What skills to build for Commodities?
Hey y’all, have started recruiting recently for Trading positions (current sophomore in college so SA 25). Have a pretty solid understanding of the oil & gas space and I’m starting to learn more about power trading as the days go by. Have read Commodities Demystified by Traf and a few things on investopedia for Power trading. Anyways, my question here is as I’m only a sophomore in college what skills should I look to build before I graduate? Have heard that coding/ python will be necessary so I’ve already taken course of action for that. But other than that, what skills do you guys recommend I try to build,
Ahoy there! Diving into the world of commodities trading is quite the adventure, and it's great to hear you're setting your sails early. Based on the most helpful WSO content and threads, here are some skills and areas you might want to focus on to ensure you're well-prepared for a career in commodities trading, especially in the oil & gas and power sectors:
Quantitative Skills: You're on the right track with Python. Being proficient in programming languages like Python can be incredibly beneficial for data analysis, modeling, and automating trading strategies. Consider also getting comfortable with other tools and languages such as R, SQL, and Excel VBA for a well-rounded skill set.
Understanding of Financial Markets: While you're focusing on commodities, having a broad understanding of financial markets, including how macroeconomic factors influence commodity prices, will be invaluable. This includes understanding futures, options, and other derivatives used in commodities trading.
Risk Management: Commodities trading can be volatile. Understanding and managing risk is crucial. Learn about different risk management strategies and tools. This could include studying historical volatility, learning about hedging strategies, and understanding the regulatory environment that impacts commodities trading.
Sector-Specific Knowledge: Continue deepening your knowledge in the oil & gas and power sectors. This includes understanding the supply chain, factors affecting prices (like geopolitical events, weather conditions for power trading), and the transition to renewable energy sources.
Analytical Skills: Being able to analyze complex data sets to make informed decisions is key. This includes both quantitative analysis (like statistical modeling) and qualitative analysis (like understanding the impact of regulatory changes).
Networking and Relationship Building: The commodities market is relationship-driven. Start building your network early by connecting with professionals in the industry, attending relevant conferences, and participating in trading competitions or simulations if available.
Internships: Gain practical experience through internships in trading firms, investment banks, or energy companies. This will not only give you a taste of the industry but also help you apply theoretical knowledge to real-world scenarios.
Regulatory Knowledge: Understanding the regulatory environment of the commodities market is crucial. This includes knowing about the agencies that regulate the market and the laws and regulations that affect trading activities.
Remember, the journey to becoming a skilled commodities trader is both challenging and rewarding. Keep exploring, learning, and connecting with others in the field. Your early start and proactive approach will surely set you apart. Good luck, and may your trading adventures be fruitful!
Sources: List of Things You Should be Doing in Undergrad, List of Things You Should be Doing in Undergrad, To Those Who's Had A Successful Career In CRE, What Advice Do You Have For Younger Generations?, Q&A: 5 Things you can do to help convert your internship to an offer in Consulting, Would I get hired after graduation?
Based on the most helpful WSO content, diving into the world of commodities trading, especially in areas like oil & gas and power trading, requires a blend of technical knowledge, analytical skills, and a keen understanding of market dynamics. Here are some skills and areas you might want to focus on before you graduate:
Quantitative Analysis: Strong quantitative skills are essential in trading. You've already taken a step in the right direction by starting to learn Python. Consider deepening your knowledge in statistical analysis and modeling, as these will help you analyze market data and make informed decisions.
Financial Markets Knowledge: While you have a solid understanding of the oil & gas space, expanding your knowledge across different commodities and understanding how global events affect these markets can be beneficial. Keep up with financial news and consider courses or readings that cover market fundamentals, derivatives, and financial instruments used in commodities trading.
Risk Management: Understanding and managing risk is crucial in trading. Learn about different risk management strategies and tools. This could include studying historical market crises, learning about hedging techniques, and understanding the regulatory environment of commodities trading.
Technical Skills: Beyond Python, familiarity with other programming languages like R, SQL, or MATLAB can be advantageous. These tools are often used for data analysis, back-testing trading strategies, and automating tasks. Additionally, proficiency in Excel remains a must-have skill for financial modeling and analysis.
Soft Skills: Communication, negotiation, and decision-making skills are vital. Trading often involves working under pressure and making quick decisions. Developing these soft skills can enhance your ability to work effectively in a team, communicate your ideas clearly, and negotiate trades.
Internships and Practical Experience: Try to secure internships in trading firms or related financial institutions. Practical experience will not only give you a taste of the trading world but also allow you to apply theoretical knowledge, build your network, and understand the daily workings of a trader.
Certifications and Extra Courses: Look into certifications or courses that can bolster your understanding of commodities trading. The CFA (Chartered Financial Analyst) program, while extensive, covers a broad range of topics that are valuable in finance and trading. Shorter, more focused courses on platforms like Coursera or edX can also be beneficial.
Remember, the field of commodities trading is dynamic and requires continuous learning. Stay curious, keep updating your skills, and leverage resources like WSO to connect with professionals and gain insights into the industry.
Sources: List of Things You Should be Doing in Undergrad, To Those Who's Had A Successful Career In CRE, What Advice Do You Have For Younger Generations?, List of Things You Should be Doing in Undergrad, Q&A: 5 Things you can do to help convert your internship to an offer in Consulting, Would I get hired after graduation?
Bump
Since no one else answered, I'll say critical thinking and quick math skills. I also think some knowledge of psychology and biases is helpful to try to understand why the market is behaving as it is on any given day is helpful. Read Thinking Fast and Slow by Kahnemann as a start.
As you said, coding is always good. Python and R are likely the most useful but some basic SQL couldn't hurt too.
The reality is, coming out of college there really isn't an expectation that you will know a lot about the inner workings of the industry. No college majors will explain scheduling systems, ISOs, etc so every shop knows they need to train the new people (or at least they should). Being able to do quick math and the ability to logic your way through issues will help make you more efficient at the job but that's really all I can say. Don't be afraid to ask questions when you start, it's the only way to learn.
Learn how to build a balance sheet using Python with data pipelines on the back end that are automatable so they stay up to date.
What are you studying? What is your favorite subjects?
Can I pm? Easier to talk there
Depends on what area of the industry you want to target. But I think a safe bet is to try as many math classes as you can. Most college econ classes will be helpful for any role in power and gas, especially econometrics, but they’re usually not rigorous enough compared to classes in the math/stats department. Especially for short term power trading, I’d say the more math and stats the better. Calc 3 and linear algebra are pre-reqs for everything, and while they aren’t directly applicable, the high level courses around optimization techniques, stochastic processes, statistical predictions, mathematical finance are.
People definitely get by without that type of knowledge, and without coding, but if you have the opportunity and aptitude they can make a difference when learning how the grid and associated markets works.
And similarly for coding if you can get up to or past data structures and algorithms, the better.
Those courses and some relevant internships would get you a look for most junior analysts roles, in my opinion.
Appreciate this, working on learning python now through LinkedIn learning bc it’s free with my university. Hoping to have some projects in the summer once I have the time
Will be direct. Do not say in an interview you have a solid understanding of O&G markets. Negotiation is one skill that is valid. Math skills and python are useful. If you want to get into O&G my suggestion is get into S&T internships at banks or summer internships at places like BP. Either would sell well when you apply to TDP programs like BP. Have a positive attitude and be willing to make your traders life easy. If that means writing a simple vba code to automate stuff. Think Maths is useful in gas markets. learn as much as you can about Energy risk and management. I doubt any one graduating college will know it so that can give a heads up as well. Finally be a sociable person if you can be.
Get a good understanding for stats and machine learning. Would recommend intro to statistical learning
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