Power Trader  What They Do

Just the Facts


Insider Info

dotPower traders are also called energy traders. They work for energy companies and independent trading firms, analyzing the markets and performing energy transactions.

There are two types of energy trading: the trading of physical commodity products for oil, natural gas and electricity, and the trading of financial products.

Power traders work in three main areas: long term, short term and hourly. These positions cover all aspects of trading, from what gets traded at any given hour to what an energy company plans on trading a year down the road.

"There is a large amount of hourly and daily data that must be researched to handle day-to-day negotiations and/or bids [and] offers in order to make money," says Lucia Tomson. She's an energy trader.

"In addition, when trading longer term [such as] monthly or annually, you must develop an opinion (price). [This is] based on forecasts of weather, generation, transmission outages and new generation installations as a base for deals -- whether to buy or sell what the market is offering," says Tomson.

Traders tend to work alone -- making phone calls and trying to figure out where the market's going. However, they also have to communicate well with others on the trading team. These other members supply them with valuable information like mathematical analysis.

People in the field say it takes an understanding of two things to be a good power trader: supply and demand basics, and the psychology of the market.

Supply and demand is a basic principle of economics. It says that when there is a lot of something (asphalt, for instance), it is not worth as much because it's not rare. On the other end of the scale, diamonds are worth a lot because there are very few of them.

The psychology of the market is a little harder to describe. It's largely driven by fear and greed. When the market is fearful, more people want to sell. When it's greedy (or optimistic), more people want to buy. This pushes up prices.

A good power trader is able to read and react to the financial and psychological aspects of the market.

"On any given trade floor, you've got some of the brightest minds in the world that are also very competitive," says Detlef Hallermann. He's director of the energy trading program at Texas A&M University. "It's a combination of being competitive and being very intelligent."

The work is not very physically demanding. Most of a power trader's day is spent behind a desk. But that doesn't mean it is easy work.

"There are a lot of long days," says Wesley Allen. He's a power trader in Raleigh, North Carolina. "Sometimes it can be tireless work where you're just plugging away every day.

"The electricity market [which I focus on] is different than natural gas and oil," says Allen. "It's open seven days a week, and it's open 24 hours a day. And I haven't taken a day off (as of December 2012) since December 3, 2008. And that's holidays, weekends, you name it. I'll go on vacation, but I'll still trade."

At a Glance

Buy and sell resources for energy companies

  • Traders typically work alone, but they need good communication skills
  • Read and react to financial and psychological aspects of the market
  • Most power traders have a background in finance, economics or engineering