How Do I get a Job Trading? - LONG ANSWER
Broadly speaking, traders fall into one or other of three main groups:
1. Retail traders working from home trading their own accounts (i.e. most T2W members)
2. Institutional traders working for hedge funds or investment banks (IBs) like Goldman Sachs.
3. Proprietary traders (known as ‘prop’ traders) working for firms like Futex.
Anyone with an internet connection and £100 can set themselves up as a retail trader from home, so this FAQ is geared towards getting a position either with a city institution or a prop’ firm. How you set about doing this rather depends on where you’re starting from. If you’re Jérôme Kerviel, the Societe Generale employee under investigation for losing (allegedly) $7.2 billion of the bank’s money trading stock index futures, then you might struggle to find any work as a trader again! However, we’ll assume this is not the case and that, broadly speaking, you fit into one of the following three groups of aspiring traders:
Youngsters
While their friends are discussing the latest shenanigans on Big Brother or Britain’s Got Talent, Youngsters are trying to figure out why BP’s share price rallied even when the oil disaster in the Gulf of Mexico went from bad to worse.
Career Changers
Career Changers are in their twenties to thirties and think how lush and green the grass looks on the other side of the career fence. Their problem is that the skills and qualifications they have for their current job aren’t directly transferable to trading.
Old Timers
Old Timers are over forty. This relatively young age may shock some people, but the reality is that most (but not all) traders in IBs are in their twenties and thirties. Those over this age tend to be in management roles and not actively trading day to day. However, age isn’t such a barrier if you’re applying to a prop’ firm – especially if you have a track record of consistent profitability. Like Career Changers, Old Timers don’t have the skills and qualifications that will wow prospective employers and knock spots off the Youngsters.
Before focusing in on the individual groups, outlined below are a few common denominators that all three groups would do well to consider.
1. Passion
Making money is the objective of all traders, but it’s rarely their sole motivation. Good traders love what they do; they have a passion for the markets. To be offered a job as a trader, you need to have a genuine interest in the markets and to be able to demonstrate it to prospective employers. Passion for a subject is conveyed by your knowledge of it and enthusiasm for it. There’s only one thing more infectious than enthusiasm – and that’s a lack of it. Do you know the price of a barrel of oil and where the S&P 500 closed at last night? If you don’t know and don’t care then, almost certainly, the job you apply for will go to someone who does.
2. Understanding
Gain a basic understanding of economics and why events in one market can create a domino effect which reverberates through many others. You’ll need to keep abreast of current affairs, especially news that moves the markets and, additionally, have an understanding of
why it moves them. Economics professor Peter Navarro entitled his bestselling book of 2002: ‘If it’s Raining in Brazil, Buy Starbucks’. Can you explain the rationale behind his book title? (If not, a brief explanation is provided here in this FAQ:
What Triggers do you use to Enter a Trade?)
3. Think for yourself
Don’t be afraid of being wrong. The beauty about trading is that even the brightest and the best get it wrong sometimes. If it’s not too traumatic, think back to your maths and physics classes at school. Do you remember how the teacher was as interested in the logic and thinking that lay behind your answers as much as they were in the answers themselves? Having your own ideas and being creative is essential. By definition, really good traders don’t just follow the herd; they formulate their own views about the markets and how best to trade them.
4. Maffs!
All interviews are likely to include some sort of a numeracy test. Granted, this is a bit tricky if you’re not naturally gifted at maths. The good news is that you’re not going to be asked to do complex algebra – just to add, subtract, divide and multiply. There’s likely to be a time restriction too, but this is as much to see how well you cope under pressure as it is about getting the correct answer. To help get your brain ‘fit’ and agile, do crosswords, Sudoku or consider getting an electronic interactive game such as Nintendo’s ‘Brain Challenge’.
5. Think of others
Demonstrate that you’re a rounded and well balanced individual who cares about the needs of those less fortunate than yourself. The best way to achieve this is by doing some voluntary or charitable work. A sustained contribution of your time over many months which ends in a tangible result will impress the most. Spending a weekend clearing a footpath with the British Trust for Conservation Volunteers – although worthy – isn’t what we’re talking about here. Think in terms of delivering Shelter Boxes to the victims of a natural disaster or working with the British Red Cross to provide emergency medical supplies etc.
