Compiled Bondarb's Comment History

When looking into global macro, Bondarb comes up a lot. Here's some of the comments I bookmarked:

Book Recommendations: 

...I trade US interest rate markets/FI...here is a list of books u should read if u want to further ur knowledge...

Fabozzi, US Treasury Securities and Derivatives Hull, Options, Futures and Other Derivatives Burghardt, The Treasury Bond Basis Burghardt, The Eurodollar Futures and Options Handbook

yes if u want to trade interest rate futures markets you should read: "The Treasury Bond Basis" and "Eurodollar Futures and Options" both by Burghardt. Take the time to get through those two and you will know more about note/bond futures and Eurodollar futures then most guys who trade them for a living.

i am old school but i the original Market Wizards...paul tudor jones, bruce kovner, etc...i also like Reminisences of a Stock Operator especially the annotated version that has the real history behind the original text which has fake names/places. That version also has a forward/interview with Paul Tudor Jones that is in itself worth the cost of the book. Inside the House of Money is good but about half the people in their blew up in the crisis.

You guys should check out the new anotated version of Reminsces of a Stock Operator...it goes through the original text and uses margin annotations to put all the stories and characters in historical context. Really great for anyone who has an interest in the history of the 1920's and the history of speculation...also has a forward and an interview with Paul Tudor Jones. I just started reading it and its really interesting...i just ordered a bunch of copies for other guys I work with...

Most important buyside trading skills:

...to trade on the buyside u need iron-clad discpline. That is the most important thing IMO. A distant second is the inteligence/ability to come up with good trade ideas. But what seperates a good smart analyst from a great trader is that a trader understands risk and manages his book with cool, emotionless discpline even when things around him are in chaos. You must also have a love for the markets and eat and breathe the job...i am at home right now logged into my bberg watching euro markets while watching chappelle and writing this.

Global macro day in the life:

...I work at a large global macro hedge fund in a pretty senior decision-making role. I think that the day that Mr pink describes is way more laid back then the one I have. Maybe its because he is an analyst and i have responsibility for p&l but my day is much more like this:

5am: Wake Up, log into my systems at home, check what is going on in Europe and what happened while I was asleep in Asia. The moment while I am logging on is one of the scariest of the day because you can get some very bad news about what happened while u slept. 545am: Get to work. Log in and begin reading research both from sell-side research people and from our in-house analysts. Also prepare for for the US markets open by going over any economic data or major earnings that are coming out that day. until about 5pm: Keep reading, watch markets, make trades where appropriate, discuss markets with sell-side salespeople/analysts, work on analytic tools i use like spreadsheets, etc., order lunch to my desk. 5pm: Leave the office. Make sure you have call levels left for the night guys overseas in case things go haywire. 5-10p: Either go out and do stuff...date/drinx, whatever, go to the gym, or go home, log in and watch Asia open up. 10p-5am: Sleep...sort of...wake up several times either to check markets or because you get calls from brokers overseas who have call levels on positions. Sometimes also if I have a large position in Asia or Europe and major economic data is coming out I'll wake up for that.

...generally if u do global macro it means no sound sleep ever again except friday and saturday nights and a work-week that begins 3pm Sunday and goes to the end of trading in NY Friday totally continuously except for about an hour every day between NY close and Asia open. So thats what you have to look forward to!

....i am a pm at a large macro fund. I am in the office from 6am-4pm weekdays but the job is basically 24-7. Right now I have positions in a few different time zones including new zealand so risk is most certainly a global thing that dosent care about what your hours are.

The thing I have found about hedge funds that deal in liquid 24-7 markets is that as you get more responsibility the hours decrease but the pressure increases. It becomes more of a lifestyle that revolves around markets as opposed to something that can be defined by "I work 9-5". Some days I am in the office for a fairly short day but other times I am up all night worrying about a position halfway around the World or I am talking to an Asian analyst at midnight. The more junior people work longer hours but they go home and thats it because they have no risk. The job becomes more grueling the farther along you get, not less. Their is no "pot of gold" where you work 8 hours and sit back and stresslessly collect million dollar checks...at least not in global macro.

