An equity trader, in essence, engages in a variety of transactions involving equities and other financial products based on equities, also known as equity derivatives. Equities are the stocks or shares of a company. The majority of the time, an equity trader works with stocks of publicly traded companies that are listed on a stock exchange. He or she may, however, engage in over-the-counter (OTC) transactions in some cases. These are typically negotiated and traded privately, rather than through a stock exchange.
An equity trader may be responsible for the execution of buy and sell orders under the direction of a portfolio manager, depending on the firm for which he or she works. If the trader isn’t directly reporting to a portfolio manager, he or she may have to deal with outside investors. Private individuals, pension funds, asset management firms, and others may be among them. Traders will occasionally trade equities with funds provided by the company where they work. Other times, equity traders are self-employed and trade on their own account, putting their own money at risk.
The trading department of a company with equity traders is usually organized in a hierarchy. Senior trader, intermediate trader, and junior trader are the most common positions, from top to bottom. As a result, senior traders and occasionally intermediate traders will handle the most advanced equity trading. In most cases, junior traders will deal with relatively simple transactions. Furthermore, the senior equity trader is usually in charge of developing trading strategies and ensuring that subordinates execute trades as planned.
An equity trader can use either technical or fundamental analysis, or both, before making a trade. Technical analysis primarily entails reading charts in order for the trader to predict future price movements. Fundamental analysis, on the other hand, entails evaluating a company’s underlying advantages and disadvantages in order to give a trader reasons to buy or sell its stock.
The instruments known as options are the most common equity derivatives that traders work with. In a nutshell, these allow a trader to buy or sell a specific stock at a specified price within a specified time frame. Furthermore, the trader may engage in over-the-counter (OTC) transactions, which he or she typically conducts through a network of linked computers and telephones. In such a network, the trader can buy and sell stocks with other traders.
At the junior level, about three years of experience in a trading position is required to enter an equity trader career. Typically, four to six years of experience are required to reach the intermediate level. Finally, candidates with a minimum of six years of experience are considered for senior positions.
Furthermore, most equity trader jobs require candidates to have at least an undergraduate degree. Degrees in mathematics, computer science, finance, and economics are among them. A license is usually required for an equity trader to work in a firm. The Series 55 License, for example, is an example of such a license in the United States. In addition, to advance in a company, one must typically work hard, earn postgraduate degrees, and occasionally sit for exams for specific industry certifications.