The interview questions for sales and trading are a bit of a puzzle because they are both easier and harder than the questions for investment banking.
They’re easier because you don’t have to remember as much, but they’re also harder because you can’t prepare or practice them the same way.
Also, there are a lot of questions that don’t have “right answers.” Interviewers ask them so that they can have a deep conversation about a subject.
Also, because sales and trading interviews are more like “choose your own adventure” games, it’s harder to make broad statements about them.
But if you say you’re interested in corporate bond sales, you’ll get a completely different set of questions.
Before choosing an adventure, though, let’s start with the qualities that interviewers want to see in candidates:
Getting hired as an equity trader is no easy feat. The role requires a unique blend of financial acumen, strategic thinking, and client management skills. Standing out in equity trader interviews requires thorough preparation and being able to impress potential employers with your market knowledge and technical abilities.
To help you get ready for the tough questions that you’re likely to encounter, I’ve put together this comprehensive guide covering the top 35 equity trader interview questions. With insights into what hiring managers want to hear and sample answers you’ll have all the tools needed to ace your upcoming interviews.
Overview of Key Equity Trader Interview Questions
Here’s a quick rundown of some of the most common equity trader interview questions that you should prepare for
-
What is the difference between fundamental analysis and technical analysis? How do you keep up with market trends and financial news?
-
Behavioral questions – Tell me about a time you had to make a quick trading decision. How did you handle a situation where a trade didn’t go as planned?
-
Market knowledge questions – What is your understanding of algorithmic trading? Can you explain high frequency trading to someone without a finance background?
-
Strategy questions – What factors do you consider when deciding to buy or sell a stock? How do you balance generating returns with managing portfolio risk?
-
Regulatory questions – What is your understanding of SEC regulations for equity traders? How familiar are you with FINRA rules?
Thorough preparation and practicing your responses will help ensure you have winning answers to common equity trader interview questions like these and demonstrate your overall fit for the job.
Now let’s dive into the top 35 questions in detail:
1. Explain the difference between technical and fundamental analysis
This is one of the most common equity trader interview questions. It tests your understanding of the core market analysis methodologies.
Sample Answer: Fundamental analysis examines economic and financial factors to forecast a security’s value. It analyzes revenues, earnings, future growth, and management quality. Technical analysis uses historical price charts, trends, and market statistics to predict future movements. While fundamental analysis focuses on the underlying asset, technical analysis relies solely on the security’s historical price and volume data. As an equity trader, I leverage both techniques to gain a comprehensive view before making trading decisions.
2. What are your favorite sources for staying updated on financial news?
Traders need to be constantly informed. This question evaluates where you get your news from to stay abreast of trends impacting your trading.
Sample Answer: As an equity trader, I start my day by reading the Wall Street Journal, Financial Times, and Bloomberg to get market news. I also receive email newsletters from Briefing and Morningstar for deep dives into specific sectors and stocks. For real-time updates, I follow key analysts and news sources on Twitter. I use tools like Flipboard to customize news flows for companies and sectors I’m interested in. These sources provide actionable insights that inform my daily trading.
3. Walk me through your process for analyzing a company before investing.
This tests your approach to researching and evaluating a potential investment. They want to see your methodical research process.
Sample Answer: My process starts with analyzing the company’s financial health – I look at their income statements, balance sheets, cash flows and key ratios over the last 5 years. This gives me an understanding of revenue growth, costs, debt levels and cash generation – all important indicators of the company’s performance.
Next, I look into things like the company’s strength and future by looking into things like its management, competitive advantages, market conditions, and industry trends.
I use valuation models like DCF and multiples to estimate fair value and upside potential. For context, I compare metrics across similar companies.
By researching across financial, qualitative and valuation dimensions, I gain a comprehensive perspective before making investment decisions.
4. How do you go about determining entry and exit points in a stock?
This evaluates your approach to maximizing opportunity while minimizing risk – two key aspects of successful trading.
Sample Answer: I use technical and fundamental analysis to determine ideal entry and exit points. On the technical side, I identify support and resistance levels for entry signals. For exits, I look at momentum indicators like RSI and moving averages to identify when an uptrend is losing steam. Fundamentally, I target undervalued stocks for entries using valuation metrics. For exits, I monitor earnings reports, industry trends and economic changes to spot downward risk early. By combining technical and fundamental data, I’m able to optimize trade timing to capture profits and limit losses.
5. Tell me about a time you had to make a quick trading decision. What was the outcome?
This behavioral question tests how you act under pressure and evaluate the tradeoffs of rapid-fire decisions.
Sample Answer: When the Brexit referendum results started coming out, the markets experienced high volatility. I had a long position in a UK real estate stock that was falling rapidly amid the uncertainty. With my knowledge of the company’s fundamentals and the broader implications of Brexit, I quickly exited 75% of the position to limit the downside. Post-referendum, the stock fell over 20% from its pre-vote value, so my quick action to take partial profits reduced the portfolio’s losses. This experience demonstrated the importance of being able to make rapid calls while considering the big picture.
6. Describe your approach to portfolio diversification.
This evaluates your grasp of risk management through diversification – a key principle for equity traders.
Sample Answer: My portfolio diversification starts with having broad asset class exposure – stocks, bonds, real estate – to manage systemic risk. Within equities, I diversify across market caps, sectors, geographies and investment strategies. I utilize negatively correlated assets and asset selection based on prevailing economic conditions. Regular rebalancing is key to maintain target allocations. By managing diversification actively, I strive to improve returns for a given level of risk.