And to answer another question, you take this job over banking because you love markets, you love the idea of running your own business and taking calculated risks, and because you can get really really rich if you are good.

Analogy on macro trading:

...on strategies...ie global macro vs long-short equity vs others...it all depends on personality and strengths. I have worked as an analyst in fixed income relative value and an intern at an equity shop so i have some broad exposure and I can say that for me i love macro because it is more artistic and less quantitative. That seems cheesy and it is, but i see the global markets as a really big machine that is constantly shifting based on world events and as you get better and learn all the products it becomes very artistic the way the different markets move in step and react to one other. It is like a symphony of different instruments and at any given moment one section is playing louder and one is playing softer but there is reason to it all and you have to learn to get in step with the markets so you can react quickly.

There is large volatiltiy as mentioned, but that is why discpline and position management are so important...that is universal accross strategies. There is a continuing shake-out accross markets not because of volatiltiy but rather because many managers always add to losing trades and express no discpline...true for every strategy.

Investment horizon for trades:

...my investment horizon is more like 30 minutes to 1 year. The best trade of my career was on for many months of 2008. If a trade is working it can stay indefinitely, if it ain't working its gone quite quickly. We track money flows and market participant behavior but so does just about everybody who is seriously involved in markets...maybe not an analyst who is tasked with something specific but almost everyone in direct contact with the markets has to at least attempt to be aware of what is going on. And I dont generate anywhere near 100 ideas per month. I have several broad themes such as "deflation" or "Libor normalization" and work backwards from there to come up with the best representations of those broad ideas. Some days i will do many trades, and i have also have had entire weeks where i dont touch my book. And of course i need to keep track of what's going on in the world...again unless u r an analyst who's just been told to do something specific like "figure out how much financial conditions have tightened in europe" everyone watches news and events very carefully.
 

Bondarb’s route to PM:

...i personally never worked on the sell-side. I went from an ops job at a bulge bracket firm, to a trading assistant role at a hedge fund where i really worked my ass off to learn about markets. At that job i was promoted to an analyst/jr trader position eventually (I was the only one at a small fund) but ended up leaving shortly after to take an analyst job on a dealer prop desk that i felt offered me a better opportunity to advance quickly (which it did). From there our whole group left to go to large hedge fund which is where i am today. Macro tends to have a pretty diverse background...most of the guys i work with are former fixed income sell-side traders but i know many who are career buyside people like me or who came from completely outside walks of life. They key for me was doing alot of work on my own to learn markets and becoming someone who really is a 24-7 "market person", doing a great job in my "lesser" early jobs, and not being afraid to take risk and switch jobs when possible opportunities presented themselves. And of course a lot of luck.

How to trade:

Here is how you learn about trading: 1) Have at least 5k. If you dont have that then get it somehow. Sell drugs, suck dick, etc. 2) Set up an account on Interactive Brokers that allows your to trade futures. 3) Pick one product that has a small sized contract...when i did this I could only trade at night so I picked Hang Seng Index Futures. 4) Read up on the leverage inherent in futures and create a risk management plan...ie how you are going to size trades, use stops, add to positions, etc. notice you do this before you know anything about the market because it is by far the most important part of being a good trader. Discipline is what is going to make you a good trader not brilliant ideas. On 5k you will probably be trading 1 lots...ie 1 contract. That is fine. 5) Learn how to account for your performance. Every day you should know how much you made or lost and have a good log of it. Not what the broker sends you...you should do it yourself and use them as a check. You are your own back-office and middle-office. 5) Learn the interactive brokers execution platform inside and out. The IB platform is not much different then one I use at a large hedge fund so when your done with this you should be able to execute in a professional manner. 6) Learn everything about the market you trade. For the case of hong Kong if thats what you picked you should know how the central bank works in that country, the politics, the composition of the stock index, valuations, etc. This will take awhile. Start by finding a local newspaper to read every day. Then go to the central bank website. Find yourself an economic calendar that shows what data is coming out in your market (they are not hard to find for free). Start very basic. Notice that you do this only after you are ready to handle all the real business of trading. Also, you should do this even if you intend on trading using mostly technical analysis...it will help. 7) Start trading. Be careful. Your goal #1, #2, and #3 is preservation of capital. This is a learning experience you arent going to get rich trading 1 lots. Trade defensively at first. If you turn out to be a good trader what you think is defensive now you will probably realize later was insane so heir on the side of caution. 8) If you actually do all these steps you will be a better trader and know more about markets then most kids do AFTER they complete an analyst or associate stint on a sales and trading desk...i gaurantee it. 9) Remember what you are doing is learning a trade...you arent learning how to sell bonds to dumb central banks or how to kiss some bankers ass you are learning a skill that few have and makes you very valuable if you become good at it. Treat your work with due seriousness and you will be paid back many-fold.

