How to become an Equity Trader?

Equity Trading has been considered one of the most sought after investment avenues to earn hefty profits in the short or long term. Today, retail investors rule the equity trading segment of the Indian financial market as they are responsible for over 43% of the total turnover in the cash segment. The number of retail investors increased by a staggering 142 lakh in FY21, deeming it as the ‘Era of Retail Investors’.

With returns higher than every other traditional investment instrument, equity trading can prove to be an ideal to start one’s investment journey. Here is how to become an equity trader and understand the skills needed to become an equity trader.

What is Equity Trading?

Equity or a share is the representation of value in a business. When a company is formed, the value of the business is calculated in terms of the shares, which are held by various individuals such as the executives, directors, institutional investors etc. However, after the Initial Public Offering, where the company sells its shares to the public for the first time, its equity is then held by the public.

These investors are known as the shareholders of the company. After the company enters the secondary market and becomes public, any investor can buy/sell the company's equity from the National Stock Exchange or the Bombay Stock Exchange. This process of buying and selling a company's equity in the secondary market is known as equity trading.

Who is an Equity Trader?

An equity trader is a person who does research and analysis of the stock market to identify stocks that are undervalued and can rise in their price in the coming future. An equity trader uses the completed research and analysis to buy and sell the stocks/derivatives etc., of a company in hopes of buying them at a lower price and sell when the price is higher.

An equity trader may use the knowledge for personal investing and making profits or can join an investment company as a trader to manage portfolios of the company’s clients. Almost all equity traders who join an investment company professionally also invest personally to increase their earnings. Equity traders differ for an investor as a trader tends to sell the equity in a short period rather than holding the positions for years, as done by most investors.

Equity trader career path

Equity trader is a comprehensive career that ranges from being a broker to the highest point of the portfolio manager. A person with the required knowledge of being an equity trader can advance from the current job title or profile to a more advanced job title that comes with a hefty salary increment. Here are some of the career paths an equity trader can advance to in a matter of years:

  1. Finance Advisor- Account Executive- Project Manager- Portfolio Manager (7 years)
  2. Finance Advisor- Account Executive- Relationship Manager- Senior Relationship Manager (9 years)
  3. Finance Advisor- Account Executive- Branch Manager- Business Development Manager (7 years)
  4. Finance Analyst- Project Manager- Vice President- Portfolio Manager (10 years)
  5. Consultant- General Manager- Directors of Sale- Executive Sales Director (10 years)
  6. Consultant- Underwriter- Portfolio Manager- Credit Director (10 years)
  7. Analyst- Staff Accountant- Treasury Analyst- Treasure Manager (5 years)
  8. Broker- Principal- Fund Accountant- Mutual Fund Manager (5 years)

The above career paths are some of the most common career paths for an equity trader. Once you know how to become an equity trader, you can choose a job profile and advance steadily to other job profiles with every promotion. As every subsequent job profile for an equity trader comes with a set of responsibilities, the skill set of equity traders rises with every promotion. That allows traders to analyse the equity markets better and increase the profit margin.

What is it like working as an Equity Trader?

Being an equity trader comes with a host of responsibilities and tasks that the traders are expected to complete. Here are some of the activities and processes that are undertaken by an equity trader:

  • Research and Analysis: Equity traders spend time analysing the events that happened in the stock market after the closing of the market. During the past hours, equity traders utilise various strategies and tools to analyse what happened during the day and predict the next day’s course of action. They decide where you buy or sell equities, depending on the analysis.
  • Developing Trading Strategies: Equity Trader work towards developing various customised trading strategies that can offer better profits from the traditional strategies. Equity traders also develop strategies for their clients depending on their time horizon and capital.
  • Advising Clients: Traders invest and trade on the behalf of their clients but the final decision on where to invest comes from the clients. Hence, equity traders are responsible for advising the clients on potential investment opportunities to ensure that the clients choose the best among the recommended opportunities. They provide concise financial reports to the clients for making a decision.
  • Business Relationships: Business relationships are one of the most important factors for the success of an investment company. Equity traders’ working involves forming business relationships with all the companies and the clients to ensure they are satisfied with the services and are on the right investment path. Furthermore, they also try to onboard new investors as clients to increase the company’s portfolio.

How to become an Equity Trader?

There are two ways an equity trader may approach the career path. The first is the personal approach where the equity trader only invests on a personal level with capital earned from an alternate profession. The second approach is where the equity traders join an investment company and make equity trading the main profession. The process of both approaches are listed below:

Equity Trading at a personal level: Equity trading at a personal level does not require any qualification as you will be the one doing it with your capital. However, you should always approach equity trading after learning how to do fundamental and technical analysis. It will allow you to gain knowledge on analysing the stock market, the companies and the stocks to identify investment opportunities.

Furthermore, you will learn when to enter and exit a position so that you don’t make losses but profits. Equity trading at a personal level would require you to open a Demat and trading account along with buying various trading tools for an effective trading process.

Equity Trading as a profession: If you are interested in becoming an equity trader and joining an investment company, you are required to have at least a bachelor's degree in the financial field. Some companies require the candidate to have a master’s degree in the financial field along with some years of experience. You can also add to the profile by completing stock market certificate courses for an institute such as the National Stock Exchange.

Final Word

Once you have learned how to become an equity trader by gaining financial and investment knowledge, you can use the understanding to identify investment opportunities for yourself, your clients or both. Being an equity trader comes with numerous interesting responsibilities that can allow for personal growth and job satisfaction. Knowing that you can turn an investment into hefty profits and be paid for it is why people enter the equity trading business.

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Frequently Asked Questions Expand All

There are numerous benefits of becoming an equity trader:

  • You get to learn how to do technical and fundamental analysis.
  • You make contacts through establishing business relationships.
  • You can invest on your own and earn through an alternate source of income.
  • You can advance to a better job profile with time.
  • Equity traders earn better salaries than many other job profiles.

You can use the IIFL Markets app that includes comprehensive research reports and other unique investing-oriented tools. You can download the app for opening a Demat and trading account from the app store.

Yes, trading is one of the most sought-after career paths. However, you must choose the career after gaining extensive financial and investing knowledge to limit the chances of losses.

There are multiple risks such as systematic risk, unsystematic risk, political risk, interest rate risk and regulatory risk.