Sales and Trading Industry Guide

Sales and trading is a fast-paced and dynamic industry that requires a unique blend of skills and knowledge. It's a world where markets fluctuate rapidly and traders must be able to adapt quickly to changing conditions.

In this guide, we'll cover the basics of sales and trading, including the different types of trading, the key players involved, and the various strategies used to succeed in the industry.

A sales and trading career typically involves working in a financial institution, such as a bank or investment firm, where you'll be responsible for buying and selling securities, commodities, or other financial instruments.

You can start your career in sales and trading with a bachelor's degree in finance or a related field like economics. Most sales and trading positions require a bachelor's degree.

To be a successful salesperson or trader, you'll need confidence, drive, and persistence to thrive in a highly competitive market environment. Salespeople must have thorough knowledge of financial products and be personable to win over clients.

Salespeople and traders have different roles and responsibilities. Sales people focus on influencing external clients into investing, while traders need to be analytical and have excellent mathematical skills.

You can expect to start out in the low six-figure range, around $108,000 base salary, according to a 2019 CFA Institute compensation study. As you move up the hierarchy, you can earn closer to $1 million and beyond.

Here are some common roles in sales and trading:

Promotional opportunities are structured within firms, allowing you to move up to associate, vice president, executive manager, and even managing director.

Sales and trading is a division of an investment bank that pitches clients on different trading ideas and then executes these trades or makes markets for the clients.

Salespeople and traders work with securities that represent small percentages of companies, unlike investment bankers who work on deals that affect entire companies.

The process of pitching trades to clients, executing them, and making markets can be complicated due to the volumes involved.

If you want to buy a large number of shares, such as 500 million, you need to do it carefully and gradually over time to avoid affecting the underlying share price.

Salespeople and traders step in to fulfill this role, dividing larger orders into smaller chunks, setting up buying schedules, and connecting buyers and sellers at their targeted prices.

They earn money via the fees charged on executed trades, but they can also earn a profit directly by buying and selling securities to make markets for clients.

To succeed in a sales and trading career, you must have the confidence, drive, and persistence to thrive in a highly competitive market environment. Most sales and trading positions require a bachelor’s degree in finance or a related field such as economics.

Securing an internship during your undergraduate career or after is a great way to enter this job market. Many firms may prefer to hire new analysts within their intern class.

To get started, you need to decide what position within a sales and trading group you are interested in. You can then work towards securing an internship to gain hands-on experience and make valuable connections.

Having a thorough knowledge of financial products is essential for salespeople to influence external clients into investing. Salespeople must also be personable to win over their clients and maintain relationships for future sales.

The recruitment process for sales and trading roles is similar to investment banking, but with some specific aspects. You'll typically start by networking through alumni or LinkedIn/email to win interviews, and then complete an online application including screening questions.

The interview process for sales and trading is also similar, but with a focus on specific products and trading strategies. Be prepared to answer questions about math and programming, especially if you're interviewing for trading roles.

Here's a breakdown of the typical interview process:

Securing a summer analyst position is the first step into sales and trading, followed by a HireVue interview and a superday with high-level associates or junior VPs.

The recruitment process for sales and trading roles can be lengthy and competitive, but understanding the steps involved can help you prepare. The process typically includes networking via alumni or LinkedIn/email to win interviews, completing an online application, and then a phone-based or in-person interview.

Securing a summer analyst position is a crucial step in breaking into sales and trading, as it's the preferred route for most banks. In fact, the division is roughly 90/10, with summer analysts making up the majority.

To increase your chances of getting hired, it's essential to have a solid networking plan in place. This includes reaching out to alumni and professionals in the industry, as well as utilizing LinkedIn and email to make connections.

The first round of interviews for summer analyst positions often includes a HireVue interview, which is a video-based screening process. If you pass this round, you'll be invited to a superday, which consists of three back-to-back interviews with high-level associates or junior VPs.

Here are three key plans to have in place, regardless of whether you're gunning for a summer analyst position or a full-time one:

It's also essential to apply broadly and not limit yourself to just a few banks. Every large sell-side bank has areas where they excel, and moving between firms within sales and trading is more common than in other areas of finance.

Interviews for sales and trading roles are similar to those in investment banking, but with some key differences. The recruiting process typically involves networking, online applications, phone-based or in-person interviews, and a Superday or assessment center.

To prepare for sales and trading interviews, it's essential to have a plan. Many people spend too little time preparing, hoping to "roll the dice" and get lucky. However, preparing properly can help you understand what sales and trading is all about and whether it's the right career path for you.