Trading in low-volatility or trendless markets:

Trading Macro, and being somebody who does "try to hit home runs" at the expense of having lots of small losers, I believe that low-volatility or trendless markets can be fine as long as you have enough products at your disposal to take advantage of it. This is because the lack of vol is a trend in and of itself...the lack of trends is a trend...and one can take advantage of that trend by selling volatility or by doing trades that mimic short-vol. Examples of synthetic short-vol trades are picking up carry in FX, betting on unchanged policy rates through short-end futures in fixed income, etc. Right now it is a moot point because markets are providing plenty of opportunity (and risk) but I have never bought the argument that lower-volatility markets are death for buy-side traders like many claim.

Rankings/prestige in trading seats:

...trading is not about rankings, its just about the seat. You want to work someplace that gives you plenty of capital, a wide mandate, and isnt on your back all the time about risk. Good systems also. Whether the name on the door says "Goldman Sachs" or "XYZ Trading Co" is meaningless. And I know, having worked at very prestiguous places and places that were less well-known. This type of shitt, making lists and the like, is for pathetic investment bankers who are only in the business because they want to impress their friends.

And that 2006 list posted above is only sell-side traders...I beieve in '06 Steve Cohen made over a billion dollars personally.

Rates trading/research:

...Interest rate research and trading means you will eithe be creating research or making markets in government bonds, interest rate swaps, and derivatives thereof. Many former sell-side rates guys become buyside portfolio managers either at hedge funds or prop desks. You will often see them at relative value hedge funds and fairly commonly at macro hedge funds as well. I currently work at a global macro hedge fund and my background is "rates"...because interest rates are such a big part of other markets like FX and equities I think its a good place to start if you want to be in macro, although I would say that if succesful one can make a nice career on the sell-side also. And BTW I have definitely heard of an internal global macro prop group because I used to work for one!

Research to PM route:

In terms of rate research backgrounds I think they are extremely varied. I have never worked in research but I think they hire everyone from undergrads all the way thru to quant PHDs. However, if your goal is to be a PM on the buyside I would try to get a job trading. I know some research analysts who now work on the buyside at macro funds but i still think trading is the most direct route to managing money. That is a topic on which some might disagree though.

yes sometimes...although many more PMs where I work are former sell-side traders. You should also differentiate between a strategist job and a research job. Strategists, who usually work for specific PMs and help them with both idea generation, trade structuring, and risk management are different from research dudes who grind out the numbers. So for example on any given day a strategist or PM might come up with an idea, talk about it together, call the research guy in to run some numbers/charts, then the PM and strategist will talk more about how specifically they want to express this idea in markets, and then the PM makes the final call and the strategist helps manage the position, etc. Strategists often become PMs, research analysts not as often. My progression was from assistant trader at a hedge fund, to analyst on a prop desk and then a hedge fund, to strategist at a hedge fund, to PM.

The issue that hods back research guys is that they usually are so busy grinding out numbers that they dont really learn enough about markets to run money. They are very valuable and can be paid quite well, but to make "the big call" you have to be able to understand the trading instruments inside out, know how to manage risk and size positions, as well as having a good understanding of the fundamentals that drive the trades.

yes i believe it is harder to become a "market person" for a research guy then it is for a market-maker to be a good idea generator. In fact I dont even think its really close.

