How to Become a Trader

Preparing to Become a Trader

Determine which type of trader you would like to become. There are a variety of different types of traders which you can become, so spend some time thinking about what role and job description fits your skills and interests most. Most traders will work for a company, buying and selling shares, bonds and assets for investors. Flow traders work for banks, buying and selling for the bank’s clients. Proprietary traders buy and sell on behalf of the bank itself. Sales traders act as intermediaries between a client and the market, investing their clients’ money. They talk to clients directly, advising them on the market and investment opportunities. The main difference is that sales traders only invest where instructed by their clients, so the trader is not taking a risk with the investment. Some traders will specialise in a particular product or market area. You could also work independently as a day trader if you had enough capital.

Recognise the skills you need. Trading is a very demanding job that requires a particular skill set, as well as the ability to learn new things quickly and adapt to a constantly changing environment. Before you think about getting the official qualifications and certifications you will need, consider the general skills that a trader must demonstrate. Traders will need exceptional analytical skills and an aptitude for working with large amounts of quantitative data. Traders will also need softer skills, such as the ability to communicate well with clients and provide detailed advice on market movements and opportunities. You must be able to work well in a team, but take responsibility for yourself. Traders must have a keen interest in the workings of the market and be able to learn quickly. Traders need very strong personal discipline and motivation. You will have to make split second decisions without emotion, based on your analysis.

Learn about the world of trading. Spend some time researching and learning about trading, how markets work, and what the daily working life of a trader involves, before you commit to a course of education and training. A trader’s day will involve analysing the market, and providing detailed market reports to clients or colleagues. You will look for mispriced assets or other opportunities. You will work to keep people informed and up-to-date on relevant events and prospects in the markets, liaising closely with clients and colleagues and building strong working relationships. You will make numerous trades, acting quickly to respond to the shifting financial landscape. You may seek to gain new clients and present opportunities to them.

Get a good degree. It is not necessarily essential to have a degree to become a trader, but the competition to work for a major financial institution is considerable. Without a high-quality degree from a prestigious university, you will have a difficult time getting a foot in the door. It may in some instances be possible to enter through an administrative position, make some contacts, and work your way up to a trading position. In theory you do not need a degree in a specific subject, but the following areas are those most highly valued: Economics. Mathematics. Finance. Accountancy. Sciences.

Look for internship opportunities. While you are studying you can help yourself get ahead by actively seeking out internships or summer placements. A placement will give you valuable experience of the realities of daily working life as a trader, but it will also help you to develop contacts who may then help you get your first graduate position. Many financial institutions will run schemes, so it is often best to contact one directly to inquire about the possibilities. You can also ask your professors, who may have a contact or a recommendation for you. There are also a number of websites that list internship opportunities online that you can search through.

Becoming a Trader at a Company

Become a graduate trainee. Once you have achieved a good degree in a relevant subject, the first step is usually to get a position as a graduate trainee at a bank or investment company. These are highly competitive, so you will need a very strong academic record as well as a real enthusiasm and commitment to working as a trader. Employers will be looking for candidates who have excellent numeracy and quantitative analytical skills. But employers will also want people who have strong interpersonal and communication skills. You should try to demonstrate strong mental and physical stamina, and a preparedness to work exceptionally hard.

Try to network. The competition is fierce, and often employers will have a large number of excellent candidates for a small number of positions. In this situation networking and personal recommendations can be highly beneficial, and help you stand out from the crowd. Talk to your university and try to identify people who are working in the industry who are happy to be contacted by a fellow alumni. Ask around friends and family to see if there is someone you know working in trading. Stay persistent throughout. It is a difficult industry to break into so you will need to prepare for a long struggle, and not be put off by some setbacks.

Pursue further qualifications and certifications. Once you have got yourself onto a graduate trainee scheme, you will still be required to continue your education. You will need a licence before you are actually able to buy and sell on the markets. The requirements for this will depend on where in the world you. In the US, you must obtain a Financial Industry Regulatory Authority (FINRA) licence. In the UK, you must become an approved person by the Financial Conduct Authority (FCA). You will take the necessary qualifications as part of your graduate position. Usually the company will pay for your examinations, but you will have to commit a lot of spare time to studying and preparing. This may include attending lectures, seminars and conferences. You will also be expected to pick up the more practical everyday skills by shadowing a more senior colleague.

Move your way up the ladder. Most often, your first two years in a position will be considered your traineeship. This is when you will get certification, and help out around the office, learning the ropes on a variety of tasks. You need to work very hard, be patient, and always look for opportunities to develop your knowledge, skills and experience. After two years of satisfactory performance, you may be moved up to the next level and become a trader or analyst. You will need to have completed all your exams and be fully certified before you can trade. After a few successful years you can expect to move up to an associate position. The next step up to executive level is much rarer and harder to achieve.

Trading Independently

Recognise the risks. You can become an independent day trader, trading with your own or a client’s money. If you are thinking of doing this, ensure that you are not committing money that you cannot afford to lose. It is estimated that around 90% of day traders lose money, so you shouldn’t be thinking of trading as a way to make a quick buck to get out of a job you hate. This is a job that requires professional training and extensive knowledge. You will also need sufficient hardware and software to create your own trading desk. You should be realistic about the profits you want to make, and don’t take it lightly.

Practice with paper trading. Before you commit your own or somebody else’s money to the market, spend some time carrying out theoretical paper trades. This gives you an opportunity to experiment and learn about markets before using actual capital. There are some good electronic tools out there to help with paper trading, where instead of actually making a trade, the beginner just postulates a trade and tracks the result. Understanding the markets is essential to any trader. You need to have an in-depth knowledge of the functioning of the market, including all the terminology. You need to learn about the different securities, stocks, bonds and assets that you are interested in trading in.

Pass the certification exam. You cannot become a proprietary trader in the US until you have passed the Series 57 Exam. This is a replacement for the Series 56 Exam that comes into place in January 2016. You may have completed some day trading courses, or even have a degree in a relevant subject, but if you have not passed the exam you are not a licensed trader. You can register online for the exam. The exam consists of 100 multiple-choice questions, and takes approximately two and a half hours to complete.

Acquire sufficient capital. If you are making a go of trading, you will need significant capital to get you going. No traders constantly turn a profit, so there will be inevitable losses that you need to be able to cope with. The amount of capital you need will depend entirely on the type of trading you want to do, and how much trading you want to do. One guide estimates that someone wanting to work full time as a day trader will need around $100,000 to get started. Remember that every trade is a risk, and once you start trading you need to be managing those risks.

Create a strategy. Before you commit any money it’s vital that you spend time coming up with at least two different trading strategies that you can then apply. You should never rush into a market, but have a well-worked out plan that you can implement. This should include information on how you will enter and exit the market, what kind of capital you will invest, the frequency of trades and the value of the trades. Markets can be highly volatile. A clear plan is vital, but so is the ability to read situations and adapt to circumstances quickly. If a strategy stops working, you need to be ready to adapt it or drop it. Having multiple strategies that you can use support each other is helpful.

Set up your office. In order to start trading, you'll need access to the stock market. Unless you already work for a bank or other institution as an employed trader, you'll need to start by making an agreement with a broker or brokerage firm. If you plan to make fewer trades opt for a per trade plan with a broker, but if you will make a lot of trades discuss a staggered plan. You will need some designated personal space to pursue market trading. If this space is in your home, you may be able to use it as a tax-deductible expense. You will need the relevant software and a high-tech computer to monitor and track the markets and make quick trades.