My Working Day: City Trader
The markets open at 8am every morning, but our day begins an hour or so earlier. That’s when we start to digest the overnight news and notable moves in the US and Asian markets, as well as any company-specific updates. Outstanding trades from the previous day are also lined up in our systems along with any new orders we have, and trading instructions are discussed and implemented. Once the markets open, we may amend our strategy depending on stock market performance, so it’s an ever-evolving environment.
Markets are very structured and follow a precise timetable, so they can appear ‘typical’. But curve balls are frequent and you never know what to expect. Back in March, the markets were extremely jittery, and the banking sector saw a lot of value wiped out due to the havoc surrounding the fall of Silicon Valley Bank followed by the bailout of Credit Suisse. The chaos surrounding the ex-chancellor Kwasi Kwarteng’s mini-budget at the end of last year also saw turmoil in both the bond and equity markets, as well as a near 40-year low in the pound. While days like those are often unexpected and can be nerve-wracking, they can also provide opportunities.
We’re plugged into all the newswires and get updates and releases as soon as they come through. We also receive information and analysis from the broking community who keep us informed of market developments and trading observations. Markets are deemed to be ‘efficient’ – meaning all available information is priced in, and any new information that comes to the fore tends to be reflected rapidly. However, keeping on top of the news is vital, and reacting to a significant announcement a few seconds too late can be the difference between a profit or a loss. News also comes in all shapes and sizes. A lot of it may seem like humdrum bulletins from central banks or stockbroker reports, but back in 2018 when Kylie Jenner posted a negative tweet about Snapchat, the company lost over $1bn of market value, resulting in huge investor losses.
I work for a small firm, sitting alongside my fund manager. Investment ideas and changes to the portfolio are part of ongoing discussions – fundamental analysis, upcoming catalysts and price sensitivity all determine how you would approach a trade. Buying shares in a company you expect to report strong earnings in a few months’ time might be approached gradually, taking advantage of any share price dips and implementing a volume cap. However, if you have taken a short position in a company which has just been bid for by a competitor at a 30% premium to the market price, your strategy goes out the window and you must act fast – factors like liquidity suddenly become more important than price.
The main challenges of the job come from factors that are outside of our control. That might include a lack of liquidity or a knee-jerk reaction to a news announcement. Markets can suddenly fall on some unforeseen macro data, but then recover quickly – the challenge is finding the balance between being agile enough to change your plan quickly and effectively, while trying not to get caught up in the panic.
I’m no scientist but I think stress – in small doses – can be a good thing. As a trader, it can boost your adrenaline and help you focus. I feel the same about pressure. We have the responsibility of managing other people’s money and we should never be complacent about what we’re doing. When things go awry, it’s important to remain level-headed, look at all the information you have and take a rational approach. We can only do our best, and it helps to remember that absolutely no one gets 100% of their trades right all the time.
Avoiding impulsive or emotional trading decisions is something that comes with experience. When I was learning the ropes, I was often nervous, and felt disappointed if I didn’t execute a trade as well as I could have. Equally, a successful transaction can lead to overinflated confidence, which might result in some very detrimental outcomes. You learn quickly to rein that in.
Gut instincts and impulses can often be right and shouldn’t necessarily be ignored. But decision-making based purely on emotions doesn’t have a place. A fantastic book I read is The Hour Between Dog and Wolf by John Coates, a Wall Street trader turned neuroscientist. He discusses the biochemistry behind stock market investing and the pitfalls of hubris when making trading decisions. It’s a great read, even for those outside the industry.
Compliance systems prevent us from breaching controls – these might be around trading a sanctioned entity, going over a disclosure threshold or hitting a margin limit. We also run daily sheets to show us where any potential hazards in the portfolio are, so these can be managed and mitigated. Risk management can sometimes appear to be the ‘bad cop’ who likes to come down hard, but it’s crucial. Things are improving and, ultimately, good risk management should lead to increased profitability, so I’m all for it.
As a trader, you have to be so on top of any regulatory changes. Regulators are frequently updating their requirements on banks and asset managers. Protecting investors first and foremost is key, as well as ensuring we are meeting our regulatory obligations. Situations can change quickly. For example, when Russia invaded Ukraine last year, a raft of individuals and entities were swiftly placed on sanctions lists, leaving a lot of firms scrambling to ensure they didn’t have exposure in the wrong places. The early stages of Covid also saw sudden changes to regulatory controls. Such events certainly keep us on our toes.
Men still make up the majority of this business, but I’m not sure ‘dominated’ is still an applicable word in this industry. It’s shifting in the right direction, and employers are far more aware of the need for further diversification, which is great. There is a fine line though and, if pushed too far, it becomes patronising. Women should be hired because they’re valuable, hardworking, conscientious and the right person for the job.
It’s a misconception that women need to be ball-breakers to succeed as a trader. It’s just not the case. Yes, you need to be disciplined and diligent, and perhaps a bit more ‘left brained’. Days can be stressful, so a bit of friendliness and banter can go a long way. It’s a great industry with great people working in it and, if you’re a young woman looking to embark on a career in finance, don’t even give the sex issue a second thought – it really is open to everyone.
Once the markets have shut and any final trade booking is done, I like to focus on other things. I admire people who are constantly on it and I’m sure it works for some, but it’s just not for me. So long as you can say you put in 100% effort on the day, that’s what matters. That’s not to say it’s easy to completely switch off. As a firm we trade global markets, and what’s happening in one jurisdiction is bound to have an impact on another. We also need to make sure we stay informed of any macro events or significant political changes that could cause disruption the following morning. I learnt this the hard way. The night before Brexit I was so confident of a ‘Remain’ result I had a few drinks in the pub and went to bed. The outcome the following morning was a huge surprise, and the market crash was no doubt the result of most market participants also being unprepared. The next time there’s a referendum, I’ll be staying up all night.
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