Sell-side trading has some overlap with being a PM which is why they often make that jump, but even if you are taking propietary-type risk the sell-side is still a much different game...sell-side guys generally have a lot more leeway with balance sheet, they have better access to liquidity, they can trade around customer flow, etc.

When I say trading experience I generally mean PM experience not pure execution...pure execution guys sometimes get hired as PMs but its not really that common. The most common way it happens is if a PM has an execution guy he really likes and that guy starts working for him almost exclusively...then sometime down the road the PM may let him take some of the balance sheet.

Buyside jobs and routes/promotions to PM:

it depends on what u mean by "trader"...i think u r more talking about the sell-side but i will answer from the perspective of a buyside "trader" or portfolio manager.

on buyside there are all sorts of jobs where the person doing them probably wants to run money/trade himself one day. Everything from research analysts who crunch numbers, to strategists that usually focus more on trade ideas or portfolio management, all the way down to trading assistants who book trades and middle-office guys who make sure they settle right. Every one of them along the way sees themselves as one day making "the big call". Of course most never will. There is no one career path but i can give u mine...

back-office/reconciliation----> Trading Desk Assistant-----> Assistant Trader/Analyst---->same but with more of a strategy bent...ie less running numbers and more coming up with ideas, advising PMs on position sizing and risk management, etc.---->managing my own money/balance sheet (and also still acting as a strat for other guys on my desk)

Once you get to the point where you are managing money then promotions have to do with capital and autonomy. But that dosent mean those arent promotions...a young PM with tight risk limits has alot different potential to make money and a much different job then the guy who runs the fund who is allowed to take as much risk as he wants and dosent have to answer to anyone. Also more senior PMs will be the ones who interface with investors when neccessary at large funds...at a small fund every PM will likely have to spend some time in front of the investors.

Ease of trading on sell-side vs HF:

Trading at a hedge fund is much more difficult then trading in a seat on a good desk on the sell-side because you dont see any flow at a hedge fund and you dont get the liquidity of the inter-dealer markets at a hedge fund. As noted above, a seat on a sell-side desk at a good shop that sees alot of flow is quite a valuable commodity. The pay is better for succesful hedge fund traders but the game is much much harder....trading on the sell-side is like being the house at a casino.

And of course it dosent take a genius to understand that most people arent rich enough to just trade their own money and make a good living. Most also would prefer not to risk their own money.

Importance of lunch orders:

certainly if an analyst cant even get lunch orders right then he cant trade. When you are asked to order lunch do it and take it seriously. Back in the day my lunch ordering skills were absolutely unmatched....a perfectly executed large lunch order is a thing of beauty.

Emotional discipline when trading:

learning to control your emotions is one of the most important parts of trading. in the future, when u r starting to feel freaked out, step back mentally, observe your emotions, and think about why you are freaking out. Dont try to suppress your emotions, instead learn to accept them and move on. For eg, ur internal dialogue should be "ok, i am feeling nervous, but that is a natural reaction to having big trade on. But the trade is not abnormal or bigger then is justified by my capital. It is part of my plan. so i accept that nervousness." As long as u r not over-betting your capital then you should just learn to live with your emotions instead of trying to suppress them. Read "trading to Win" by Ari Kiev which deals with this subject extensively.

PMs bondarb works with:

I work in a portfolio management group that is made up entirely of former sell-side traders...in fact i am the only risk-taker in the group who has never been a market-maker...so that is definitely a path sometimes. But as i have posted many times before people come from everywhere...ive worked with PMs who were previously research people, previously central bank officials, have been life-long buy-sde traders, and many other things. Research is a very popular path to get hired where i work as analyst but rarely leads to being a PM....sometimes they will give analysts small balance sheet within their niche but almost none have the broad product knowledge to really be macro portfolio managers. For eg the New Zealand Economist will be allowed to put on a small position and get paid if his/her call on kiwi interest rates pans out but will never be allowed to trade other markets or get big enuff to make alot of money (relative to what is considered alot in this world at least).

