Published January 21, 2008
Even with a driven personality, a trader's career life span tends to be short because of the high-stress work, reports QUAH CHIN CHIN
HAVING a career in foreign exchange (forex) trading often comes at a price, both literally and figuratively. It is exciting and lucrative - according to a survey last September by the Bank for International Settlements (BIS), trade on global currency markets is worth more than US$3.2 trillion daily. This is approximately equal to the annual economic output of Germany, the world's third-largest economy.
Closer to home, Singapore is the world's fifth largest forex centre, with an annual daily turnover of US$231 billion.
HAVING a career in foreign exchange (forex) trading often comes at a price, both literally and figuratively. It is exciting and lucrative - according to a survey last September by the Bank for International Settlements (BIS), trade on global currency markets is worth more than US$3.2 trillion daily. This is approximately equal to the annual economic output of Germany, the world's third-largest economy.
Closer to home, Singapore is the world's fifth largest forex centre, with an annual daily turnover of US$231 billion.
Despite the whopping figures, forex trading is often fraught with risks and pressure. In this article, we give you a run-through on the important aspects for a career in forex trading.
An eye on the market
'Forex traders can either work in a bank or in a company,' says Gary Lai, front office manager of recruitment firm Robert Walters. 'For most of these corporations, the traders are there for hedging purposes, but in banks, there is a group of proprietary traders who trade for profits for the bank.'
'The long-term prospects are not good, given that, in the near future, the world is heading towards a few currencies only. First, the euro. And in the Americas, the US$ is a de facto single currency, while Asia is thinking about having one currency too. So the volatility has dropped a lot, making trading harder.'
- a forex trader
The traders make money for their institutions by buying currency and selling it later at a higher price or, if they anticipate that the market is heading down, by selling at a high price first and buying back at a lower price later.
- a forex trader
The traders make money for their institutions by buying currency and selling it later at a higher price or, if they anticipate that the market is heading down, by selling at a high price first and buying back at a lower price later.
A forex trader working at a bank in Singapore describes the job as 'straightforward'. 'The person speculates which way the currency will move, much like equity traders. However, the forex market is much bigger,' he says. 'For example, if you expect the US dollar to appreciate against the Japanese yen, then you as a forex trader will buy USD so that you can sell it off later.'
As currency prices are constantly on the move, forex traders are inevitably subjected to a fast-paced environment which Mr Lai describes as 'a pressure cooker'. 'Even during lunch breaks, (traders) cover for each other; you bring lunch back and eat at your desk,' he says, adding that 'even when you go for toilet breaks, the markets can just move'.
As currency prices are constantly on the move, forex traders are inevitably subjected to a fast-paced environment which Mr Lai describes as 'a pressure cooker'. 'Even during lunch breaks, (traders) cover for each other; you bring lunch back and eat at your desk,' he says, adding that 'even when you go for toilet breaks, the markets can just move'.
Due to the high pressure that the job entails, traders should have certain characteristics.
'A good forex trader is highly adaptable, decisive and has the ability to think out of the box, especially in volatile situations,' says Angela Kuek, manager, banking and financial services of recruitment company Hudson. 'He has a steady mind, stays cool and is not easily distracted, veering off course from positioning strategies. He should have an eye for opportunities and precision.'
Mr Lai shares similar sentiments: 'To be successful in forex trading, or any trading for that matter, a person has to be very numbers-driven, able to take calculated risks; and be a very calm, collected person who doesn't get scared of losing money overnight.'
In addition, a trader should be up-to- date with current world issues which influence forex markets. 'He or she is constantly at the forefront of happenings and movements in the global financial markets,' says Ms Kuek.
Interestingly, these traits take precedence over academic qualifications. 'In the past, when you look for a trader, it's all track record. But these days, many traders have degrees, except for the European and American traders,' notes Mr Lai. 'Many brokerage houses (in Europe and the United States) don't require traders to have degrees; they need personality.'
'A good forex trader is highly adaptable, decisive and has the ability to think out of the box, especially in volatile situations,' says Angela Kuek, manager, banking and financial services of recruitment company Hudson. 'He has a steady mind, stays cool and is not easily distracted, veering off course from positioning strategies. He should have an eye for opportunities and precision.'
Mr Lai shares similar sentiments: 'To be successful in forex trading, or any trading for that matter, a person has to be very numbers-driven, able to take calculated risks; and be a very calm, collected person who doesn't get scared of losing money overnight.'
In addition, a trader should be up-to- date with current world issues which influence forex markets. 'He or she is constantly at the forefront of happenings and movements in the global financial markets,' says Ms Kuek.
Interestingly, these traits take precedence over academic qualifications. 'In the past, when you look for a trader, it's all track record. But these days, many traders have degrees, except for the European and American traders,' notes Mr Lai. 'Many brokerage houses (in Europe and the United States) don't require traders to have degrees; they need personality.'
However, he acknowledges that degrees are 'a given these days', especially in Asia.
The forex trader from the bank agrees that 'most banks would like to see at least a university degree', adding that when job interviews are conducted, the questions are 'secondary; the primary assessment will be based on the personality'.
The forex trader from the bank agrees that 'most banks would like to see at least a university degree', adding that when job interviews are conducted, the questions are 'secondary; the primary assessment will be based on the personality'.
Perks and downsides
The biggest lure of forex trading, it seems, are the monetary rewards.
'The starting pay of a trader is around $2,500, and that is just the basic pay. On top of that, you get a dealing allowance of around $500 and are entitled to profit sharing, which is normally about 5 per cent of the profit that you make above the budget given,' explains the forex trader.
'The starting pay of a trader is around $2,500, and that is just the basic pay. On top of that, you get a dealing allowance of around $500 and are entitled to profit sharing, which is normally about 5 per cent of the profit that you make above the budget given,' explains the forex trader.
He adds that a senior trader with about eight years of experience, on the other hand, can earn up to $200,000 a year, while star traders can easily reap more than $500,000.
However, the career life span of forex traders tends to be shorter than other banking positions, says Ms Kuek.
'The trading floor is a highly stressful environment, mostly for long periods at a stretch, causing higher burnout rates.'
She adds that traders also have to be prepared to work long hours which span the Asian, European, and sometimes part of the US time zones.
Where to next?
Ms Kuek explains that there are two career paths for forex traders: they can choose to become specialist traders - for example, dealing with G-10 (the Group of 10 industrial countries) currencies; or take on management responsibilities such as being heads of desks, who trade but also manage other traders and the entire portfolio.
The forex trader, however, believes that the career prospects look bright only for the 'next 5-10 years'.
'The long-term prospects are not good, given that, in the near future, the world is heading towards a few currencies only,' he explains. 'First, the euro. And in the Americas, the US dollar is a de facto single currency, while Asia is thinking about having one currency too. So the volatility has dropped considerably, making trading harder.'
He adds: 'A word of advice - investment banking is where the big money is.'
Tuesday, January 22, 2008
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