For many years there was a prevailing school of thought around what made up an ideal trader: good with numbers, good with people, and good under pressure. But as time has passed and more and more layers have been peeled back, it would appear that what makes for a truly successful trader, and more importantly, what makes for their longevity, has transformed.
The notion of the ‘ideal trader’ was a key topic across numerous conferences and industry reunions last year, where experts across the buy- and sell-side seemingly agree that the optimum mix is a high performing quant individual with a good grasp of data combined with a sociable attitude. However, coming out on top was the consistent belief that embracing the increasingly technological market is paramount.
The technical side
“The trader of tomorrow should ideally be able to do coding, data analysis, have the relationship with the sell-side and their own teams internally, as well as be an automation enabler and be able to assess technology,” said Peter Welsby, head of European FICC trading at Manulife Investment Management, speaking at the Fixed Income Leaders Summit Europe in October 2023.
Where the skillset of traders has continued to evolve, due in large part to an increasingly data-driven market, so too has the notion of subject matter expertise. No longer are traders solely required to arrive, learn and sit still. Constantly educating oneself on ever-evolving processes is paramount.
“The more modern skills, such as being able to navigate an ever-changing market microstructure or get into the weeds analysing data, are now also essential,” explains Graham Sorrell, managing director and head of EMEA and APAC equity, currency and derivatives trading at State Street Global Advisors.
“The ideal trader requires a combination of traditional and modern skills. That being said, you cannot underestimate how important it is for a trader to possess some key traits, such as being able to spot that anomaly in a large data set or juggle multiple items at once with an incredibly high degree of accuracy.
“[…] To run a successful trading team, you require a diverse mix of skills. That blend provides the foundations of an efficient and successful trading team.”
Heads of desks across the market agree that in this new age, the spectrum, educational backgrounds of candidates has also increasingly widened in order to plug ‘tech’ gaps.
Historically, the majority of traders have typically been either accounting and finance or economics majors. Today, however, desks are seeking more and more candidates qualified in maths or computer science, as well as a swathe of individuals comfortable coding or learning to code on the job.
Looking deeper into the empirical skills needed on the desk, Chris Pizzotti, senior managing director, global head of FX voice trading at State Street, says one of the most noticeable differences, compared to 10-15 years ago, is that programming skills are increasingly highly-sought-after – and is something set to be progressively important going forward.
“As a trader, if you are making markets electronically you need to be able to make adjustments to pricing and spreads as the market adapts to changing conditions. While gaining experience of the macro environment takes time, a junior trader who can program, can make an immediate contribution to the trading desk,” he explains.
Speaking to The TRADE earlier this year, Dan Burke, managing director and global head of credit e-trading at Standard Chartered, asserted that looking at his trading desk today, every team member is coding in Python, something that he explained “you would not have seen in credit trading even two years ago”.
“We now have access to so many more data sets and variables that instantly price huge numbers of bonds, so candidates need to be very comfortable with maths and statistics,” he said.
“Being able to confidently engage with this data and sculpt strategy by writing your own code is now essential, especially now as our competitors are not just traditional banking peers, but newer fintech firms as well. More and more, price formation is happening via smart algos, so our traders are morphing into a combination of programmers and risk managers.”
Nevertheless, the need for traders to cultivate real-life relationships in order to be successful has not shifted from the fore – although technical skillsets develop, market onlookers agree that being likeable remains something that should be nurtured in tandem.
“We are a long way from the stage where the only role of the human is to feed the dog that keeps the human from touching the machine,” adds Sorrell. “While so much of what is done today is done electronically, a lot of that is underpinned by broader relationships, which is one of the areas where having good people skills comes to the fore. Navigating through the period of extreme uncertainty and volatility we saw during the Covid pandemic demonstrated that.”
Thus, despite the clear importance of technological capacity, a successful trader cannot survive on data alone. A plane will fly itself, but there will always be a need for the pilot to land it – especially in times of turbulence. Therefore, market participants agree that a combination of both new skills and the conventional are essential to playing the role of the ‘ideal trader’.
In other words, what currently equates to a successful trader does not mean the death of the personality hire. Indeed, market volatility has over and over again exacerbated the need for the human side of trading.
The personal side
Typically, when hiring someone onto the desk, the easy and go-to answer for decades has boiled down to selecting someone at the top of their game. Central to this concept has been the extrovert and overall ‘people person’ – sociable, likeable and palatable. A winner. However, what being at the top of your game really means empirically has changed.
