Financial traders buy and sell financial products such as assets, shares and bonds for private clients, banks or companies. They monitor the financial markets closely and aim to maximise profit and to minimise risk through their transactions.
Types of financial trader
There are different types of trader, for example:
- 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.
- 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.
The duties of a flow trader typically include, but are not limited to:
- conducting research and data analysis to determine the state of the market
- monitoring the performance of national 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.
The following job titles also refer to financial trader:
financial trading expert
natural gas financial trader
financial trading specialist
proprietry options trader
financial instruments trader
financial trader trainee
Financial traders work in the fast-paced, high-pressure environment of the trading floor. They are constantly monitoring financial markets around the world, making split-second decisions to buy or sell shares, bonds, and assets.
Financial traders work long hours, often starting before the markets open and working late into the night. They may also be required to work on weekends. The job is extremely stressful, and traders must be able to handle large sums of money and make quick decisions under pressure.
Financial traders need a minimum of a bachelor’s degree to work in this field. Some of the most common majors for traders are finance, economics and mathematics. Some financial traders also have a master’s degree in business administration (MBA). An MBA is not required to work as a financial trader, but it is an advantage.
Most financial traders learn the specific skills and knowledge they need for their role while on the job. They may start as entry-level financial professionals and work their way up to trader. Some financial traders may have previously worked in other roles in the financial industry, such as analysts or accountants.
Financial traders may also receive additional training in the form of seminars and conferences. These events can help them learn about the latest trends in the financial industry and how to apply them to their work.
Although not always required, certification enhances professional standing and is recommended by employers. Financial traders can earn the Chartered Financial Analyst (CFA) certification, sponsored by the CFA Institute. To qualify for this certification, applicants need a bachelor’s degree or 4 years of related work experience and must pass three exams, which require several hundred hours of independent study. Applicants also must have an international passport. Exams cover subjects in accounting, economics, securities analysis, financial markets and instruments, corporate finance, asset valuation, and portfolio management. Applicants can take the exams while they are getting the required work experience.
ISCO skill level
ISCO skill level is defined as a function of the complexity and range of tasks and duties to be performed in an occupation. It is measured on a scale from 1 to 4, with 1 the lowest level and 4 the highest, by considering:
- the nature of the work performed in an occupation in relation to the characteristic tasks and duties
- the level of formal education required for competent performance of the tasks and duties involved and
- the amount of informal on-the-job training and/or previous experience in a related occupation required for competent performance of these tasks and duties.
Financial trader is a Skill level 3 occupation.
Financial trader career path
These occupations, although different, require a lot of knowledge and skills similar to financial trader.
Long term prospects
These occupations require some skills and knowledge of financial trader. They also require other skills and knowledge, but at a higher ISCO skill level, meaning these occupations are accessible from a position of financial trader with a significant experience and/or extensive training.
It’s normal for financial 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. Traders who prove themselves after five years are often 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.
Many investment banks use an “up or out” policy, in which entry-level investment bankers are either promoted or terminated after 2 or 3 years. Investment banks use this policy to ensure that entry-level positions are not occupied long term, allowing the bank to bring in new workers.
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.
Essential knowledge and skills
This knowledge should be acquired through learning to fulfill the role of financial trader.
- Financial products: The different types of instruments that apply to the management of cash flow that are available on the market, such as shares, bonds, options or funds.
- Economics: Economic principles and practices, financial and commodity markets, banking and the analysis of financial data.
- Financial markets: The financial infrastructure which permits trading securities offered by companies and individuals governed by regulatory financial frameworks.
- Actuarial science: The rules of applying mathematical and statistical techniques to determine potential or existing risks in various industries, such as finance or insurance.
- Financial jurisdiction: Financial rules and procedures applicable to a certain location, whose regulatory bodies decide on its jurisdiction
Essential skills and competences
These skills are necessary for the role of financial trader.
- Communicate with customers: Respond to and communicate with customers in the most efficient and appropriate manner to enable them to access the desired products or services, or any other help they may require.
- Protect client interests: Protect the interests and needs of a client by taking necessary actions, and researching all possibilities, to ensure that the client obtains their favoured outcome.
