The trader business
The trader business is professional activity related to international trade. It is to manage the financial risk by playing on the differences in prices, mostly short term.It is a stressful job and high risk. Indeed, trading requires constant responsiveness since we must decide in real time buying or selling stocks, currencies, bonds or options. Specifically, the trader should buy some to sell to others.To achieve this, it is armed with several phones, faxes, computers that deliver real-time information and to monitor the evolution and fluctuations of international markets.Caliber and appreciates the risks, fixed or sometimes offers the prices of products and negotiate, minute by minute, transactions: purchase or sale.It has a very good command of the functioning of the economy, juggles with the most sophisticated mathematical models, statistics and computers, not to mention a perfect knowledge of English. The trader also has excellent administrative skills and management concepts.It is physically and nervously resistant because the trading rooms (or front office) in which it works are still in turmoil even though they are less noisy than before.The working days are long since the opening of international markets scholarships succeed throughout the day (Tokyo, Frankfurt, Paris, London, New York).
In general, it works in the big cities, where stock exchanges are established, large companies, brokerage firms, banks.The trader can specialize in managing equity , treasury bills , foreign exchange ( forex trader ) , raw materials or energy .A trader can become " market makers " or " market maker ". This implies an active and ongoing market presence . It must produce competitive prices at all times.A trader may address other areas of finance and the stock exchange : Portfolio Manager, Corporate Treasurer ...It can also work in the back office and control the execution of orders , collection of sales and detect any legal or accounting anomaly.The salary of a trader is very variable. It consists of a basic remuneration to which is added a premium / annual remuneration proportional to the profits obtained.This premium is sometimes greater than the salary "fixed" . In terms of wage restraint for a beginner range is between 4000 and 6000 dollars per month.
The trader is a trader of securities incurred by a bank, brokerage firm or investment. Financial, economic analyst, it anticipates the market fluctuations in order to generate profits.The trader business is professional activity related to international trade. It is to manage the financial risk by playing on the differences in prices, mostly short term.It is a stressful job and high risk. Indeed, trading requires constant responsiveness since we must decide in real time buying or selling stocks, currencies, bonds or options. Specifically, the trader should buy some to sell to others.To achieve this, it is armed with several phones, faxes, computers that deliver real-time information and to monitor the evolution and fluctuations of international markets.Caliber and appreciates the risks, fixed or sometimes offers the prices of products and negotiate, minute by minute, transactions: purchase or sale.It has a very good command of the functioning of the economy, juggles with the most sophisticated mathematical models, statistics and computers, not to mention a perfect knowledge of English. The trader also has excellent administrative skills and management concepts.It is physically and nervously resistant because the trading rooms (or front office) in which it works are still in turmoil even though they are less noisy than before.
The working days are long since the opening of international markets scholarships succeed throughout the day (Tokyo, Frankfurt, Paris, London, New York).In general, it works in the big cities, where stock exchanges are established, large companies, brokerage firms, banks.The trader can specialize in managing equity , treasury bills , foreign exchange ( forex trader ) , raw materials or energy .A trader can become " market makers " or " market maker ". This implies an active and ongoing market presence . It must produce competitive prices at all times.A trader may address other areas of finance and the stock exchange : Portfolio Manager, Corporate Treasurer ...It can also work in the back office and control the execution of orders , collection of sales and detect any legal or accounting anomaly.The salary of a trader is very variable. It consists of a basic remuneration to which is added a premium / annual remuneration proportional to the profits obtained.
This premium is sometimes greater than the salary "fixed" . In terms of wage restraint for a beginner range is between 4000 and 6000 dollars per month.
This premium is sometimes greater than the salary "fixed" . In terms of wage restraint for a beginner range is between 4000 and 6000 dollars per month.
First, before wanting to become a trader, it is good to know the daily missions of this business. A trader is a "wholesaler" who's mission is to provide liquidity in the markets, so they are market makers or market makers. Specifically, when a customer will call a bank to buy or sell a security, it is returned to the trader that will provide a buying or selling price (price range). Contrary to popular belief, a trader market maker will not take directionality in the markets. It is therefore not sensible to take risk by maintaining positions without being covered. A trader will make money through margin (spread) between the sale price and the purchase price. He can do more back and forth, that is, the more it makes transactions between customers and it will clear margin. Generally traders specialize on one type of financial product such as bonds, stocks, forex ... And most of the time they are specialized in a niche the currency EUR / USD forex trader for example.A second type of trader are, it is the traders prop (proprietary trading) ranging trader money from speculative bank to make profits for the bank. Since the subprime crisis, this type of trader tends to disappear in banks and they are now working for investment funds.Traders therefore have an important place in the trading rooms but are not the only operators there are many different desks. Traders represent approximately 25% of jobs in this trading floor. The other desks are as varied as: strategist, economist, technical analyst, IT support.