6. Common sense
This is an uncommon quality that all applicants will need in abundance. Put yourself in the shoes of the person looking at your CV. One T2W member who works for a well known spread betting firm says that they receive over 1,000 CVs every week! First impressions count: your CV has to stand out from the crowd. Using some basic template downloaded from the internet simply won’t cut it. First and foremost, a good CV must sell the idea that reading it will be a good investment of a prospective employer’s time. It must have seductive good looks and be impossible to ignore. Finding out that you’re an alchemist and can turn base metals into gold comes a distant second.
7. Experience
You absolutely have to have experience. Period. A youngster under 18 may struggle on this front if they can’t persuade an adult to open an account for them. However, anyone over 18 can open an account with a spread betting firm with £100 and be placing live trades in a matter of minutes. The more experience you have – the better. Having no experience at all is completely unacceptable and will guarantee your CV is filed straight into the waste paper bin. Being able to prove that you’ve been trading for X months or years sends a clear and positive message about your interest and commitment to trading.
8. Track record
There’s only one thing more impressive than experience and that’s being able to provide account statements that prove you have a consistent track record of success. Depending on your style of trading, this will range from six months to a year or more. If you’re a swing trader, placing one to two trades per week, then three months positive P&L doesn’t really prove anything. It’s barely enough for a day trader doing ten round trips or more each day. A strong equity curve with minimal drawdowns will compensate for an array of shortcomings. You can have Halitosis, dubious looking stains down your clothes and think Spiders is a sequel to Arachnophobia - the hit 1990 comedy horror film. Being able to walk a profitable walk is waaaaay more important than merely being able to talk a good talk.
Youngsters
Being young is a major advantage because it gives you options. The biggest of these is the ability to plan in advance. If you know where you’re heading in life, you can then create a route map to get you there. This is much, much harder for Career Changers and Old Timers to do. If you’re a youngster, here are some ideas to help set you on your way . . .
Keep your options open
The first thing to do is to look at where you think you’d like to be in three, four or five years time and work backwards. So, you think you want to work in the city and, right now, the idea of being a trader really floats your boat. However, be wise enough to accept that you may think differently in a year or two, so try to keep your options open and burn as few bridges as possible.
Ask questions - lots of 'em!
If you’re still at school, contact the Human Resources (HR) departments of city institutions and ask them what ‘A’ levels and Uni’ courses to take in order to get a job there. Find out how, when and where they recruit staff. Ask if it’s possible to visit and be shown around and to meet people doing the job(s) that you might be doing in the future. Enquire if they run any kind of a graduate scheme or offer internships. The former are good as you’ll get paid whereas, with the latter, you won’t! Both of them get you in on the inside. On that note, check out
this post by
highbury fx - an industry veteran who has held senior management positions with some of the U.K.'s largest spread betting companies.
The bad news: qualifications do matter
Be aware that the street wise Cockney barrow boys landing big city trading jobs are a thing of the past. These days, city institutions only recruit the brightest and the best. Competition is fierce, so getting straight As in your ‘A’ Levels and a first class honours degree in the right subject from the best university really matters. All things being equal, if you’re a graduate from Plymouth Uni’ and the next best candidate is a graduate from Corpus Christi College, Cambridge – guess which one of you gets the job! Not convinced? In which case, read the
Interview with Anton Kreil of BBC Million Dollar Traders As a former trader with Goldman Sachs, Lehman Brothers and JP Morgan - with graduates working under him - he should know!
You're only young once . . .
While being single minded and totally focused on your objective of becoming a trader is good, don’t make the mistake of missing out on the joys of life that are only available to you when you’re young. Developing into a nerdy and anti-social geek could well create problems that will affect you in the long term. So, don’t ignore your friends and be sure to let your hair down once in a while and, above all, have fun!
Career Changers
Everyone must play to their respective strengths. As a Career Changer, you have experience that The Youngster doesn’t have. There will be parallels between what you’re doing now and trading. For example, let’s say you’re a gardener. On the face of it, gardening and trading have little in common. Think again . . .
Relationships
Gardeners know which plants combine well together and how their planting schemes relate to any hard landscaping in order to produce the best results. Likewise, traders know the idiosyncrasies of different markets and instruments; how they impact one another and how best to exploit these relationships for financial gain.
The winds of change
Gardeners have to adapt to an ever changing environment, from blue skies and sunshine one day to cold winds and rain the next. Similarly, traders have to adapt from volatile trending markets one day to low volatility - range bound ones the next.