Sales and trading interviews often start with a variation of the "walk me through your resume" question. Be prepared to discuss specific products that interest you, such as equity derivatives, and specific trading strategies.

You can expect math and programming questions, especially if you're interviewing for trading roles. Brainteasers and "mental math" questions are also common, so be prepared to think on your feet.

It's worth noting that sales and trading interviews can be less structured than those in investment banking, so it's essential to be prepared to think critically and answer questions outside of your comfort zone.

Here are some common types of questions you can expect in sales and trading interviews:

Keep in mind that sales and trading interviews are not as rigid as those in investment banking, and getting a few questions wrong is not necessarily a deal-breaker. However, having a methodical approach to preparation and covering the most common types of questions can help you feel more confident and prepared.

Sales people are the backbone of any finance team, and they're often underrated in the industry. They're not just about making calls and closing deals, but about building relationships with clients and understanding their needs.

In sales, it's all about managing a book of people, not a book of risk like traders do. This means being constantly in touch with clients, figuring out what they need, and finding ways to serve them.

Great sales people can make as much as great traders, and they work closely with their clients, valuing their advice and views on the markets. When a sales person leaves one bank to go to another, their clients often follow.

Sales people are often misunderstood as being extroverted, but the reality is that they're working with sophisticated investors who respect their intellectual views and seriousness. They're not looking to deal with people they don't respect.

Trading teams focus on specific complex products, asset classes, and regions to create investment strategies for their trade client and work as an advisory service.

There are three main types of trades. Trading professionals specialize in certain trading services because these market makers need to be experts in their niche.

Proprietary Traders, also known as "prop trading", focus on a hedge fund approach, maximizing the proprietary firm's profit via investments in financial instruments rather than via service fees.

There are three main types of traders: agency traders, prop traders, and flow traders.

Agency traders execute orders for their clients, making smaller profits and having limited freedom on the market.

Prop traders, on the other hand, use their own money to make trades, giving them more freedom and potentially higher profits.

Flow traders are a hybrid of the two, using client funds for trades while also making some investment decisions.

Typically, large banks stick to agency and flow trading, making markets for clients and designing complex products for them to trade.

According to a 2019 CFA Institute study, traders in the industry reported a typical global total compensation of US$165,000, with a base salary of US$108,000.

Here are the main differences between the three types of traders:

Quants are highly skilled professionals with advanced degrees in math, stats, physics, or computer science who create tools to help traders and sales people make informed decisions.

These tools can include risk analysis, client tracking, and pricing sophisticated instruments like bespoke credit or equity derivatives.

Some quants have a more trader-like role, dealing directly with clients on pricing and executing trades.

Quants are hired through a separate process at most major banks, similar to a tech interview.

This interview process is often more challenging than traditional sales or trading interviews.

The career path in sales and trading is well-defined, with clear job titles and hierarchy. You'll start as an Intern or Summer Intern and move up to Analyst, Associate, VP, Director or Senior VP, and finally Managing Director.

As you progress, your salary and bonus will increase, but the work itself may not change much unless you move to the management side of sales and trading. This is where you'll oversee the group and deal with strategic, hiring, and other personnel decisions.

To succeed in sales and trading, you'll need to have confidence, drive, and persistence in a highly competitive market environment. You'll also need a bachelor's degree in finance or a related field, such as economics.

In a sales and trading career, you'll move through a familiar hierarchy, starting with an intern or summer intern role. As you progress, you'll take on increasingly senior positions, such as analyst, associate, VP, director or senior VP, and managing director.

The salary and bonus will increase as you manage a larger book, but the work itself may not change much unless you move to a management role.

Here's a breakdown of the typical sales and trading career path:

As a managing director, you'll oversee the group and make strategic, hiring, and other personnel decisions, which can lead to more consistent compensation, but also means you'll lose the potential for outsized pay.

If you're in sales and trading, you have limited exit opportunities compared to investment banking. Sales & trading exit opportunities are more limited than in investment banking.

You can either stay in trading or move to a different industry, but it's not easy to transition into private equity or corporate development from trading. The skill sets just don't have much overlap.

It's best to decide within your first year or two where you want to be in your career, as the longer you stay in the field, the harder it is to move elsewhere.

On the sales side, you might find it easier to move to a normal company and work in sales there, selling products or services rather than stocks. Overall, sales is more transferable to other industries than trading.