Roles and Responsibilities of the Home Trader


Today we are building on the Analyst vs. Risk Manager vs. Trader concept discussed last week, by further breaking down the roles of the home trader. In total, these seven roles sketch an accurate picture of an effective trading business. Each one needs to be performed competently for you to be successful.

An accurate framework is also a big help when deciding which roles and responsibilities can be outsourced or automated by the time poor Forex trader.

Seven core roles of the home trader

Risk manager: The risk manager is responsible for designing and implementing risk management systems. This includes position sizing algorithms, correlation control, risk event management and disaster protocol.

Outsourcing: Much of this role needs to be done in-house, as it relates directly to your personal situation and objectives. Some pre-built position sizing models can be found at FX Renew.

Trader: The trader is responsible for timing the market, implementing trades and managing/monitoring positions, including protecting profits, taking profit and aborting. This is the same for both day traders and position traders.

Outsourcing: Much of this role will be done in-house. To efficiently use your time, you could set alerts. You may want to think about which tasks can be automated (perhaps you identify the market type and then run an Expert Advisor (EA) to enter into positions when the entry condition is met)

Analyst: The analyst is responsible for identifying upcoming opportunities, figuring out what will drive the market, and market type analysis. The analyst’s job is to get the direction right, and provide guidance on the correct approach for implementing trades to the trader.

Outsourcing: Much of the analytical heavy lifting is done by bank analysts. You can get this for free from a number of sources. You can use their work to form your view in a short space of time. Signals provide very specific direction and key level analysis. The weekly trading opportunities report on this blog, will help you to determine the current market type. After reviewing your information sources, your analyst part and trader part will need to work together to decide on which opportunities to focus on.

Quant/Developer: The Quant/Developer is responsible for using computers (code) and data to assist in analysing the markets and automating systems.

Outsourcing: Unless you have a technical proficiency in this area, you may need to outsource any requirements. Look for pre-built solutions, or hire a programmer to complete a job. Note that any costs need to be allocated against your trading profits. 

Researcher: The researcher is responsible for generating new trading ideas, edges and opportunities. They spend their time on system development and updating/improving the market model.

Outsourcing: While it may be tempting to outsource this role, it needs to be done carefully. Buying or learning a system from someone does not always work out, because your system needs to fit you personally before you can trade it properly. Also, the systems you end up buying are often dangerously ignorant of market types.

Psychologist/Performance coach: The psychologist deals with mental issues and peak performance. They help to eliminate self-sabotage and isolate trading problems. They help the trader and business manager set ‘stretch goals’, and support them in achieving them. They help the business manager in holding each role (and the business managers themselves) accountable for performance. They monitor for signs of stress, and make sure the trader is kept in a relaxed state, scheduling breaks when appropriate.

Outsourcing: If possible, I would recommend outsourcing some of this role. Depending on the cost, you may find that a trading group will be able to fulfil some of the required functions.

Business manager: The trading business manager has a multi-faceted role including record keeping, IT systems, accounting, capital allocation across traders and systems, marketing the trading business/raising funds, broad trading strategy (i.e. is it macro, quant, trend-following intra-day, combination) and oversight of the other roles including accountability for performance. Importantly, the business manager sets goals and objectives for the trading operation.

Outsourcing: The business manager can look to outsource some of the specific duties like accounting and IT systems. Board strategy, goals and objectives will need to be kept in house. Accountability can be outsourced to a degree to a coach or group but ultimate responsibility remains with the business manager. Additionally, look for technology to ease the burden, such as automated software for record keeping.

Balancing your roles

It may seem like managing these roles is a heavy workload, and it can be. In order to make sure you are being as efficient as possible, it can pay to do a review of your daily activities.

In analysing your activities, you may find that you are spending too much time on one area, and not enough on others. Perhaps you like trading, so you are always in and out of the market unnecessarily.

It could be that you really like being an analyst, so you are constantly going over charts. Perhaps you like system development, so you are constantly working on your trading rules, trying to get them perfect.

Think hard about what roles you are over-emphasising or neglecting, and make conscious adjustments to your schedule. You will likely find that the ones you are neglecting are the ones you need most.

About the Author

Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is the owner of a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.


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