If I was creating the perfect macro PM I would start him on the money market desk at a sell-side bond dealership..i think interest rates are the building blocks for all the markets and they also in my opinion require the most specialized knowledge. Once you really understand the mechanics of the rates markets it makes everything else much easier. Unfortunately this type of job no longer has any "prestige" so its a rare path nowadays.

Getting a job through cold-calling/emailing:

I am going to assume you cannot get a job through campus recruiting. I was in the same spot when i was in college...here's what i would do:

1)first of all if you have a year of shool left start trading now. Fund an account with $5k and start trading 1 lots of equity or commodity futures. Read extensively about risk management, trade with tight stops, and generally be very discplined. If you have classes during the day pick an asian market to trade at night...in fact asian markets are preferable. Become expert in the market/country you trade. I did this when i was in college so dont tell me its ridiculous. In fat if u honestly do this wholeheartedly i would get u an interview.

2) Once you are doing that start working your alumni network. Cold call/email people who currently trade. In fact cold call or email everybody...find friends who work at banks and figure out the email format each firm uses... ie firstname.lastname@citigroup.com, then watch CNBC and send an email to every person who is interviewed whose email you can figure out. Somebody will eventually meet you...if u go to an ivy you might get 10 "informational interviews" just by being aggressive.

3) When you go on these interviews with traders have informed opinions about the market you trade and listen to what they have to say about theirs. They will actually learn something from you during the interview and even if you don't get a job you will learn something that makes you a better trader.

4) Generally start behaving like a trader...eat, drink, and sleep markets 24/7.

...Take this approach and i gaurantee you will get a job...

Shadowing traders:

...I am an "md level" trader at a large hedge fund and i can give some tips having talked to many interns and analysts who almost always say something stupid. First of all, in the office you should talk only about business unless the senior person moves the conversation into the personal realm. The question about drinks would be absurd unless prompted, this job is my life so I really dont care to waste time talking to 20 year olds about bars when im at work...go look on nymag.com and they have plenty of info on where to go get drunk. And when I say business I mean what you can do to help out operationally right now, not your career or advice about recruiting. Also, do not ask any questions about strategy or the thought process behind trades unless you are sure that there is a lull in the day and the trader is in a good mood. Nothing is worse then when something is going against you, your stomach is grinding, and some kid starts asking about why you did that trade or what you think of markets....that is a sure-fire way to be told to fuck off. Have a sense of trading floor etiquette and if you don't understand that just be quite until you do. The bottom line is that people who have been succesful in this business (on the buy-side where it isnt about sales or politics) are deadly serious about their jobs and you should treat your work and office conversations the same way because it shows respect. If your out for drinks obviously it can be more personal but again let the senior person lead in that direction..you should not be drunker then your boss and you should not be less apropriate conversationally.

I am a PM at a hedge fund and I never worked on the sell-side. I sat next to really good traders on the buyside for quite a few years and watched them (while booking their trades, getting their lunch, etc) and that's how I learned the business. That experience is way more valuable then anything you can learn on the sell-side and because of this I have been trading at a big name fund for longer then just about anybody I know who is my age and went thru the sell-side. On the sell-side they are mostly teaching you to sell, whether you know it or not. As I have said many times before, to be a PM on the buyside I would rather be an assistant to a PM as a post-college jon then an investment banking analyst.

the questions thing ias key...do not ask alot of questions...u r there to help other not to be tutored. write down your questions, figure out the ones you can answer yourself, and only ask the rest of them if you are 100% sure the time is apropriate and the person will be receptive. To me there is nothing more tone deaf then an intern asking a bunch of questions when we are trying to work...this isnt college, the task at hand is making money not learning.

Building Interest rates knowledge:

I am a buyside trader and 70% of what I trade is G10 interest rates.

