The role of the trader is certainly one of the most iconic within investment banking. The influential deals, City lifestyle and tasty commission and bonuses make it a popular career consideration for anyone with an interest in this area. But are you cut for the trader ropes?
What are the recruiters looking for?
There are certain boxes that can be pretty straight forward to tick for some investment banks and funds. They’ll ideally be looking for a numerical, finance related degree for instance as a prerequisite for their graduate intake – and primarily from their target universities too in some cases!
Then add some relevant work experience into the mix. It’s all very well having the desired degree, but you need to be able to suck a punch with some cracking examples of times when you’ve been faced with the some of the challenges and responsibilities of the investment banking world already by the time you get round to applying for a graduate role in this sector.
Remember, a significant number of graduate places in investment banking will be filled by applicants who have already undertaken some investment banking work experience! Some investment banks will only recruit from graduates who have completed their placement and internship schemes. Finance work experience will also be a great way to collect some direct examples of you putting your analytical and numerical skills in action – also highly sought after attributes…
Recruiters are additionally looking for some shining commercial awareness from their future star traders. (You can check out the Careers Advice section for some rather handy tips on how to develop your commercial awareness!)
But there’s one more thing that makes a top trader. It’s that certain je ne sais quoi that can be the difference between success in investment banking and a real up-hill struggle. We’re talking having the right mind set…
The psychology of trading…
Having the right head for trading is, quite simply, essential. You can have all the top grades going and numerical prowess to challenge Einstein to boot, but if you can’t take the pressures and pace of the unique investment banking environment, then the truth of the matter is that you may well not succeed in this particular area…
Here’s the problem. In many ways, the trading buzz is not unlike the scenario of having a gamble and getting the rush of excitement from a big win. And that’s where the danger lies. It can be very easy to be overcome by the thrills and spills of making lots of money through a snap decision; in investment banking nailing just one great trade could potentially make you a heck of a lot of commission. The overconfidence that can emerge as a result of a good run can be a killer. You can be cruising along, believing you’re making all of the right decisions and then suddenly…boom…you’ve blown the account. Ouch.
In addition to that adrenaline rush, modern trading is now undertaken on computer screens, which means that when you aren’t seeing anything tangible in what you’re trading – just the results in your pay packet – which can make it doubly hard not to get carried away.
Risk takers with reason…
It’s true that luck can play a part in the odd deal, but the good, modern trader will have a solid strategy in place which has risk management strategies at its core. Overzealous trading played a part in running the markets into the ground a few years ago, and as a result a huge shift is occurring in regulation of the profession and the way in which traders approach the markets. Nowadays, risk management and risk strategy is at the heart of what traders do.
It can be extremely hard to define the type of character it takes to succeed in life as a trader. Until you find yourself under that kind of pressure in a trade scenario, you probably won’t be too sure yourself about how you’ll react! As a guideline, it’s useful to remember that a good trader won’t give in to their impulses and gut feeling – that just isn’t the way to go about things in trading anymore. It’s more about having the strength of mind to stick to meticulously planned out risk strategies and combine them up-to-date commercial awareness to bring in the trading bacon.
So how do you know if you’re cut out for trading?
The stereotypes imply that top traders are confident, sometimes pretty cocky Jack The Lads. And yes, there may be a few out there! But each individual will have their own reaction to the pressure and ways that they can manage it. Some Jack The Lads will crumble, where others shine! As such, you’ll find a real mixture of personalities on the trading floor. The thing they have in common is the ability to handle pressure effectively and stick solidly to their strategies.
How do you figure out if you’re one of these guys then? Think about these two points:
1) Consider times when you’ve had to make important decisions. How do you go about it? Do you stem your choices in facts and logic, or do you tend to go with your gut feeling more. You need to have the strength of mind to suppress a sudden urge to deviate away from the strategy and go with your gut on a trade.
2) Ask yourself whether you actually like being under pressure. Little things like how you go about life and feel about it on a daily basis can also be a good indication of whether a career that will throw up stressful situations regularly is for you. Pressure is an integral part of front office roles in investment banking. But if that’s not for you, don’t worry! There are plenty of other challenging opportunities in investment banking in the back office that can offer a slightly less pressured environment with more regular working hours.
How do traders deal with the pressure?
Traders will actually now tailor their trading strategies to befit their personalities. For example, some people (and I for one don’t blame them!) prefer to avoid the angst of having a particular trade ticking away overnight. Imagine the horror of waking up to find there have been drastic changes in a market you’ve got a hand in overnight, and that tasty deal you’d gone to bed feeling confident in has gone to pot!
Others prefer the long game in trading, and don’t mind letting a trade brew for a more extended period of time. As long as they’ve got their strategy right, they will all know when is the right time to stick, buy or sell.
And after you’ve mulled over that for a while…
These considerations are just a start when it comes to finding the right finance career for you. If you choose to go for a front office role in investment banking, then further down the line recruiters may use psychometric tests as a rough indication for how you currently react in certain situations and under particular types of pressure. Some of the questions they ask you in interviews are designed to wheedle out this kind of information too.
Finally, never underestimate the insight work experience will give you! Once you’re there and getting a feel for the trading test of willpower, you’ll really know whether it’s for you.
For years I have studied American finance regulations. All the information in this blog is sourced from official or contrasted sources from reliable sites.
Salesforce Certified SALES & SERVICE Cloud Consultant in February 2020, Salesforce Certified Administrator (ADM-201), and Master degree in “Business Analytics & Big Data Strategy” with more than 13 years of experience in IT consulting.