7. What strategies do you use for risk management when short selling?
Short selling carries significant risks. This tests your understanding of managing those prudently.
Sample Answer: When short selling, I implement several risk management strategies. I set stop loss orders at predetermined levels to cap potential losses if the stock moves against me. I maintain a highly diversified portfolio to minimize exposure to any single short position. Before initiating a short, I use options to hedge downside. I also analyze various scenarios using different assumptions to assess the risk-reward payoff. Ongoing monitoring of fundamentals gives me an early warning to cover shorts if the thesis changes. With these prudent strategies, I’m able to tap short selling opportunities while managing the inherent risks.
8. How do you go about convincing a client about your trading strategy or stock recommendation?
This evaluates your communication skills in explaining complex trading strategies persuasively to clients.
Sample Answer: When recommending ideas to clients, I present a compelling, fact-based investment thesis. I walk them through my analysis of market trends, valuation and metrics that back up my recommendation. To show accountability, I’m transparent about potential risks and downsides alongside the upsides. I provide data-driven comparisons to alternatives to demonstrate the relative attractiveness. My goal is to educate clients on my thought process so they feel comfortable acting on my recommendations. Maintaining their trust is paramount.
9. What metrics do you monitor to determine when to exit a long stock position?
This reveals your approach to locking in profits, a key equity trading skill.
Sample Answer: I use a combination of technical and fundamental signals to monitor long positions for profitable exit points. On the technical side, I track metrics like the 20-day moving average and MACD to spot downward momentum shifts. For fundamentals, I closely follow earnings reports, valuation trends and forward guidance to assess a company’s outlook. Significant deviations from my original investment thesis trigger a review. I also set price targets based on valuation models and take partial profits incrementally. Using metrics tailored to each stock allows me to balance returns and risk management when exiting positions.
10. Describe your experience with SEC regulations applicable to equity traders.
Knowing regulatory environments is crucial for succeeding in compliance-intensive roles like trading.
Sample Answer: I have strong experience in adhering to SEC rules governing equity traders. This includes regulations around insider trading, short selling, disclosure requirements, and fraud avoidance. I maintain diligent information barriers when privy to confidential information that could be perceived as material and non-public. My transactions follow laws on short selling and options exercise timing to avoid manipulation claims. I stay up to date on SEC filings for full transparency to clients. Having worked in both buy-side and sell-side firms, I’m well-versed in SEC regulations from different market participant perspectives.
11. Tell me about a time you made a trading mistake. What did you learn?
This behavioral question reveals how you react to and learn from errors – critical for success in a field like trading.
Sample Answer: Early in my career, I made an overly speculative trade against the prevailing market sentiment that resulted in losses. The mistake taught me the importance of avoiding emotional bias in trading decisions. Now, I rely on data-driven analysis to guide disciplined position sizing. I also place greater emphasis on risk management techniques – like setting stop losses – when making higher risk trades. This experience instilled in me the mindset to take
Sales and Trading Interview Questions, Part 1: Fit/Behavioral Questions
There are 1. This group has 5 important questions: your story and the why S
“Walk Me Through Your Resume” or How to Tell Your Story
The beginning, your financial “spark,” your growing interest, and why you’re here today and your plans for the future are all parts of the investment banking story template that you can use for this question.
The differences are:
- You should say that you’re interested in a certain plan or product, like swaps, options, commodities, FX, or FX, and you should really know that one product well.
- You should also say that you want to work in a results-driven environment and that you’d like to work for a big bank because you’ll get to work with clients and trades and build a network that way.
You can use the same method for sales, but instead of learning all the technical details of a product, you should focus on building relationships with customers.
A reasonable example outline might look like this:
- Beginning: I grew up in [City or Country], went to [University Name] for school, majored in [Major Name], and did [Fun or Interesting Activity, Ideally a Sport] while I was there.
- Finance: You won a trading competition in your first year by studying the software industry and buying a stock that went up in 2020 and selling another stock that went down in 2015.
- Growing Interest: You did an internship at PWM and liked working with markets, but you wanted to work in a more results-driven environment. This is what led you to a small hedge fund, where you focused on currency swaps to help them with their hedging strategies. You did well there, but you wanted to meet more people at a big bank and work with their clients and staff.
- Why You’re Here Today: Your Future: You want to keep trading foreign exchange and learn more about different types of swaps. This bank has a great practice, so you’re sure it’s the right group for you.
Equity Trader Interview Questions
FAQ
What questions are asked in an equity interview?
What makes a good trader interview question?
Why should we hire you as a trader?
How do you answer an equity trader interview question?
This question can help the interviewer determine if you have the skills they’re looking for in an equity trader. Use your answer to highlight any skills that are relevant to this position and how you developed them. Example: “When it comes to equity trading, there are a few key skills that can make or break success.
What questions do employers ask equity traders?
Employers ask this question to learn more about your unique skills and talents. They want to know what makes you a valuable asset to their company. When answering this question, think of two or three things that make you stand out from other equity traders. These can be specific skills or experiences.
What questions should you ask during a trading interview?
Most interviews are likely to include many specific questions like this one, to test the applicant’s theoretical knowledge regarding all the tools that a trader can use and when they should be used. You should make sure you are up to date with all the theory related to trading before attending the interview.
How do I become an equity trader?
They must have an in-depth knowledge of the stock market and be able to make quick decisions in order to capitalize on opportunities. If you’re looking to become an equity trader, you’ll need to be able to answer some tough questions in an interview.
