to accept responsibility.
Pre-entry experience is not needed but vacation work, internships or placements will give you an advantage. For further information see individual company websites.
Major investment banks recruit graduate trainees and offer internships or work experience; some offer 'insight' days for first-year students. Closing dates are normally in late October and early November for opportunities starting in the following summer or autumn. Banks may start to fill positions once applications open so you are strongly advised to apply early.
Most traders work in the City, which describes the UK financial services sector rather than a physical place.
The City is made up of a number of financial institutions involved in banking, asset management, insurance, and services to business.
Major institutions include:
There are also a number of market institutions, such as:
In addition to this, there are thousands of firms, which include insurance companies, investment houses and financial advisers.
The vast majority of traders are employed by investment banks. An investment bank is usually a financial house whose role is to finance the trading and commercial activities of others and themselves. The major investment banks have offices in financial centres throughout the world.
Investment banks have a high profile in the City and recruit significant numbers of graduates during peaks in the economic cycle. There is keen competition between investment banks and selection is equally rigorous.
Specialist investment management firms employ a small number of traders. Treasury departments of very large companies may employ a few traders, but this is less common.
Look for job vacancies at:
Most vacancies are filled via specialist recruitment agencies, by word-of-mouth and through speculative applications.
Networking and following up contacts can be useful in finding jobs. Check with your university careers service for a list of past students working in the industry who are happy to be contacted. Ask your family, friends and associates to see if anyone can put you in touch with someone working in the field.
Competition for entry is intense. Generally, vacancies are limited and the entry standards are consistently high. Not all jobs may be advertised so it is advisable to write speculative applications, expressing your interest and your suitability should a post arise, and enclose an informative, targeted CV.
Persistence is essential. You must be able to promote yourself effectively and give evidence of the reasons you believe you will be successful in this career. Read the financial press, attend presentations and do thorough research about potential employers and the opportunities they offer.
Training is provided on the job and is often organised on a rotational desk basis. This usually consists of shadowing a more senior trader to watch what is going on and to learn the trading language (how to phrase questions and trades).
This training is supplemented by lectures, seminars and conferences. If traders are specialising in a product for a specific country, language training is frequently provided.
Before traders conduct any business, they must qualify to be placed on the Stock Exchange’s list of people who are eligible to trade. You are required to become an approved person by the FCA.
Relevant FCA approved qualifications for traders, e.g. the International Certificate in Wealth and Investment Management, which is assessed by a multiple-choice examination, is offered by the Chartered Institute for Securities & Investment (CISI). Traders often have to take the examinations relevant to other European exchanges. Those choosing to do further study often go on to the Chartered Financial Analyst (CFA) Institute to complete the CFA programme.
Most firms pay for examinations, but individuals are expected to contribute a lot of self-study time. Graduate trainees are expected to learn quickly from other traders when starting out and need to be prepared to take on some menial tasks, such as data analysis and administrative duties, to assist other traders.
Generally, new entrants are considered as 'trainees' for the first two years. After that time it is likely that you'll move up to the next level, provided your performance is satisfactory.
Once operational, traders who have completed their certificate-level qualification from the CISI may take the CISI Diploma or, more often, the CFA programme from the Chartered Financial Analyst Institute.
Although different banks have different job titles, promotion is generally structured in the following way:
- graduate trainee;
- analyst or trader;
- senior associate;
- vice president or executive director;
- managing director.
It would be normal for traders to reach associate level about two to three years after their graduation. After associate level, the numbers able to reach executive director level are significantly lower. If you have proved yourself after about five years, it is usual to be given responsibility for a small team, possibly two or three small teams, and then to head up a new desk trading a new product or in a new country.
Regular moves between banks are possible at all levels, although such moves are more common from associate level and above. As many trading banks are international, there are opportunities to work in other locations and countries.