While this ability to build external relationships remains an important facet, the market appears to be increasingly valuing what individuals are really like on the inside.
Self-awareness, emotional health, stability and temperament are all personal aspects to the game also – and it’s when looking inwards that an important, and for a long time overlooked, aspect of being an ‘ideal trader’ comes to the fore. Someone with a strong mental will.
“You read a lot on people saying some traders need to be unemotional but that’s not the case. Everyone’s got emotions and it’s fine to have emotions, but you need to be aware of them,” says David McAnany, co-head of foreign exchange, EMEA at BNY Mellon.
“If you’re really, really restricted and you’re feeling negative, that’s fine, but then don’t go putting on a significant amount of risk or putting on a trade. Conversely, if you’re feeling super happy because you’ve made some money maybe it can be easy to be a little bit greedy or a bit bold which could need to be reined in just a little bit.”
The ups and downs of a traders’ life is well documented, and so it speaks to reason that the ability to cope with these often incredible highs and lows is vital – with the most successful individuals being those with the ability to be mentally consistent.
“It’s about your ability to control, you’re going to have emotions but to understand how to be able to control the emotion is the key. If you don’t feel something from trading, you’re not going to enjoy it,” explains Jordan Barnett, managing director and global head of custody FX trading and product at BNY Mellon.
Elsewhere, skillsets aside, what the market continues to value almost number one is drive – a prevailing trait from the 80s floor trader to the new millennium algo specialist. The importance of hunger and the want to develop further has never waned.
“[It’s] something which you can’t learn at university. It also knows no boundaries in terms of diversity,” adds McAnany. “It’s very psychological. Sometimes your worst enemy is yourself, something a lot of people don’t really think about. It’s important for traders to strive to be the best possible version of oneself in order to succeed. This includes things inside and outside of the office, like diet, exercise, right mental frame of mind.”
A good headspace is also closely linked to the ability to multi-task. It is a key and often ignored component to being a good fit for trading, Barnett explains.
“Studies show that multitasking doesn’t always work well. That idea is very ironic because in trading, you absolutely have to multitask, he says. “It is inherent to the job, it’s fundamental that you are able to do, listen and process multiple things at once.”
Relatedly, a key talking point across the market in recent times has been on enlisting the most well-rounded traders in order to cope with increasing change and the high stakes game being played.
Speaking at TradeTech FX 2023, Carolina Trujillo, head of e-FX distribution at SEB, made clear how times may be changing, but proactivity is here to stay.
“Gone are the days where you would come into a position and have a steep learning curve for a few months and then sit comfortably for five years. The young talent definitely wants to be challenged and wants to grow continuously,” she said.
“[…] We need great specialists, but we also want them to have many complementary skills. We want those people to learn and grow and be much more adaptable and be able to move across different paths.”
The best of both worlds
A one size fits all answer to the ‘perfect trader’ adage is an impossible feat. It is clear that where the two sides come together – both the technical and the personal – is the ability and psychological range to grow, coupled with the proactivity to keep up. Accurate self-reflection, followed by action, is the pervasive trait of the successful trader.
In the end, it’s not about the technical skills with which an individual arrives, nor the personal factors which makes for good connections. Instead, the market overarchingly believes success comes down to one’s willingness to adapt, learn and develop on all levels.
Speaking to this, Pizzotti says: “While technologies, as always, help humans improve efficiency and productivity, talent remains an important part of any trading desk.”
In order to be considered ‘ideal’ as a trader it is no longer enough to have just half of the bases covered, especially amidst times of stress. The ideal trader must put in the effort to plug their own gaps and constantly seek improvement, educating oneself on the technical side which will not magically come, as well as investing in oneself to build resilience.
“The desired skillset has matured, it’s more well-rounded and that’s how we stack the desks, with well-rounded talent,” explains Barnett.
The consistent quest to optimise your own processes appears to be the overarching key to success, but importantly, this is true for both newcomers and individuals who have spent years in the job. In a changing environment, open-mindedness is the key to longevity.
In the fast-paced world of trading, there is a reason not everyone cuts the mustard – in another profession it might be fine to take your foot off the pedal occasionally or fall back ever so slightly as the office technology upgrades, but for a trader keeping up is imperative.
“If you have a really good year trading, it has no bearing on the fact that your next year might not be as good. As a result, traders have to stay ahead of what’s coming at them,” Barnett concludes.
Amidst an ever-changing market, what it means to be well rounded in this space has enhanced, and the market agrees that if you fall behind, you will stay behind.