Life as a Professional Trader: A Detailed Insight
It was fascinating to read previous responses discussing topics such as controlling emotions and comparing the profession to sports. For the purposes of this article, we will assume that the term ldquo;professionalrdquo; refers to someone who works for a financial institution, such as a bank, a broker, or a fund.
Requirements and Qualifications
First things first. To trade for a financial institution in most countries, you will need specific licenses. In the United States, this often involves passing the Series 7 exam administered by the Financial Industry Regulatory Authority (FINRA). Other certifications, such as the Chartered Market Technician (CMT) or the Certified Financial Technician (CFT), can also be valuable.
The path to becoming a professional trader is rigorous and demanding. A solid educational background in finance, economics, statistics, programming, or related fields is typically required, along with a proven track record of successful trading. It’s not about being proficient in concepts like ldquo;fair value gapsrdquo; or ldquo;the smart moneyrdquo;—at least not in the way retail traders often seem to focus on today.
Role and Responsibilities
Although the image of a professional trader might suggest someone with complete freedom to trade according to gut feelings or personal strategies, this is not always the case. Institutional traders operate within the financial objectives and risk tolerance constraints of their institutions. Their primary role is executing trades, supporting the institution's portfolio management, managing risk, and achieving specific tactical allocations.
Traders typically fall somewhere in the middle of a financial institution's hierarchy. They often specialize in specific asset classes such as fixed income, equities, alternative investments, foreign exchange, or trading strategies such as arbitrage, market making, algorithmic trading, and high-frequency trading.
Working Conditions and Daily Life
Many believe that professional traders sit in front of monitors all day, making impulsive decisions based on market whims. This is a common misconception. The reality can often be quite different. Traders indeed sit in front of multiple monitors throughout the day or in front of one big one, as their work involves constantly consuming a never-ending stream of information. They work long hours, particularly during periods of high market volatility. This can be a stressful but ultimately rewarding profession where some people may experience burnout quickly.
Trading is a multi-faceted and complex role that requires a blend of technical skills, thorough knowledge of financial markets, and the ability to make informed, rational decisions under pressure. The journey to becoming a professional trader is both challenging and fulfilling, and the role, while demanding, can offer immense satisfaction and financial rewards.