All profits from the volatility of financial assets, called simply the risk. It is by taking chances that the bank earns (or sometimes losing) money. The role of the trader's there. It has two main functions, exercisable simultaneously or not: manage risk and speculate. These two roles through his whole profession and on the respective dosage of one or the other, he will bear different names. Room marchéTraditionnellement a trading room is organized as a two-way table, vertically and horizontally.The vertical classification is that which separates the treated products. They were born five types of risk, called underlying. These underlying are : Credit risk: The risk arises from the likelihood of a company or a state to default on its debt. The treated product is similar to an insurance policy that protects the purchaser of a possible default, ie an event that would make the company or the state would be unable to honor its debt . The buyer of such insurance is a person who has a claim against the company or the state concerned. The trader gives a price to this insurance based on risk. For example Russia is more likely to default than the US so insurance on its debt is more expensive. Then, depending on economic or political conditions, the price of the insurance varies. It is said that the "credit quality" varies. And according to the price at which the insurance was bought or sold, the trader makes a loss or gain. These products are the newest on the market are those that grow the fastest. They are also those who have no future.The trader thus manages its portfolio with more or less freedom. Prop traders are pure speculators. Traders of vanilla products, have an intermediate position since a large share of their profit comes from speculation. Their job is to rate customers, as market maker but also to speculate on their market, they know well. Usually their speculative positions, which can rightly qualify prop trading positions surpass in volume of 5 to 100 times the market-making positions. Traders structured products also occupy this intermediate position but mainly generate profits through market making (through margins). Their prop trading positions are largely sidelined and often it does not even have. Whoever has the least flexibility is the market maker.
The risk arises from the movement of interest rates, which are decided by the central banks. If you borrow 5% today to one year and that the central bank suddenly decides to cut rates to 4 % per year, you can re- lend money at 4%. So you will lose money. It is the second largest market in the world in terms of volume. A contract for a nominal amount of several hundred million dollar poses no problems. It's called the " fixed income " or the debt market. Is treated in this market primarily swaps and obligations. This is the most technical and mathematically market where typically found engineers .This is the most known risk. It is linked to business activities. It is a small market compared to the debt market. Exchanges nominal agenda million dollars are the norm.The risk associated with exchange rates. It is the largest market in the world with a daily volume of 2,000 billion, increasing.Small market compared to forex or debt but also expanding, the risk is linked to commodity prices. Horizontally, the room is divided into four main branches that separate the functions between traders.Two main categories distinguish the subsidiary structured products that bases products.
Working on the basis of products such as the spot ( exchange rates ) the "cash action" government bonds etc. the market maker is simply responding to customers by quoting two-way prices, a price which he agrees to buy and another price when he agrees to sell. The positions he holds are the result of deals he realizes, and it should always cover these positions, while trying to make a profit. But the market maker is not supposed to speculate. It must respect strict position limits. Most often young recruits begin with a job market maker, which allows them to understand the market taking little risk
The vanilla products are those that generate the most income in the room. But these profits represent only 60% of the total and are constantly falling, competition from structured products. Revenues come only very few margins (even if it is), and much more speculative activities. For example, a deal of 100 million euro swap might bring EUR 5,000 margin. The profits usually come from speculation. Does Will the price of gold up or down? The Federal Reserve does these rates showed the next meeting? etc. As trader, incomes vary greatly depending on the activity. In what currency he occupies, what market, what part of the world but mostly it is a good speculator or not? And a priori not need a diploma, recruits are mostly young people 20-23 years enthusiastic but inexperienced, the bank educates its own among professional models.
The vanilla products are those that generate the most income in the room. But these profits represent only 60% of the total and are constantly falling, competition from structured products. Revenues come only very few margins (even if it is), and much more speculative activities. For example, a deal of 100 million euro swap might bring EUR 5,000 margin. The profits usually come from speculation. Does Will the price of gold up or down? The Federal Reserve does these rates showed the next meeting? etc. As trader, incomes vary greatly depending on the activity. In what currency he occupies, what market, what part of the world but mostly it is a good speculator or not? And a priori not need a diploma, recruits are mostly young people 20-23 years enthusiastic but inexperienced, the bank educates its own among professional models.
Structured products are more fashionable at the moment and they represent profits are rising sharply in recent years. These products often offer a complex index of profitability on various vanilla products. The profits then come from the margins taken by the bank during the transaction. As it is generally difficult to give a price with certainty exotic products (since they generally do not exist yet) and there is no liquidity in the market to cover them perfectly (they are often issued to unit), these margins are important even monumental. These are pure risk managers, they do not speculate as only one deal can sometimes bring 500,000 dollar. This branch employs mostly former researchers of the bank or graduates for the future and have an inclination for business. A degree of X then a pass through certain Parisian DEA is the norm.
Privileged banking, prop traders have carte blanche to speculate with the banking capital in all markets. In contrast to the market maker, it does not rate customers. High risk business but one of the best paid in the world, he is entitled to a percentage of earnings. If the trader of structured products may generate 50 million dollars a year, it must share the profits with the structuring of teams, sales and research. The trader prop it easily generates profit but does not share it with anyone. Its position is coveted, but represents an exception in terms of age within the room since prop traders are the most experienced traders. 10 years prior experience in trading is the norm.
Privileged banking, prop traders have carte blanche to speculate with the banking capital in all markets. In contrast to the market maker, it does not rate customers. High risk business but one of the best paid in the world, he is entitled to a percentage of earnings. If the trader of structured products may generate 50 million dollars a year, it must share the profits with the structuring of teams, sales and research. The trader prop it easily generates profit but does not share it with anyone. Its position is coveted, but represents an exception in terms of age within the room since prop traders are the most experienced traders. 10 years prior experience in trading is the norm.