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A foreign exchange, or FX, dealer invests a corporation's funds on currencies markets with a profit motive or as part of a risk management (hedging) strategy. An FX dealer applies quantitative methods, such as VaR (value at risk) and Monte Carlo simulation, to manage financial risks inherent in a firm's foreign currency portfolios.
An FX dealer, or trader, engages in financial market transactions and evaluates investment opportunities in currencies. An FX dealer who uses corporate funds to buy and sell currencies is referred to as a proprietary trader. The sponsoring firm records in its investment income account all gains made and losses incurred in proprietary transactions. An FX trader who makes a positive return in his portfolio receives a bonus at the end of the year.
Education and Training
No formal education is needed to trade on foreign currency markets. However, most firms, especially financial institutions such as banks, insurance companies and hedge funds, require a four-year college degree for a junior FX trader position. A senior FX dealer usually has a master's degree in a finance-related field. An FX trader who applies quantitative, or math-based, strategies to invest in financial markets generally holds a doctorate degree in a field such as mathematics, statistics or econometrics.
An FX trader's total compensation includes wages and performance-based cash or stock bonuses. Most FX traders receive large portions of their compensation in bonuses. According to data from the Bureau of Labor Statistics of the U.S. Department of Labor, FX traders earned median salaries of $68,680 in 2008, excluding annual stock and cash bonuses, with the middle half of the profession earning from $40,480 to $122,270. The same source indicates that FX dealing analysts earned median wages of $73,150 in 2008, excluding annual stock and cash bonuses, with the lowest 10 percent of the profession earning less than $43,440 and the highest 10 percent earning more than $141,070.
Although opportunities for career growth typically depend on performance, a foreign exchange trader can improve his chances of promotion by seeking a higher academic degree such as a master's or doctorate degree in econometrics or finance. A skillful and apt foreign exchange dealer is promoted to a higher position, such as senior FX dealer, portfolio manager or FX trading strategist, in a few years.
The foreign exchange market operates continuously from Sunday night through Friday afternoon. Accordingly, an FX dealer's work schedule depends on her shift and the securities in which she engages. For example, a New York-based FX dealer who trades Asian currencies works late nights or early mornings. A junior FX dealer usually has a standard 8:30 a.m. to 5:30 p.m. shift.