Power Trader Progression
Hello,
I've been interested in power trading and have talked to several different traders. One of the questions that I have been struggling to get an answer to is the progression in the roles of a power trader. I know that being a real-time trader at a spec shop is seen as an entry-level position. My question is, after being a real-time trader at a shop, assuming you do a good job and have potential, what comes next? Do you get promoted and allowed to trade short term and eventually long term? If so, what is the desire to trade these markets? I'm assuming greater volatility means a greater potential payoff? If it helps, I'm looking at this through the lens of trading on ERCOT.
Thanks!
Based on the WSO threads discussing career progression in power trading, here's a typical pathway you might expect:
Real-Time Trader: As you mentioned, this is often the entry-level position. Real-time traders are primarily focused on the immediate demands of the market, managing positions and responding to real-time changes. This role provides a solid foundation in understanding market dynamics and the operational aspects of power plants.
Day-Ahead Trader: After gaining experience and proving your capabilities in real-time trading, the next step is often moving into day-ahead trading. This role involves more strategic planning, as you would be responsible for forecasting market conditions and setting up positions for the next day. This requires a deeper understanding of market trends, regulatory impacts, and more complex analytical skills.
Term Trader: Following success in short-term trading roles, traders can progress to term trading, where the focus shifts to longer-term contracts and positions. This role demands a robust understanding of broader economic factors that influence the energy markets over extended periods. It's here that your strategic thinking, risk management, and negotiation skills are crucial.
Senior Trader/Trading Manager: With continued success and experience, a trader can move into more senior roles, potentially overseeing a team of traders or managing larger, more strategic trading portfolios. This role would involve not just trading but also mentorship, strategy development, and possibly involvement in high-level business decisions.
Regarding the desire to trade in different markets like ERCOT, the attraction often lies in the unique characteristics of each market. ERCOT, for example, has its own set of challenges and opportunities due to its isolated grid and the variability of renewable energy sources like wind and solar. Greater volatility in a market can indeed mean higher potential rewards, but it also comes with increased risk, which can be appealing for those who have developed strong risk management skills.
Each step in this progression not only requires increasing technical expertise in market analysis and trading strategies but also enhanced skills in risk management and decision-making under pressure. The potential for higher earnings and greater impact on the trading strategy of the firm typically increases with each upward step.
Sources: Offered a Real Time Trader job at a respectable utility with a tricky situation. Thoughts?, Alternative jobs after trading stint, Refined fuels trading experience but lackluster Engineering GPA, energy trader, do I move?, I'm A Former Trader Who Now Owns A Food Truck: Ask Me Anything
A lot is going to be company specific. Seat openings can play a big part. If you are a RT traders and there's several term traders, you do well, that doesn't necessarily mean that's your next step. Either there would have to be enough capital, risk appetite, no overlap concerns to make a new seat (very unlikely) or a seat like that opens up due to someone leaving. Most likely, after 2-3 successful years, if you want to move onto term trading, you will have to start applying for jobs elsewhere to find that open seat.
As for why term over RT trading. In ERCOT, no doubt you can make a killing in RT if you get the right day, but most likely, there is more money to be made trading term products and therefore more risks. It's a simple matter of size. I make $10 on 50 MW of a bal day thats 8k. I make $1 on 50 MW of a cal thats ~200k.
Thank you for your response. Makes a lot of sense when you break down that way.
If you want to be a “term trader” I find the better approach is to start as a analyst for a term desk. Eventually the desk might let you start to dabble in balday, next week etc.
Physical RT trader here.
The question stems from a very exit opps IB/S&T kind of mindset.
Power trading paths usually are internship/scheduler/analyst > RT Trader > Cash/DA > Term or Origination > Management.
Not that everyone follows this structure or path but very common at utilities/merchant gen/sell side shops.
But if you look at traders that are pure spec then no path exists and what I mean by that is just cause you were successful in rt doesn't mean you have any edge in trading term/congestion.
You might far better trading DA given its being a natural succession to being on RT.
Having said that you cant trade financial power without some amount of physical experience.
IMO best thing you can do is develop strong fundamentals and expand your learning to actually make pnl independent of your franchises assets/transmission portfolio and that will be a good indicator of whether you can earn an living outside of a traditional RT job.
Thanks! Mind if I PM you? I have a couple more questions.
sure bro
PM sent.
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