I don’t think there are many careers as sexy as that of a professional trader. You buy, sell and repeat to the tune of the ever-ticking financial markets.
Currencies, stocks, futures…your inventory is intangible. No need to herniate yourself hoisting heavy boxes or to make angry faces at an underqualified middle manager on the other side of the phone. Your workday does not involve any of the nonsense that worker bees plugged into the Corporate America Matrix have to deal with on a regular basis.
Sounds like the ultimate dream job, right?
Don’t get it twisted. It is not easy peasy by any means. Yes, the perks highlighted above come with the package, but becoming a successful trader ain’t a walk in the park. It takes a lot of hard work and dedication and, like with any career, at the end some make it and some don’t.
But what does a career in trading consist of anyway?
A Trading Career – What is It?
There are many different types of traders out there. You have probably heard some of the acronyms and buzz phrases associated with the trading profession: CTA, prop trader, money manager, hedge fund trader, etc. The list is long. These traders can also work for themselves (like some CTAs [commodity trading advisors] and money managers do). They can also trade for financial institutions like hedge funds, mutual funds, proprietary trading firms, banks, etc.
But regardless of their title or the institution they work for, in a nutshell, true traders all do the same thing. Even thought they might trade different things (stocks, bonds, currencies, futures, etc.), they all open and close transactions in financial assets with the objective of making money for someone in the process.
Now the potential journey from Joe Blow to trading wizard is as diverse as the human retina.
How to Get a Trading Job – The Formal Way
One way to trade for a living is to first go to a good university and get a degree in a complementary field; for example, Finance or Mathematics.
Many candidates that opt for this more traditional route, might also supplement a Bachelor’s Degree with a more advanced one; e.g., Masters in Math/Finance, MBA (Master’s in Business Administration), PhD, etc.
These candidates have an opportunity to get hired by certain banks, hedge funds or investment firms that require a formal, higher level education, and then work their way up the ladder.
Unfortunately, a formal education does not guarantee a lucrative career in trading.
Even if a study-hard-get-a-higher-level-degree approach would land a candidate a trading job, from experience, I have learned that a formal education is as uncorrelated to trading success as stocks are to bonds; in other words, getting a college degree does not mean that a trader will ever make money (and most highly educated people don’t).
On-the-Job Training – Does it Guarantee Success?
The candidates I described in the previous section typically don’t begin trading right away once they get hired. The reality is that most trading firms would not be in business for too long if they allowed college graduates without both prior trading experience and a verifiable track record to manage any capital whatsoever.
If firms don’t require prior trading experience, they normally will want candidates to undergo extensive training – sometime years of training and/or fulfilling other job functions prior to being entrusted with the repetitive pulling of the trigger.
Unfortunately, even if you were lucky enough to get hired in a manner similar to what I previously described, no amount of training and education would guarantee that you would trade successfully once given the opportunity. It’s like training to become a professional athlete. You can study and practice baseball all you want, but that doesn’t mean you’ll ever be able to hit 95mph+ fastballs hurled at you!
And except maybe in the mutual fund world where many average traders still get paid to “manage” investments and maintain the status quo, most real traders are judged pretty harshly – normally in a black and white fashion. If you make money, you’re in – if you don’t, guess what happens? There’s no hiding behind a cubicle while you continuously lose money for the firm or its investors. That just doesn’t happen.
So What Should You Do if You Still Want to Work as a Trader?
If you dream of becoming a professional trader one day and think that you’ll never be happy doing anything else, what I have written so far may have burst your bubble.
Cheer up. It’s not a hopeless cause; at least not fully!
Look, any endeavor that may offer a potentially huge rewards in life comes with a certain level of risk. If it didn’t, everyone would be doing it and the potential rewards wouldn’t be huge. Being a full time trader is no exception.
However, if you want to give yourself the best chance possible to succeed, here’s what I suggest…
The Self Journey of a Professional Trader
If you choose the traditional route to a trading career (what I described earlier), and try to get hired without any trading experience under your belt, you might not be giving yourself the chance you deserve to make it.
Think about it…Let’s say that you were hired by a well-known hedge fund, got trained by them, and then failed miserably once given control of the ship. Then what? In this industry, news travels fast. If you screw, you may not be given a chance to trade at that level ever again. But remember that even professional baseball players are given multiple chances to prove their worth after striking out. Why wouldn’t you want to give yourself the same chance?
That is why I recommend that, if you’re truly interested in a trading career and have a passion for it, opt for the self-discovery approach. Would you really want to play basketball for a living if you couldn’t put a ball through a hoop even if your life depended on it? No, right? Trading is no different. You need to practice it and try to do it, normally multiple times, before moving on to the next level.
When I refer to “self-discovery,” I’m referring to a journey that you undertake by yourself. You become your own guinea pig. You trade your own money. You place your own trades. You evolve, by yourself, as a trader. Once you succeed, you determine if you would like to pursue a professional trading career (as I mentioned earlier).
How long should you take trying to succeed on your own? It’s a great one-dimensional question with a three-dimensional answer. It all depends on the you and on the professional trading capacity you want to fulfill; for example, some firms would require at least 18-24 months of good , continuous performance before hiring you, while some other trading jobs would require only 6 months if certain requirements are met (see our unique requirements in my trading career section).
Realistically speaking, I believe that you will never know if you are ready for prime time unless you actively trade for at least 12 continuous months. But even when you do, how long your journey winds up taking and its destination will be totally unpredictable. Furthermore, early failure(s) in trading do(es) not necessarily mean that you’re not cut out for success. This is true in any business.
Just look at all the famous people that have fallen flat out on their faces over and over before making it big…
Henry Ford failed and went broke five times before founding the Ford Motor Company. Thomas Edison failed at least 1,000 times before he successfully created the light bulb. When Babe Ruth broke the home run and batting average record in 1923, he also broke the strikeout record. One of his famous quotes sums up my advice to all the traders who visit my site:
“Every strike brings me closer to the next home run.”
It is the same with a career in trading. Before becoming successful at it, you need to see a lot of strikes!
So is a trading career for you? Let me know what you think and where you currently are in the journey to greatness.
