As a recovering energy trading floor manager, I recently fielded a request to speak to a group on the topic of “What makes a successful energy trader."
Here are my thoughts.
Based on my careers in fixed income and energy, I suspect these five characteristics apply across all commodities.
1. Knowledge & expertise – Successful traders have a deep understanding of the markets they trade in, including supply and demand dynamics, market trends, and pricing patterns. They have an insatiable thirst to stay abreast of the market and often struggle to turn it off.
2. Risk management skills- Energy trading can be a risky business and successful traders know how to manage risk effectively. This includes developing a comprehensive risk management strategy and implementing risk mitigation techniques such as hedging. They almost never roll the dice to go “all in” and they treat the company capital as it were their own. They know the risk policy of their company inside and out and respect the role of those charged to enforce it.
3. Financial Acumen- Commodity trading requires a solid understanding of financial markets and financial instruments such as future contracts and options. Successful traders own a keen sense of market timing and have an uncanny knack of identifying fear and greed.
4. Analytical Skills- Successful traders are skilled at analyzing market data and using that data to make informed trading decisions. This includes the ability to analyze technical charts, track market trends, and interpret economic indicators.
5. Discipline & emotional control-Trading any commodity can be highly emotional and successful traders own the ability to silence emotions and maintain the discipline to stick to their trading strategies. This includes the discipline to cut losses and take profit at appropriate times.
When it comes to hiring or identifying these successful traders, I have often seen two mistakes happen.
1. Not taking the time to identify whether a candidate is risk seeking or risk averse.
2. Mistaking somebody introverted as “not aggressive enough to trade.” Never judge a book by its cover. My personal experiences have taught me that introverts own the five skills listed above more often than extroverts.
How do you identify these people?
They are the folks who take the initiative to spend time pestering the trading desk with a bunch of questions before they start their day job, during their lunch hour, or staying after work.
They do not wait for a job posting.