Description of a Foreign Exchange Trader
Foreign exchange traders--also known as forex traders, foreign currency traders, or simply currency traders--speculate on the prices of foreign currencies, trying to make a profit by investing in one currency and selling it back for more money when it appreciates in value. Many foreign exchange traders work for investment banks and hedge funds, while others are self-employed and work as day traders. However, their job descriptions are generally similar.
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Function
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Forex traders either act as brokers, setting up trades between a buyer or seller, or purchase currency on their own with their own money or on behalf of their employers. Forex traders who are not filling orders on behalf of someone else are speculators, meaning that they purchase different currencies that they speculate will become more valuable. Forex traders help provide a more liquid market for investors looking to purchase larger amounts of a currency, often so as to invest in a particular country.
Duties
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Some forex traders are, like brokers, responsible for finding clients for whom to place trades. Often this requires cold-calling potential clients and pitching them on sales. Other have duties similar to those of financial analysts, in which they investigate the value of particular currencies and make investments based on whether they believe the value of the currency will go up or down.
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Qualifications
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According to the New York Federal Reserve Bank, many factors can affect the movement of currency prices. This includes a particular region or industry's business cycle, a country's balance of payments, political developments, tax laws, the movement of the stock market, inflation, investment patterns, and policies made by governments and central banks.
Good forex traders must be aware of all these factors when deciding how to invest. They must also have good interpersonal skills to allow them to conduct trades and manage clients. Although many have backgrounds or educations in business or finance, others simply learn by experience.
Compensation and Benefits
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Compensation for forex traders depends on their precise duties. Those who broker deals will generally be paid on commission, while those who make investments can receive either a salary with a bonus, or a percentage of their earnings. Those who are self-employed generally keep their profits.
Considerations
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Unlike physical exchanges, such as the New York Stock Exchange and the Chicago Mercantile Exchange, the foreign currency exchange is a worldwide network without set hours of business. Although stock brokers might work regular hours during the weekdays, forex traders can work all day, every day.
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References
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