Currency trading – or foreign exchange trading – is one of the largest commodities markets within the financial sector. Fast-paced, dynamic and hugely volatile, it is also one of the most profitable – especially if you have what it takes to become a profitable trader.
So, if you’re patient, diligent and good with numbers, why not consider a career in this potentially lucrative field? This is how to become a professional currency trader.
1. Research the Profession
Before making any career choices, it’s important to do your research. This will give you a clearer idea of the downsides of your chosen profession, as well as the benefits.
In a nutshell, currency traders focus on the foreign exchange market – also known as the Forex market – and look to execute trades based on the performance of two types of currency against each other.
Although the basic concept is simple – you are essentially trying to sell for a higher price than what you paid – knowing and understanding the political and socio-economic factors behind market shifts (and developing a proven strategy to exploit them) are what separates profitable traders from the rest.
Although many investment banks, equity firms and Forex companies employ dedicated traders, there’s also a significant number of ‘amateur’ and part-time participants in the market, with many looking to supplement their income or simply trade for fun.
Either way, your day-to-day responsibilities may include:
- identifying and executing potentially profitable trades
- developing and adhering to responsible trading strategies that minimise loss
- researching market conditions and keeping abreast of any external factors that may affect currency rates, either negatively or positively
- building positive relationships with brokers and other industry players
- meeting profitability targets (if employed by a bank or investment firm).
Essential Skills and Qualities
While Forex traders come from a wide variety of backgrounds – both in terms of education and experience – they all share several must-have skills and qualities, including:
- patience – many experienced traders assert that patience and discipline are hugely important aspects of the role; after all, when things are slow, it can be all too easy to get itchy fingers and make a poor – and potentially very costly – trade
- diligence – profitable traders don’t buy or sell on a whim; they look at every possible angle of every trade and weigh up the pros and cons before executing
- attention to detail – whether it be spotting something in the charts that others may have missed or picking up on an obscure news story that could have far-reaching consequences, it’s vital to keep your eye on the ball and take everything in
- research skills – if you want to understand why a certain currency may be on the way up or down, then you need to consult a variety of resources; the ability to conduct effective and reliable research can often give you a competitive edge
- global awareness – often, currency peaks and troughs are a direct result of political actions or socio-economic circumstances; keeping on top of developments relevant to your chosen currencies and, more importantly, understanding how they might have an effect, is a highly useful skill
- numerical skills – it may go without saying, but your trading career will be a lot easier if you have a firm grasp of numbers, including how to read and analyse data and make quick calculations.
Working Hours and Conditions
One of the most appealing aspects of currency trading is its flexibility, meaning that, depending on your circumstances, you can work as little or as much as you like.
If you are employed by a bank or investment firm to trade on their behalf, then it is likely you will work shifts within your company’s offices – usually of around 12 hours. Depending on the regional market that you’re operating in, this can entail working nights and weekends, too; if you’re based in London, for example, but you trade within the Hong Kong market, then expect plenty of graveyard shifts to reflect that market’s opening hours.
Alternatively, if you are self-employed or choose not to trade on behalf of a company, then you can be a lot more flexible. Forex, like most markets, can be accessed entirely online, with knowledge of and access to a trading platform the only requisite; therefore, many decide to work from home or, if they are particularly successful, to embrace the digital nomad lifestyle and execute trades while travelling the world.
Finally, many hobbyists and casual participants trade part-time, either before or after work. While this may entail a different strategy, the advent of automated and semi-automated software programs and platforms makes it easier to adopt this low-risk, low-reward approach, with many simply trading for the thrill.
As you would expect, earnings for currency traders are heavily dependent upon how successful they are and how well they perform, although much also depends on how you choose to work.
If you’re employed by a bank or an investment firm, then you’ll receive a starting salary of between £26,000 ($33,800) and £32,000 ($41,600), although with experience this can grow to anything from £45,000 ($58,500) to more than £150,000 ($195,000), depending on performance. As with all investment arms, bonuses and commissions can also make a significant impression on your earnings, with six and even seven-figure sums not uncommon at the top firms.
Independent traders, meanwhile, are reliant upon their own profit margins to provide income.
Financial markets play a key role within global economies, meaning that there will always be jobs within the sector and currencies to trade. During recessions and periods where there are tough market conditions, it is likely that there will be smaller margins for profit and even a temporary lack of appetite for trading; as the recent global banking crisis showed, though, these effects are usually only temporary.
2. Get the Qualifications
Licensure for traders is surprisingly lax, meaning that, in most jurisdictions, you do not need any form of permit or specially-granted licence in which to execute a trade. Indeed, although knowledge of how Forex (and markets in general) operate is essential, many traders are self-taught or possess no formal education in this area.
If you are planning to go it alone, then it is important to look online to find a good broker. These are the middlemen who provide access to the platform and arrange the actual trades between buyers and sellers. Often, they will also provide advice and additional access to a demo account so that you can practise trading in live markets but with fake money.
Alternatively, if you’re looking to get hired by one of the traditional investment giants, then you’ll need a postgraduate educational background in a relevant field, such as economics, finance or data science, while many traders also possess an MBA. Be wary, though: due to the lucrative nature of these positions, competition can be fierce, and it’s not unheard of for top investment companies to demand a relevant PhD as a minimum.
3. Land Your First Job
As previously mentioned, landing a job at a top investment firm isn’t easy. However, if you have the right blend of the qualifications and skills already listed, and you are prepared to put in long hours in stressful and demanding conditions, then it’s certainly not impossible. Just make sure you research the various internships and graduate schemes that are on offer at all the big players.
On the flipside, if you’ve already got experience as an independent trader, then your lack of qualifications may not necessarily matter. If you can prove that you have been consistently profitable for an extended period of time in your trading, then firms may overlook your academic shortcomings in favour of your experience and proven track record.
4. Develop Your Career
Again, how far you go in your currency trading career is down to your own motivations and circumstances. For instance, if you wish to work for an investment organisation, then there is the scope to progress beyond the trading floor and into executive management or strategy. As you develop your network of contacts, other career opportunities may arise, too, such as working in an advisory capacity for industry clients or government organisations.
Once you have a proven and established reputation and a consistently healthy profit margin, you might also be approached by investors to trade on their behalf. If this is the case, then starting your own company can be an appealing prospect from a workload management perspective, and you’ll get to play the market on your own terms.
Of course, you might just be happy to put up a small amount of capital and try to get a little return on your investment each month; it really is up to you. While the percentage of profitable Forex traders is generally low, there are numerous online guides that can provide tips and assistance in how to formulate a strategy that yields results, and with discipline and know-how, you could gradually transition from your hated 9-to-5 job to a viable and more exciting alternative.
That’s the key, though: it really is up to you.
Currency trading is a hugely risky and complex market, but if you play it right, then the potential rewards can be life-changing. If you think that you have what it takes, then start learning as much as you can (in fact, don’t think of investing a single penny until you understand what you’re doing), and who knows? A simple evening hobby could potentially lead to one of the most lucrative career paths in the world!
Have you ever tried your hand at currency trading? Tell us about your experiences in the comments section below!