Foreign exchange trader

Foreign exchange traders buy and sell foreign currencies to secure a profit on fluctuations in foreign exchange rates. They undertake technical analysis of financial information (market liquidity and volatility ) to predict the future rates of currencies on the foreign exchange market. They trade on their own name or for their employers.

The duties of a foreign exchange trader typically include, but are not limited to:

• Monitoring financial markets and trading activities around the world in order to identify opportunities for profit
• Trading currencies or other financial instruments on behalf of clients or firms, including speculators, investors, and corporations
• Identifying and analyzing market trends using technical analysis and other indicators
• Communicating with clients to provide information about fluctuations in currency prices and other financial information
• Calculating risk exposure to determine whether trades are suitable for clients based on their investment objectives
• Using advanced computer programs to monitor positions and execute trades
• Negotiating with foreign exchange brokers to set prices for trades
• Reporting trading activity to supervisors or using automated trading systems to place orders on behalf of clients or firms
• Identifying opportunities for profit by analyzing economic trends and news events that might affect currency prices

The following job titles also refer to foreign exchange trader:

foreign exchange handler
foreign exchange dealers
forex dealer
forex handler
forex trader
foreign exchange handlers
forex dealers
forex handlers
foreign exchange dealer

Foreign exchange traders work in the foreign exchange market, which is a decentralized market where currencies are traded. The foreign exchange market is open 24 hours a day, from Sunday evening to Friday night.

Foreign exchange traders work in banks, investment firms, and as individual investors. Most forex trading is done by large institutions, such as banks, central banks, commercial companies, investment management firms, hedge funds, and retail investors. Individual investors can trade through online brokerages. The foreign exchange market is the largest and most liquid market in the world, with an average daily trading volume of more than $6.6 trillion.

Most foreign exchange traders have at least a bachelor’s degree. Some of the most common majors for forex traders are economics, finance and business administration. Many forex traders also have a master’s degree in finance or economics. Earning a master’s degree can help traders get a higher-paying job or qualify them for a position with more responsibilities.

Most foreign exchange traders learn the skills and knowledge they need for their role while on the job. Training for this role can last from a few weeks to a few months, depending on the firm and the trader’s experience. Some firms may require that a trader has at least two years of experience in the financial industry before they hire them.

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.

Foreign exchange trader is a Skill level 3 occupation.

These occupations, although different, require a lot of knowledge and skills similar to foreign exchange trader.

foreign exchange broker
futures trader
commodity trader
securities underwriter
stock trader

These occupations require some skills and knowledge of foreign exchange trader. They also require other skills and knowledge, but at a higher ISCO skill level, meaning these occupations are accessible from a position of foreign exchange trader with a significant experience and/or extensive training.

securities analyst
investment analyst
investment fund management assistant
corporate banking manager
dividend analyst

This knowledge should be acquired through learning to fulfill the role of foreign exchange trader.

• Foreign valuta: The currencies of different countries such as the euro, dollar or yen including their exchange rate and the currency conversion methods.
• 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 govern by regulatory financial frameworks.
• Commercial law: The legal regulations that govern a specific commercial activity.
• Financial jurisdiction: Financial rules and procedures applicable to a certain location, whose regulatory bodies decide on its jurisdiction

These skills are necessary for the role of foreign exchange trader.

• Analyse market financial trends: Monitor and forecast the tendencies of a financial market to move in a particular direction over time.
• Perform financial risk management in international trade: Evaluate and manage the possibility of financial loss and non-payment following international transactions, in the context of foreign exchange market; apply instruments like letters of credit.
• 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.
• Trade foreign currencies: Buy or sell foreign currencies or valuta on the foreign exchange market on your own account or on behalf of a customer or institution in order to make a profit.
• Manage financial risk: Predict and manage financial risks, and identify procedures to avoid or minimise their impact.
• Analyse financial risk: Identify and analyse risks that could impact an organisation or individual financially, such as credit and market risks, and propose solutions to cover against those risks.
• Forecast economic trends: Gather and analyse economic data in order to predict economic trends and events.
• 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.

This knowledge is sometimes, but not always, required for the role of foreign exchange trader. However, mastering this knowledge allows you to have more opportunities for career development.

• 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.
• International trade: The economic practise and study field that address the exchange of goods and services across geographic borders. The general theories and schools of thought around the implications of international trade in terms of exports, imports, competitivity, GDP, and role of multinational companies.
• 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.
• International commercial transactions rules: Pre-defined commercial terms used in international commercial transactions which stipulate clear tasks, costs and risks associated with the delivery of goods and services.
• 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.
• Statistics: The study of statistical theory, methods and practices such as collection, organisation, analysis, interpretation and presentation of data. It deals with all aspects of data including the planning of data collection in terms of the design of surveys and experiments in order to forecast and plan work-related activities.
• Stock market: The market in which shares of publicly held companies are issued and traded.
• Actuarial science: The rules of applying mathematical and statistical techniques to determine potential or existing risks in various industries, such as finance or insurance.
• Accounting: The documentation and processing of data regarding financial activities.

These skills and competences are sometimes, but not always, required for the role of foreign exchange trader. However, mastering these skills and competences allows you to have more opportunities for career development.

• Trace financial transactions: Observe, track and analyse financial transactions made in companies or in banks. Determine the validity of the transaction and check for suspicious or high-risk transactions in order to avoid mismanagement.
• 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.
• 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.
• 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.
• 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.

3311 – Securities and finance dealers and brokers

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References

1. Foreign exchange trader – ESCO
2. Forex Trader Job Description: Salary, Duties, & More – Climb the Ladder
3. Featured image: By Tomáš Hrubý – Traders Union, CC BY-SA 3.0