What path to break into physical commodity trading?
Enrolled in a Finance Msc in the Netherlands I'm interested in breaking into the physical commodity trading industry. I wondered if someone had any advice on how to approach it, how to document myself, and which commodity is best to start with. Are graduate programs at ABCD's the way to go? If I have a good contact to start as a trader within Dutch mid-sized agricultural commodities (starches, sweeteners, proteins...) global supplier, is it a better path than starting as an intern in an ABCD? Is the move to start in paper trading and divert to physical after? Thanks for any insights on the subject!
Based on the most helpful WSO content, here are some strategic steps and considerations for breaking into the physical commodity trading industry, especially from your position in the Netherlands:
Networking and Internships: As highlighted in the WSO discussions, getting your foot in the door through networking is crucial. You don't necessarily need to go through a formal HR program. Internships, even short-term ones, can significantly boost your chances of securing a full-time position later. Engaging with industry professionals and leveraging any contacts you have can be very beneficial.
Choosing the Right Commodity and Company: Regarding which commodity to start with or whether to join a large ABCD company or a mid-sized Dutch agricultural commodities supplier, it largely depends on where you see more learning and growth opportunities. Both paths have their merits. Large companies like ABCD's might offer structured graduate programs which are excellent for building foundational skills, while mid-sized companies could provide more hands-on roles earlier in your career.
Graduate Programs vs. Direct Entry as a Trader: Graduate programs are structured and designed to equip you with necessary industry knowledge and skills, making them a solid starting point. However, if you have a good contact and can start directly as a trader, this could accelerate your practical learning and responsibilities. Evaluate the training, exposure, and career progression opportunities each path offers.
Transition from Paper to Physical Trading: Starting in paper trading to gain a comprehensive understanding of the markets before moving to physical trading is a common trajectory. Paper trading can provide you with valuable insights into market dynamics and risk management, which are crucial when you handle physical commodities.
Educational Preparation: Since you are enrolled in a Finance MSc, make sure to focus on courses relevant to commodity trading such as risk management, derivatives, and international trade. This theoretical knowledge will complement your practical experiences.
Documenting Yourself: Stay informed about the industry by following relevant news, market trends, and reports. Websites like Bloomberg, Reuters, and specialized commodity trading news platforms can be valuable resources. Additionally, participating in forums like WSO and attending industry conferences or webinars can enhance your understanding and network.
In summary, both paths have potential, and your choice should align with your career goals, the kind of environment you thrive in, and where you see the best opportunities for growth.
Sources: Physical Commodity Trading, Physical Trading: Best commodities to be in?, Physical Commodities: Shell vs. BP vs. Trading House Grad Programmes, A few questions on getting started in physical trading, Crude Oil trading at big oil exit opps
Each product is different.
Be wary of physical trading jobs that are disguised as glorified sales roles with terms like merchandising/origination etc.
Those depend on you creating new business and then they can add value by exisiting relationships with suppliers.
Some shops have the old guys own the buyside relationship with the supplier and essentially make money from all the new business that juniors bring in.
If sales is not a problem and you like meeting new people, are outgoing then this can be a good path for you as the cut of pnl can be good, straight forward and sometimes incentives are more like commision rather than bonus so you have several payouts through the year vs one bullet at the end of the year in traditional commodity trading shops.
Generally people dont like such roles and you will see the interview process pretty basic and less techinical in my opinion. Study the linkedin page of the firm if they are really focussing on retreats, team building, culture etc more likely than not its a salesy kinda place.
For other traditional trading seats on the physical side, you need internships/operations/new grad programs to break in. You cant trade paper and go to physical. Usually that never happens but there are always exception but wont encourage to try that route. I work in power so you get in as a scheduler or a real time trader then progress within the group and take on more responsibilty over the years. DM if you have any questions. I am north america based so dont know much about european power just a headsup.
Ops, risk, Analyst
Yep this is the way. For most finance gigs back office is a death sentence, in commodities most traders started out in some back/middle office function. Nowadays rotational programs are a great in
Yeah. You can see the difference in knowledge between a person who has done ops vs someone who has not.
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