Trading Strategy

Depending upon the type of trader you are, trading strategy could mean everything or nothing at all.

Execution Traders

A large number of trading jobs involve the trader placing orders based on instructions from the managers. This may involve learning and applying the strategy that has been developed; or it may involve changing the trading parameters on a day-to-day basis. But the common denominator is that the execution trader is applying a set of rules, or in some cases outright directives, provided by the company, rather than developing and applying his or her own trading strategy. For traders who can learn such systems and apply them, this type of trading job is ideal, provided that they can indeed learn it and apply it. And just because this trading style does not involve the trader’s personal strategy does not mean that this type of trading job comes without stress. In fact, there can be a lot of stress, especially because execution traders will be compared to each other with regard to performance on a monthly, quarterly, and yearly basis, which usually determines raises and bonuses.

Self-strategy Traders

Some traders develop their own trading strategy and seek to apply their strategy on a large scale to institutional money. These jobs have become less and less common over time, especially for larger institutions, but these jobs still do exist, and of course they are fiercely competitive.

These jobs are highly competitive because most funds and institutions do not want the increased risk that would necessarily come with managing traders with diverse strategies. Next, fund managers struggle to manage so many different strategies all at once. The challenges compound as the number of independent traders increases, and that is another problem because any institution that incorporates self-strategy traders will need a large number of such traders in order to have them offset each others’ risks. And the bottom line is that funds and institutions seek to minimize risk, not to increase it. This is why these jobs are increasingly rare. And for each available job, there are a large number of traders who are competing for it. So, do not be surprised if you are asked to trade a demo account before you are offered this type of trading job. You need to prove yourself, and if you don't, someone else will and they will be the one to get the job.

Next, if you do land a job as a self-strategy trader, you will need to keep proving yourself each fiscal period. If you have one weak period or a single deep drawdown, you will likely find yourself out of a job. So, unless you are highly consistent or unless you are given a wide leash with regard to returns, this might not be the best job for you – even if it is your greatest desire. Despite all of this, self-strategy trading is the number one preference among the traders who have provided feedback to us.

Manual Traders

Manual traders enter each trade themselves, sometimes in real time and other times as limit or stop orders that execute when the specified price is hit. But either way, the trader is entering the order himself or herself. Both execution and self-strategy traders can trade manually. It involves a lot of time watching the screen and making decisions as price action unfolds. If you enjoy this type of trading, which many do, then manual trading is for you.

Algo Traders

Algorhythmic traders (“algo” traders) use a program to enter and exit trades, including stop and limit orders. Some algo traders are involved in development of the algo; others test (backtest) algos, and others watch the algo as it works in real time, prepared to interrupt it or tweak it if certain parameters are hit. Almost all algo traders have a computer background, which enables them to turn their trading strategies into a program; others develop the rules for how an algo should run, and they then work with a programmer to turn the rules into a program. Algo trading is highly rewarding for traders who can identify and harness patterns in price charts in a way that enables automated trades to take place without any human decision-making (beyond the decisions that went into the development of the algo program itself). Large and small institutions alike are highly interested in algos that can be shown in back-testing to be successful across all or most market conditions and which have tolerable draw-downs. If you are an algo trader, you may either seek a job in which you apply your pwn algo, or one in which you work with a group of people to develop and tweak algos as a team.

Take-Aways and Tips

• No type of trading job is better than another. It is all about which type fits you the best.
• Take an inventory of the type of trader you are, and only apply for the jobs that fit your trading style. Trying to do anything else is a waste of your time and everyone else’s.