Goldman Sachs traders posted losses on just six days during the second quarter. They booked more than $100 million in profits on 10 days. Needless to say, there’s plenty of money to be made as a Wall Street trader. Plenty of stress too.
If you want to be a successful trader on Wall Street, you better be highly intelligent and have an inspiring work ethic. You also need to have a certain personality – strong, fearless but also humble. Here are the six traits you’ll need if you want to make it.
An Early Riser
Any good trader gets up early – like, really early. While the markets in New York don’t open until 9:30 a.m. EST, successful traders want to get a sense of what’s happening in international markets, said Evan Lerman, principle at IJC Partners, a Wall Street search firm. Western economies have become incredibly intertwined with global markets, making it imperative for any trader to have a strong macro view, he said.
A trader at a boutique investment firm in New York says he often wakes up before 5 a.m. to get a snapshot of the Asian markets before getting in to work.
Although it’s almost impossible to do, a good trader removes as much emotion from the process as possible, Lerman said.
“How did you feel when market dropped 1000 points in a day?” Lerman asked. It’s gut-wrenching for anyone with a position in the market, but good traders need to view the situation dispassionately as a buying opportunity, he said. “When disaster strikes, you have to look at it as just data.”
“There are different types of traders, but a common characteristic to most of them is a cool head that knows not to fall in love with a market view when the tape runs against you,” said George Stein, managing director of New York-based Commodity Talent. Stubborn traders often find themselves looking for work.
This is particularly true for those who take directional bets, either on flat price or spread positions, Stein said. “They must have the confidence in their ability to see in future what others in the market do not, and assess whether events undermine or reinforce that view.”
While flexibility is paramount, good traders follow a certain methodology, particularly in the morning before the market opens. “There is no longer room for gun slingers who just wings it,” Lerman said.
You must come in with a plan and check off research activities as you go. “Good traders look at consumer data and expansion around the globe – any news that came out overnight,” he said. “They don’t deviate unless something causes them to.”
Ability to Handle Stress
Managing hundreds of millions of dollars can be, let’s say, stressful. To put in multiple decades at a trading desk, you can’t bring that stress home with you. It’s easier said than done. The trader at the boutique firm, who asked to remain anonymous, said he gets crushed with stress even on Sundays with the thought of Monday morning close to his mind. “It can be tough on family life – always worrying about tomorrow.”
Good traders hedge risk, even when the market is on a tear. “Smart traders are buying yet also shorting in case there is a downside pull,” Lerman said. When in doubt, follow Warren Buffett’s advice, he said: “Be fearful when others are greedy and greedy when others are fearful.” That theory seemed to work out OK for him during the economic crisis.