Financial trader
Financial traders use their analytical minds to make quick and informed decisions about the buying and selling of assets for banks and other investors
As a financial trader, you'll use your knowledge of the financial markets to buy and sell shares, bonds, stocks, commodities, derivatives, currencies, cryptocurrencies and other assets for investors.
You'll seek opportunities to make money through price fluctuations for a banking employer and its clients, or other investors, and will execute trades to maximise assets or minimise financial risk.
Types of financial trader
There are different types of trader, for example:
- Flow traders - buy and sell products for the bank's clients on the financial markets. Products include securities and other assets such as futures, options and commodities.
- Sales traders - act as intermediaries between their clients and the market maker. They take instructions directly from the client and communicate them to the person executing the trades.
Traders may specialise in a particular product, such as shares, fixed-interest bonds or foreign exchange (FX) markets.
Before 2008, it was common for traders to use a bank's money to bet on market movements - known as proprietary (prop) trading. However, following the financial crisis, regulations like the Volcker Rule were introduced to limit risky activities by banks, including prop trading. As a result, prop trading is now usually done by separate specialist firms rather than regular banks.
Responsibilities
While there are many similarities in the work of flow and sales traders, their roles differ substantially. The main difference is risk - sales traders try not to take risks, while flow traders take risks in seeking rewards.
Work activities of a flow trader typically include:
- conducting research and data analysis to determine the state of the market
- monitoring the performance of UK and international markets
- 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)
- 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
- 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
- securing deals with new clients
- keeping market-making traders informed of relevant issues with their customers and products.
Salary
- Trainee financial traders, also known as graduate/junior/entry or analyst financial traders typically earn between £30,000 and £50,000 in London and around £25,000 to £40,000 outside of London, plus bonuses.
- Traders with a few years' experience can expect to earn in the region of £60,000 to £120,000, plus bonuses.
- Senior and high-performing traders can earn up to £250,000. In some cases, this can be higher, particularly if working in the lucrative area of derivatives.
Very high earnings are possible, especially for proprietary traders who are often paid a bonus equivalent to a proportion of the profits made. Financial firms are required to set appropriate ratios between the fixed and variable components of their employees’ total remuneration, although the previously imposed bonus cap under EU regulations has been lifted.
Additional benefits, such as non-contributory pension schemes and mortgage subsidies, are common.
Income figures are intended as a guide only.
Working hours
Experienced financial traders typically work between 7am to 6.30pm, but newer less experienced traders may need to work longer hours. Foreign exchange (FX) is 6.30am to 5pm, while oil can be 8am to 6.30pm or 9.30am to 8pm.
Part-time work is not feasible, but it may be possible to job share and career breaks are becoming more common.
What to expect
- The work is office based with most opportunities being 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 to be taken lightly.
- Overseas travel is occasionally required and, depending on the client base is likely at least once a month for traders in sales.
Qualifications
Although this area of work is open to all graduates, a degree in the following subjects may increase your chances:
- accountancy
- business
- economics
- finance
- maths
- politics
- sciences
- statistics.
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.
Skills
You will need to have:
- strong numeracy and analytical skills
- the confidence to make decisions
- excellent communication and interpersonal skills
- teamworking ability
- physical and mental stamina
- independent thinking
- alertness and the capacity to work well under pressure
- confidence, self-motivation and self-discipline
- integrity and a willingness to accept responsibility
- a strong interest in finance and the financial markets and how they work.
Work experience
Pre-entry experience is not needed but vacation work, internships and placements will give you an advantage. See individual company websites for opportunities and how to apply.
Major investment banks recruit graduate trainees and offer internships or work experience, with some offering 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're strongly advised to apply early.
Find out more about the different kinds of work experience and internships that are available.
Employers
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 including 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 such as Pearse Partners, 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 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 provide evidence to show that 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.
Professional development
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, are 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 complete the Chartered Financial Analyst (CFA) Institute CFA Program.
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.
Career prospects
Generally, new entrants are considered as trainees for the first two years. After this, you'll usually 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 Program.
Although different banks have different job titles, promotion is generally structured as follows:
- graduate trainee/entry-level trader
- analyst or trader
- associate
- senior associate
- vice president or executive director
- managing director.
It's 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've proved yourself after five years, it's not unusual 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.