"While it's important to understand the economics of trading, it takes years of sitting on the desk in order to pave your way through the minefield," he continues. "Traders also need to have a good BS detector -- to have a nose for whether someone is snowing you or being honest with you."
The ability to develop relationships -- to cultivate and maintain personal relationships with counterparties -- also is very important, adds Olsen. "Time and experience are critical these days," he explains. "There are probably smarter guys out there that are mathematicians that do a good job and provide value, but I think what we do institutionally and negotiating the small-cap end of the space -- it takes patience to talk to people and build those relationships."
Of course internal working relationships also are important. "No amount of technology is going to replace a good conversation between a portfolio manager and a trader," asserts OPERS' Stack, who says good communication among traders, analysts and portfolio managers will always be vital.
TABB's Berke points out that buy-side traders not only must be able to gather information this way, they also must work closely with and communicate effectively to portfolio managers and analysts. "The trader is the front line to this extraordinary market environment and is the only person who can help a portfolio manager or analyst understand the ramifications of volatility on stock selection, on alpha or on implementation costs," she says.
ICM's Olsen notes that a little gray hair in this environment is probably a good thing. "They've seen the markets in the '60s and '70s and the economic cycles," he says. "[They] aren't green -- it's important these days."
And, again, being inquisitive is a plus, says Olsen, who's been on the buy side for the past 12 years. After 10 years on the sell side, he recalls, he made the switch because he wanted to learn more about the entire investment process and how trading fits into the overall process.
Olsen says he has even gone so far as to become actively involved in the marketing side of his firm's work and gets out to talk to clients himself. "I want to be very active in the whole process, and I really have a blast doing it, even though it's a lot of 12-hour days," he relates.
While intellect goes a long way in determining a trader's success, often a little muscle is required to get the job done, and technology has become an indisputable part of any buy-side trader's strength. In fact understanding and effectively leveraging technology is the hallmark of a quality buy-side trader.
"The biggest change for the buy-side trader in the past five years has been the ownership of the trading process," says OPERS' Stack. "Much of the trading process has moved away from the sell side to the buy side as market structure changes and regulation and the sheer speed of the computational power available to us now have all conspired to put the buy-side trader truly in the driver's seat."
Stack explains that if she were looking for a highly qualified senior trader, she would look for someone with technology experience in a number of different trading areas. "I wouldn't look so much for experience or skills in specific systems, but more general skills," she says. "I don't care what OMS they've worked with, but I'd like to know that they've worked with an OMS."
Noting that buy-side traders must understand the technology tools available to them, Olsen says, "Understanding where you can find the liquidity -- and not necessarily in the traditional places -- is important. They also have to be willing to understand what tools are available to the broker side too -- they need to know what they are using on the other side."