- Analyse market financial trends: Monitor and forecast the tendencies of a financial market to move in a particular direction over time.
- Analyse economic trends: Analyse developments in national or international trade, business relations, banking, and developments in public finance and how these factors interact with one another in a given economic context.
- Maintain records of financial transactions: Collate all the financial transactions done in the daily operations of a business and record them in their respective accounts.
- Obtain financial information: Gather information on securities, market conditions, governmental regulations and the financial situation, goals and needs of clients or companies.
- Advise on financial matters: Consult, advise, and propose solutions with regards to financial management such as acquiring new assets, incurring in investments, and tax efficiency methods.
- Operate financial instruments: Work with financial instruments such as stocks, bonds, mutual funds and derivatives.
- Offer financial services: Provide a broad range of financial services to clients such as assistance with financial products, financial planning, insurances, money and investment management.
- Provide financial product information: Give the customer or client information about financial products, the financial market, insurances, loans or other types of financial data.
- Handle financial transactions: Administer currencies, financial exchange activities, deposits as well as company and voucher payments. Prepare and manage guest accounts and take payments by cash, credit card and debit card.
Optional knowledge and skills
This knowledge is sometimes, but not always, required for the role of financial trader. However, mastering this knowledge allows you to have more opportunities for career development.
- Banking activities: The broad and continuously growing banking activities and financial products managed by banks ranging from personal banking, corporate banking, investment banking, private banking, up to insurance, foreign exchange trading, commodity trading, trading in equities, futures and options trading.
- Securities: The financial instruments traded in financial markets representing both the right of property over the owner and at the same time, the obligation of payment over the issuer. The aim of securities which is raising capital and hedging risk in financial markets.
- Stock market: The market in which shares of publicly held companies are issued and traded.
- Modern portfolio theory: The theory of finance that attempts to either maximise the profit of an investment equivalent to the risk taken or to reduce the risk for the expected profit of an investment by judiciously choosing the right combination of financial products.
- Investment analysis: The methods and tools for analysis of an investment compared to its potential return. Identification and calculation of profitability ratio and financial indicators in relation to associated risks to guide decision on investment.
Optional skills and competences
These skills and competences are sometimes, but not always, required for the role of financial trader. However, mastering these skills and competences allows you to have more opportunities for career development.
- Make investment decisions: Determine whether to buy or sell financial products such as fonds, bonds or stocks in order to enhance profitability and to reach the best performance.
- Perform stock valuation: Analyse, calculate and appraise the value of the stock of a company. Use mathematic and logarithm in order to determine the value in consideration of different variables.
- Assess risks of clients’ assets: Identify, evaluate and determine the actual and potential risks of your clients’ assets, considering confidentiality standards.
- Develop investment portfolio: Create an investment portfolio for a customer that includes an insurance policy or multiple policies to cover specific risks, such as financial risks, assistance, reinsurance, industrial risks or natural and technical disasters.
- Review investment portfolios: Meet with clients to review or update an investment portfolio and provide financial advice on investments.
- Create a financial plan: Develop a financial plan according to financial and client regulations, including an investor profile, financial advice, and negotiation and transaction plans.
- Advise on investment: Assess the customer’s economic goals and advise on the possible financial investments or capital investments to promote wealth creation or safeguarding.
- Communicate with banking professionals: Communicate with professionals in the field of banking in order to obtain information on a specific financial case or project for personal or business purposes, or on behalf of a client.
- Manage financial risk: Predict and manage financial risks, and identify procedures to avoid or minimise their impact.
- Monitor stock market: Observe and analyse the stock market and its trends on a daily basis to gather up-to-date information in order to develop investment strategies.
- Trade securities: Buy or sell tradable financial products such as equity and debt securities on your own account or on behalf of a private customer, corporate customer or credit institution.
- Forecast economic trends: Gather and analyse economic data in order to predict economic trends and events.
ISCO group and title
3311 – Securities and finance dealers and brokers
- Financial trader – ESCO
- Securities, Commodities, and Financial Services Sales Agents : Occupational Outlook Handbook – U.S. Bureau of Labor Statistics
- Financial trader job profile | Prospects.ac.uk
- Trader Job Description: Salary, Duties, & More – Climb the Ladder
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