As a day trader, it will reach a point where you will have a desire to hire extra traders. This is mostly the case when you are running a trading floor or when you are part of an interviewing panel in an investment or hedge fund operation.
The process of building an efficient team is often approached too superficially. The inclination, in fact, is to focus on profiles with high technical skills - and therefore profitable - without considering everything else. These aspects include personality and the ability to integrate within the office, which includes teamwork and the willingness to adapt to a proven environment.
In this article, we will look at some of the skills that you need to watch when hiring traders for your trading floor. These are, of course, just recommendations from our experienced managers, and are in no way an exhaustive list
» Related: Team Trading vs Solo Trading
Running a trading floor
At Day Trade the World (DTTW™), we are the world’s biggest day trading company (and Prop trading firm) with hundreds of trading floors globally. In most cases, our trading floors have at least five traders, meaning that the floor owner is often engaged in recruiting traders.
In our experience, the talent in each of our trading floors is so important such that it determines their overall success. So, let us look at the several skills that you need to look at when hiring traders for your floor.
Interest in trading
First, you need to look at the traders’ interest in day trading and in the financial market in general. Besides, you want to hire people who love the market and who have an interest in becoming successful in it.
We consider trading to be almost equivalent to personal careers like doctors and nurses. To succeed in these careers, you want to be in love with them.
Similarly, in running a trading floor, you want to hire people who are in love with the market. That’s because they will spend tens of hours per week observing trends in the market. They also need to find it fun to spend time watching financial media and reading finance literature.
There are several ways of knowing whether a person has an interest in the market. For example, you could ask them about current events in the media and their views on them.
At DTTW™, it is not mandatory for one to have any experience in trading to operate their floors. Our experienced team of in-house traders is usually tasked to provide some training to the traders. Also, it is not mandatory for the floor managers to hire traders experienced in the market.
Still, when you are hiring traders, it is important that you look at their experience in the market. Doing so will save you time in training the traders.
For example, if you hire someone with experience in technical analysis, it will be easier to train them about your style. In contrast, when you hire someone who has no experience, you will need to spend more time training them.
Therefore, look for someone who has some experience in trading. It does not need to be a lot but it will be worth it in the long term.
Can they handle pressure?
Trading is a difficult industry. While it is possible to make a lot of money in it, at times, it can lead to substantial pressure.
For one, there are days when your trades will not be working out at all. Also, there are times when you will lose a substantial amount of money in the market (but you don't have to give up for this). Additionally, since this is a 24-hour industry, the trader needs to have the ability to trade for long hours.
Therefore, in the interviewing process, we recommend that you interview the applicant about whether they can handle pressure. As a floor manager or interviewer, you will have an easier time knowing that your trader is someone who can handle pressure well.
You can know whether the person handles pressure by asking some questions about their past experience and by recreating some scenarios to see how they can handle them.
There are several questions you could ask to gauge whether the trader can handle pressure. An example of a question is:
You are on the highway in morning traffic and you have an interview at 09:00am and it is now 08:55. What will you do?
As mentioned, trading is a difficult activity that can lead to substantial pressure to traders. Indeed, it is not uncommon for traders to have burnout and even go through depression (or in overtrading). In other periods, it is common for traders to even commit suicide.
Therefore, during the interview process, assess the emotional state of the trader and whether they can manage to work in a fast-paced environment.
The next key skill to look at when hiring a trader is to look at their work attitude. Ideally, while trading success is important, you want traders who have a good attitude. People you can have fun working with. In other words, you want people who have a positive attitude and those who are self-motivated to perform better in the market.
People with a good working attitude will do several things. For example, they will come to the trading floor early and leave late. They will do this not because it is required of them but because they love doing it.
Also, they will go an extra mile in achieving the floor’s goals. For instance, they will take part in team activities, train new traders, and handle things that can save the floor money.
Hiring people with a bad attitude can be relatively challenging. For one, they will come to the trading floor when they want, leave early, and do the bare minimum. They will always complain and give excuses about minor things.
Attitude to risk
Trading is a risky endeavour in that a trade that you open can go in either direction. Whenever you open a trade, there is a probability that it will make money or lose money. As a trading floor, there is a possibility that you have set clear policies about risk management.
Therefore, you should use a certain approach to understand how the prospective candidate approaches risk. Ideally, you want a trader who is willing to take risk and one who is able to follow the procedures out in place to deal with risk. You could ask the following question to see their attiude towards risk.
There are six closed envelopes with $2, $4, $8, $16, $32, and $64 lined up in sorted order in front of you. Two envelopes next to each other are picked up and shuffled. One is given to you and one is given to your friend. You and your friend then open your own envelopes, look inside, and decide whether or not to offer to trade. If you both agree to trade, then you will swap. Assume you open your envelope and see $16. Should you offer to trade? Why or why not?
Of course, risk is part of the game. But trading is not gambling, and every decision must be supported by proper analysis. And, anyway, as a general advice every trader should not risk more than a small percentage of his portfolio in a single trade.
Finally, you want to hire a trader with who you have a personal connection with. This means that you should look at whether there is a personal vibe between you, the trader, and the rest of the team.
Doing this has the benefit in that it will make your trading floor a happy place to work in.
In our experience, we have found that hiring traders is one of the biggest challenges that many floor managers face. When you decide to get into the day trading business, or move from trading on your own to running an office, building your own team that allows you to scale profits is key. Just as it is vital to make it a second family, allowing you to work in harmony and making it much more enjoyable to work.
In this article, we have looked at some of the key details to look at when hiring a good trader.
External useful resources
- Should You Quit Your Job to Trade Stocks? - Investopedia