Patience and focus
Gardeners can spend many hours on their own doing simple and often repetitive tasks such as digging or weeding. By the same token, traders can spend many hours on their own, sitting on their hands, just watching and waiting, especially on days when the markets are flat and choppy.
Good judgement
Gardeners need the right tools for the job and to know how and when to use them. Trimming a hedge with a pair of secateurs isn’t very efficient! Likewise, traders also require a variety of tools and need to deploy the right ones according to the prevailing market conditions. A moving average crossover will do more harm than good in narrow ranges when the market is drifting sideways.
Respect and humility
Gardeners have to respect the environment they’re in and let it dictate what they do, not the other way around. Is the soil acid or alkaline; is the garden a south facing sun trap or a dark, dank hole? Equally, traders have to respect the markets they trade and let them dictate how and when to enter and exit them. Fighting the markets is as futile as planting an orange or olive grove on Dartmoor.
Managing risk
Gardeners need to understand the risks involved and protect themselves in the event of an accident by wearing appropriate eyewear and footwear etc. Failure to do so could result in serious physical injury. Similarly, traders have to understand trading risk and manage their exposure to it. Failure to do so could result in serious financial loss.
Of course, it doesn’t follow necessarily that good gardeners make good traders! Clearly, the two activities are poles apart but, nonetheless, hopefully you can see that there are some parallels. As a Career Changer, think about what you do currently and how it applies to trading. If you get an interview, you’re sure to be asked why you want to switch professions and how your experiences to date will support your trading objectives.
Old Timers
If you’re over 40 and you don’t have a professional background that’s readily transferable to trading, then you have to face facts. Realistically, the prospect of gaining employment at an IB or similar institution is slim. One way to do it is through the back door via the ‘old school tie’ network but, like the barrow boy traders of the 80s, this too is rapidly dying out. Alternatively, you’ll have to come up with a unique selling point that really is that – unique! Moreover, it has to be one that the IB really needs and wants. In the words of one T2W member,
“City institutions may be racist, sexist, homophobic, anti-semitic, wheel-chairist, maybe even ageist but, first and foremost, they are capitalist and if you can make them a fortune, all prejudices disappear - as if by magic!” Perhaps your best bet is to focus on getting in with a prop’ firm as they don’t place quite so much emphasis on age and qualifications. Here are a few ideas to point you in the right direction . . .
Proprietory trading firm
‘Prop shops’ as they are known are numerous. Many of them take on people remotely, so location isn’t necessarily an issue. Equally, many of them have offices and will kit you out with everything you need to trade. You just have to turn up and pay a monthly desk fee (which can be quite big). The variety and hue of deals available is too numerous to go into here. However, one thing is critical, you must be very clear about why it is that you want a job with one. What will you learn, what will you have access to – be it people, kit or favourable commissions – that you couldn’t get by trading your own account?
A double edged sword
Remember, prop’ firms will only offer you a place if they think you will make money for
them. Conversely, you have to be crystal clear about what it is that they will do for
you. Once you know this, it’s then easier to draw up a short list of firms to contact. If you’re not able to demonstrate consistent profitability then, presumably, you want their training and mentoring services. Almost certainly, this will involve you coming up with a chunk of your own cash. Beware of some so called prop’ firms that are to aspiring traders what vanity publishing houses are to aspiring authors. Don’t end up shelling out £1,000s for training that you could get for a fraction of the price elsewhere – or for free on T2W!
A catch-22
Route one into a prop firm is to have brokerage statements that prove beyond doubt that you know what you’re doing and show a consistent record of success. This raises the obvious question that if you can trade profitably for yourself by yourself, why go to a prop firm and hand over a share of the profits? Some traders will answer this by saying they don’t like being stuck at home all day on their own and want to be in an office environment with other like minded people. Additionally, many are offered excellent commission structures that they couldn’t negotiate on their own with their own broker. Although profitable, some traders have small accounts that would take many months or even years to build up to a level that generates the income they require. Once they’re backed by a prop’ firm, they can leapfrog to where they want to be financially. However, all of these ‘benefits’ have to be weighed against sharing the profits and the cost of desk fees. Things like travelling expenses may also need to be added into the equation. Only you can decide whether it’s the right path for you.
Whether you’re a Youngster, a Career Changer or an Old Timer – happy job hunting and good luck!
