Trader
A Day in the Life of a Trader
A trader buys and sells securities, which include currencies, stocks, bonds, and options, to make a profit. The worth of these securities are derived from the value of an underlying asset-and commodities (oil, gold, cocoa, coffee, sugar, etc.). Traders are employed by hedge funds (partnerships that invest in stocks, futures, options, and currencies), the fifteen or twenty largest banks in the United States and Europe, and large companies. Primary markets are located in New York, London, Singapore, and Tokyo. A company trades to 鈥渉edge鈥 its exposure, much like a gambler 鈥渉edges鈥 bets. For example, Microsoft sells products in Europe, where the Euro is the common currency. Today, the value of one Euro may be equal to $1.00, but in six months that value could be $1.15, meaning the value on the books is worth more when converted back into dollars. The company, therefore, has to offset its foreign exchange exposure. While all markets are cyclical, trading currency is generally the most fast-paced, and the currency trader鈥檚 days are almost always frantic. 鈥淚鈥檓 a market-maker, I make prices. I鈥檓 constantly looking at screens on which the numbers are always changing,鈥 says one trader. 鈥淎t the same time, I have to listen to six brokers shouting different prices all at the same time. I have to listen to what my colleagues are doing and what the spot desk is doing in the back. I have to listen to marketers calling me for prices for their clients. Over time, you learn how to deal with mayhem.鈥 A trader鈥檚 day starts at 7:30 a.m. and ends at 5:30 p.m., and the work is creative as well as routine. 鈥淵ou go through the same motions and your mind is set to work in the same way, but you have to be creative with ideas in order to make money. You need discipline, which is related to routine, and you must be able to make quick decisions, think fast on your feet, and be a risk-taker. Traders are disciplined and creative gamblers at heart. There鈥檚 no way you can be calm in this job. Once in a while, I break a phone or a computer. I don鈥檛 know anybody who is polite and calm during the day.鈥 Trading demands a particular temperament and an aggressive, type-A personality. Though culturally diverse, the industry is still very much an old-boys鈥 club comprised of nearly 90 percent men. 鈥淭here鈥檚 a definite culture and attitude among traders of spending and splurging and carousing with women, and you are expected to take part.鈥Paying Your Dues
An assistant or junior trader helps traders with routine work such as recording trades or managing the process of 鈥済etting the trade to the books鈥 by following SEC compliance rules. However, an assistant won鈥檛 advance very quickly; therefore attending business school while armed with a background in finance and math is essential. An MBA can earn a trader a lot more responsibility. There is tremendous competition for jobs, and getting into a top investment bank is difficult. While a particular pedigree isn鈥檛 important, attending an Ivy League school is advantageous.Present and Future
The U.S. investment market was born in 1790 when the federal government refinanced all Revolutionary War debt and issued $80 million in bonds, the first publicly traded securities. Five securities were traded in 1792-three government bonds and two bank stocks. By the end of the War of 1812, the market for securities in New York began to expand as stocks traded along with government bonds, bank, and insurance stocks. In 1817, New York brokers established the New York Stock Exchange, renting rooms at 40 Wall Street and adopting a constitution with rules governing business conduct. During the 1830s, railroads dominated trading, and the turn of the century saw the first published Dow Jones Industrial Average, with twelve stocks and an initial value of 40.74. World War I was a turning point, as America emerged from the war as a creditor rather than a debtor nation, and Wall Street replaced London as the world鈥檚 investment capital. Over the next decade, more than 1,700 foreign issues were offered publicly in the United States. Trading will continue to be profitable, and online trading is quickly revolutionizing the industry as more people on Main Street take to Wall Street. The object of trading will always be the same, but the methods in which business is transacted are quickly changing as decimalization takes hold (allowing trading to the penny), along with round-the-clock markets.Quality of Life
PRESENT AND FUTURE
In the first couple of years, a trader will be responsible for a smaller account and allowed to take fewer risks than other players with more seasoned market experience. 鈥淓xperience is the most important factor. Over time, once your employer trusts you, you鈥檒l be allowed to take more risk,鈥 says one trader. A new trader will earn a fairly small salary (by banking standards) of $80Ð$100,000, plus a year-end bonus, ranging from nothing to $100,000, though this varies greatly by field. Equity derivatives, for example, did very well in the last two years with the growth of Nasdaq, while some other fields didn鈥檛 fare as well.
FIVE YEARS OUT
Bonuses are revenues shared by the team based on the group鈥檚 and bank鈥檚 performance, and the senior traders get a larger piece of the pie. After five years, traders鈥 bonuses can reach $500,000, as they are responsible for larger accounts and allowed to take greater risks. 鈥淚鈥檝e heard stories of people who made a lot of money year after year, and then one year just blew everything they鈥檝e made. There are also people who haven鈥檛 done well but made a fortune from one great idea.鈥 Traders with a good reputation will be lured by headhunters and often jump from one employer to another.
TEN YEARS OUT
Most traders are in their 20s and 30s, work for two or five years, and then take the high road. The basic exit strategy is to simply retire. 鈥淚f they鈥檝e survived ten years without a heart attack, most traders take their $10 or 15 million and move on. Some who want a less stressful job start a small hedge fund and work out of the suburbs, attracting money from other investors. Others open a bed and breakfast in Vermont.鈥
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