Career objectives for retail traders by Sean Lee

The retail FX industry continues to grow and the career opportunities for passionate and talented traders are certainly plentiful. Last year’s lull seems to have weeded out many of the less-competitive market participants leaving us with a much stronger base. This is badly needed, as we know that the next generation of traders, market-makers, commentators, strategists etc will come from this base.

From what I can gather, most of the retail market’s current full-time participants are still ex-interbank employees. But with an average age of 50+, it’s obvious that hedge funds will have to find fresh trading talent, Algos will need new maths geniuses, blogs will need new commentators etc.

So if you think you are a talented trader and you are looking for a full-time career in the FX space, which direction should you be looking?

The glamorous option is to be a full-time trader. To be brutally honest, I’d suggest that less than 1:500 serious traders will even make it as a full-time trader. But as we know, similar to the golfing industry for one, the really successful traders will make vast amounts, moderately successful traders will make a decent living, and the rest won’t make it. The criteria are very simple, maximise your profits and minimise your losses. Easier said than done. You will need to be able to demonstrate an ability to increase risk when you are in a strong position, and squeeze as much out of this winning position as possible. You will also need to be able to demonstrate the ability to cut and forget about losing trades. You will need the passion to watch the market 24/5, and the energy (both physical and mental) to nurture strategies/positions over periods of weeks.
You don’t necessarily need to be a great trader in order to build a big Hedge Fund, although it does help especially in the beginning. Money managers are less about maximising profits and more about steady returns. In a way, you start at the end, decide on what return profile you want, and build from there. As an example, a very successful interbank spot dealer from the 80’s and 90’s built a GBP2 billion hedge fund around a return profile of 6% annual return and monthly drawdowns of less than 0.5%. He knew that asset managers would be keen to allocate to FX as an asset class but were turned away by the big swings in p/l and large monthly drawdown profiles. It can be less about the returns and more about the risk management.
Signal-selling has become a huge part of the retail industry over the last 2 years and this offers the talented strategist an opportunity to earn income off their good calls without actually needing to be a capable trader. Most banks (when they were still actively prop trading) employed big teams of analysts/strategists in order to provide trading ideas to their trading teams. The skill sets are actually completely different. Maths students, number crunchers, or simply those who are lacking the physical and mental energy required to be a trader, might be better suited to this avenue.

That’s the simplified version.

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