Stock Trader Sara Goldstein on Developing an Expertise

Stock Trader Sara Goldstein on Developing an Expertise

Sara Goldstein clearly remembers the cold day in January 2015 when the Swiss National Bank suddenly dropped its cap on the franc sending the safe-haven currency soaring against the Euro. In minutes, the Swiss Franc rose nearly 30% against the Euro. The move bankrupt some stock traders caught on the wrong side of the trade. “There are different types of volatile days. There are the ones you can predict, like a Fed rate decision, and the ones you can’t. The Swiss Franc decision caught a lot of people off guard,” she observes.

London-based Goldstein, Head of Premium Clients – Trading at IG, says days with unexpected volatility are among her favorite. “It’s very intense. You’ve got to be alert and on your game so you’re ready for anything that’s thrown at you. That’s kind of the job this is,” observes the stock trader.

Goldstein broke into finance almost nine years ago when a university friend in the industry told her about the high-energy world of trading. Today she manages a book of more than 100 high-net worth clients, who trade often and everything from foreign exchange to cryptos, commodities and small cap stocks.

Intensity rules Goldstein’s days. Before the London Stock Exchange even opens, Goldstein has written and distributed a morning rundown to clients summarizing the overnight moves in Asia and the US, talked with analysts and often taken a few client calls. “It’s about being as prepared as you can. Knowing which clients are going to call, which ones are going to trade and what bad news could be putting clients’ accounts in trouble,” she says.

Most of Goldstein’s clients focus on European small cap equities trades and she has developed an expertise in the area and a nose for growth opportunities.

We spoke to Goldstein about how she developed her trading expertise.

How did a degree in economics prepare you for equities trading?

Not much at all. Adam Smith’s division of labor pin theory from 100 years ago doesn’t help you digest Lloyd’s banking results. I really enjoyed economics but wasn’t sure what I wanted to do. A friend worked in the industry told me what she did and I thought, why not give that a go?

Talk about early experiences as a trader

When I joined IG in the graduate rotation program, I was one of the only women on the trading floor. This will sound funny, but if you went to the loo, there was never a queue because no one was there. At the same time, if you needed a hair brush you were in trouble because there was no one to ask! That’s changed over the last eight years. I’ve seen a lot more women coming into the industry. IG’s philosophy is about empowering people for financial freedom and women are a part of that.

Do you see differences in the way men and women trade?

This is something people have tried to analyze for years. Is it an education thing? Does it go back to what girls study vs boys? Is it about risk? In terms of differences—I don’t have enough females clients to answer the question. But there’s certainly a difference in the number of women that trade versus men, and it would be lovely to see more join the market.

What markets most interest you?

I prefer shares. I like to look at a company, see what they do and assess their value: what P/E ratio they trade on; how much cash and debt they’re carrying and so on. I’m not a technical trader. I don’t know how you can predict what the price of cable (the forex term to refer to an exchange between British pounds and U.S. dollars) is going to be in the next 30 seconds. Equities is something I’ve grown into, starting by reading news stories on individual stocks. At the same time, I was trained in economics, so I do look at the wider markets.

Are there key distinctions between stock trading vs commodities, for instance?

From a trading and execution point of view, we have so much liquidity at IG that many of our products—indices, foreign exchange, commodities—can be traded online. There’s no need to call an execution dealer like me, unless you’re dealing in significant size. And that’s where it becomes interesting. Someone gives you a big order and wants to buy a huge volume in a stock that’s illiquid, you have to find that volume, and know how to trade it without moving the price.

A lot of my clients trade very small cap stocks, driven by market makers, those who provide liquidity and make the pricing. You can’t just put your order up on an exchange like you would for shares in Apple or a FTSE 100 stock. It’s very much like a game of poker. The market makers control the price; you want to know what flow and volume they have. They want to know what you’re holding and where you sit, so it becomes a game to try to get clients a good price and a good fill.

I find it most exciting and I do it daily. You’ll see two prices on the screen; a bid and an offer price. You’ll see different market makers on the offer. But you don’t always know that they actually are the best offer. The market maker might just be trying to get an order to make us show our hand. It’s a strange market and quite fun.

How do you keep an eye on dozens of dynamic small cap stocks?

It’s impossible to stare at your screen all day looking at 40, 50 markets for price moves. I set price and news alerts, which will tell me when something’s happened. For instance, if a stock moves more than 5 or 10 percent, it will ping me and I can jump in to investigate the movement. Why has it happened? Is it rational or logical? Do I need to call my clients about it? Do I need to trade off it? I am pretty hot on news and price alerts

Some people might feel stressed out about hearing unexpected pings all day—how do you manage your emotions?

People in the office know me as feisty. I have a bit of a tongue, and can occasionally be heard yelling across the floor. I think that controlling emotion comes down to being organized. You get flustered, panicked and act irrationally when you’re not prepared. If you assure yourself that you know what you’re doing, then in those times of heightened emotion when the market is incredibly volatile, that confidence will enable you to stay calm, keep focused, trade and get the job done. Saying that, the odd swear word helps.

Using stops and limits won’t take the emotion out of how you trade, but it will certainly help you to control and manage your risk. I think losing that control of your risk is where a lot of emotion comes from. Losing control is when you panic and make errors. If you’ve got control of your risk management, your less likely to act recklessly or on impulse – which is probably one of the worst things you can do when the market starts to get volatile.

Who do you look to for inspiration?

This is controversial, but I don’t like following other traders. I think there are people you can admire, but if you’re going to place a trade because someone else said they placed a trade you’re never going to be successful. You need to make your own decisions. You never know why or when someone placed a trade (and more importantly at what price!). A good example is Gamestop and the frenzy around Wall Street Bets. While a lot of people made a lot of money, there were also those who joined the bandwagon late and had huge losses. Blindly following someone is a pretty lazy way to trade and will always end in tears.

Learn about other women traders at DailyFX’s Women in Finance content hub.