So you want to work on the trading floor of an investment bank? Be warned: so do plenty of other people. Along with M&A or the ‘investment banking division’ (IBD), banks’ sales and trading teams attract the highest number of applicants in the industry.
This means competition for jobs is intense. As the high standard of juniors working in Goldman Sachs’ markets division suggests, it’s not easy to get a junior trading job in an investment bank. You’ll need an impeccable academic record and – in Europe at least – it will help if you attend a select group of top schools – the London School of Economics, Imperial College and Bocconi in Italy are among the favourites.
If you want a job as a trader, the trading CVs uploaded over the past year to the eFinancialCareers resume database suggest a few other attributes that will help your cause. Most traders have studied economics or finance. Share on twitterThey cite analytical skills on their CVs. Many also have a quantitative or mathematical background.
Trading jobs have changed
If you want a junior trading job now, you need to know that the nature of trading jobs in investment banks has changed since the financial crisis. Pre-2008 it was common for traders to use a bank’s own money to best against predicted movements in the market. In recent years, however, this kind of ‘proprietary trading’ has been banned (or is in the process of being banned in Europe).
Today, therefore, the main function of traders in investment banks is to help ‘make markets’ for clients. ‘Market making’ means that banks act as the intermediary between clients who are buying X and clients who are selling X. Banks help to bring the two parties together, and will often hold a quantity of X themselves to help smooth the exchange. Much of this trading process has now been automated and takes place electronically, but traders are still needed to help clients who are placing large or complex orders and to tweak electronic trading processes. These traders also help banks to offset the risk that X falls in value while they are waiting to sell it on. This offsetting is called ‘hedging’ and will involve, for example, buying a quantity of Y, whose value usually rises when X’s value falls.
Some traders are simply ‘execution traders’ – or ‘advanced admin professionals’ – they simply ‘push buttons’ and monitor trading algorithms to make sure clients’ trades take place. Often, however, execution traders also need to watch the markets to make sure the trade happens at the right moment, or is broken down into appropriate chunks, meaning that the job isn’t completely devoid of skill.
What does this mean for the skills required of today’s traders? It means that trade ideas are still important – but that they’re important as ideas which can be communicated to clients (if you work in sales trading) or as ideas that can be used for hedging activities (if you’re a trader who’s not client-facing). – You don’t need ideas for trading with a bank’s own money. It also means that you still need to demonstrate an interest in the markets. If you can point to profits (P&L) made on your own trading strategy, even if that strategy involves fantasy money through a trading game, you will stand out.