Foreign Exchange Trader

A Day in the Life of a Foreign Exchange Trader

A foreign exchange trader looks at the various factors that influence local economies and rates of exchange, then takes advantage of any misvaluations of currencies by buying and selling in different foreign exchange markets. Those with the most information, the best contacts, and strongest decision-making skills come out ahead. “It’s the wild west of trading,” wrote one foreign exchange (FX) trader, “and remember: A lot of people died in the wild west.” Those who are comfortable with a high degree of risk and uncertainty should look into this exciting career. A foreign exchange trader manages an account, looks at reports, reads the press from various countries, and most importantly, spends time on the phone. He may spend up to 80 percent of the day on the telephone and working at his computer. Traders must act fast to exploit valuation differences: “You’ve got seconds to decide how millions of dollars should be spent,” said one trader, “so you have to have confidence.” Confidence ranked second right after “guts” in qualities important in new traders. A sharp analytic mind is also crucial; while a variety of degrees are helpful, those with technical or scientific analysis backgrounds tend to find the job more manageable. Accounting strengths are helpful in keeping track of positions and profit and losses throughout hectic days. FX traders specialize early in their careers, following one currency and the underlying economy of its country. Many traders specialize in groups of geographically related countries, such as those who trade Central American currencies or Pacific Rim currencies. Since foreign exchange trading is international, it can take place at any time of day. Many managers run twenty-four-hour shops and do business around the clock; most employees do have regular shifts, but world events may demand being summoned from bed late at night. Eighty percent of the traders we surveyed were satisfied with their choice of profession, but over 40 percent responded that they were exhausted at every day’s end.

Paying Your Dues

Economics, mathematics, and statistics majors have a distinct advantage in applying for positions in this field, as do history majors whose coursework included economics. A bachelor’s degree is required. Any experience in a trading environment is valued, as is any work that demonstrates the ability to work hard, make fast and accurate decisions, and manipulate numbers. Many employers appreciate study abroad, international work experience or fluency in a foreign language. As a number of entry-level positions are account representatives as opposed to trading positions, candidates who have good interpersonal skills and access to capital may have an advantage. While on the job, keeping abreast of changes in the industry is important; continuing education is the norm. Few people leave to get advanced degrees in this field-there is a reverse snobbery associated with most trading floors that holds that traders are born, not made, and that no advanced degree will ever make anyone a more competent trader.

Present and Future

Foreign exchange was originally the province of multinational corporations that would collect revenue in one country and need to return the funds to the parent corporation in another. This left the companies extremely vulnerable to interest rate shifts over short periods of time and made valuation of foreign assets difficult if not impossible. The in-house foreign exchange manager determined areas of exposure and maintained financial equilibrium among corporations and their foreign outposts. As these divisions proved profitable on their own, a market developed in speculating risk in the 1940s and 1950s in countries with exchangeable currency. To date, these companies control the flow of over $74 billion around the globe each year. The market for foreign exchange is growing steadily, and opportunities for those interested in the business should grow. However, legislative changes should shape the way that foreign exchange markets do business over the next ten years, whether through the establishment of a clearinghouse system, conversion to a different form altogether, or the protection of the status quo.

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Quality of Life

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