Be careful in pitching a rates idea unless you have real understanding of how rate markets work. Nobody expects an undergrad to have a full understanding of trading the yield curve but basic questions that you should know if you are pitching a curve trade are "what is the carry and roll on that position?"..."what is your view on the Fed and how will that effect your trade?".....You should really understand the relationship between the forward curve and the spot curve and how that effects your decision-making process. I am not going to give you the answers but if you dont understand that stuff then you are better off saying nothing. To be fair I knew none of this stuff when I was right out of college, but if you are interviewing for a high-level job right away (i started as a back-office trade entry clerk) and you are trying to differentiate yourself by displaying knowledge of fixed income then you should know this stuff.

My perspective is that of someone pretty senior though...as sad as it is, many sell-side people will not question you as hard as I would because their knowledge is spotty and they will be afraid of looking like idiots. If a 22 year old came into where i work with a curve trade i would probably crush him just out of spite, but most of the sell-side guys you will be interviewing with will probably be much easier.

Mental math:

I trade mostly fixed income and I find it is helpful, but not neccesary, to be able to quickly add and subtract numbers with two decimals in my head quickly (like 252.86-135.37) but other then that i have never felt the need to do any higher level mental math. I have always been much more verbal then quantitative (ie standardized test scores, etc) so as lame as it sounds I actually had to practice to be able to really add and subtract numbers such as the above example quickly in my head. I actually made myself an excel sheet that would spit out random numbers and would practice for ten minutes per day until I could do it like second nature.

Hedge funds outlook:

A couple of points here:

1) as long as the fee structure at hedge funds remains, it will be a desirable place to work if you have any signifigant piece of the pie. 2 and 20 adds up to a tremendous amount of money in goods years. 2) Any time hedge funds have a bad year, many of them shut down. This is simply because you dont get paid until you recover your high water mark...so many operators find it more profitable to shut down the fund and open a new one with a new high water mark as opposed to making back the money they lost. This may be immoral but unfortunately its how the business works at some places. 3) I have seen no diminishing interest in the hedge fund industry from recent college graduates.

More generally, a hedge fund is just a legal structure that allows a trader/speculator to be paid a performance fee and a management fee in a way that is beneficial from a tax perspective. Traders have been around for literally thousands of years. So whether it is called a "hedge fund' or something else, traders will always find a way to speculate on markets and that isnt going to change....its just a matter of whether they will use this particular form of incorporation.

Are great traders born or made:

We could argue all day about whether the few great traders are "born" or "made" and this debate is as old as trading itself. The great comedy movie "Trading Places" was even based on this argument! I think that the great traders I have worked with all shared a few traits such as humbleness (ie they arent afraid to explore the possibility that they are wrong), flexibility of mind (ie they can change their mind when the facts change), discpline (ie they manage their money right even when it is tempting to "gamble" so they always live to fight another day), and an ability to stay rational and follow a plan even under high pressure (as Mike Tyson said "everyone has a plan until they are getting punched in the face"). All of these qualities can be built/learned but their are also some who are pre-disposed to having them genetically.

This is really my own opinion, but I also think that it is helpful to be a contrarian thinker generally even outside of markets (this is for buyside traders not market-makers). I find a much higher percentage of great traders embrace alternate views on things like politics, health, entertainment, and lifestyle....quirky people tend to see the World differently and not follow the herd. I generally live my life with the belief that if anything is universally agreed upon by any "establishment" (govt, scientific, academic, etc) then its probably bullshit and this is a very helpful mindset when trying to sort through the noise of the markets. In my opinion, this really cannot be taught and must be genuine.

Technical analysis:

I use alot of technicals, more for information then anything else. For example every morning I have a report that tells me what products have tbroken 50 day, 100 day or 200 day moving averages...its not because I neccesrarily think that one can make money trading these signals but rather because these crosses just mean that something is happening and I want to investigate what it is. When u r trying to follow so many different markets these type of things can help you not to miss anything.

Pissing at work:

Corporate bathrooms have me terrified of old age. Pissing next to an older guy about to retire and he starts the stream, stops, start stop start stop. Grunting and shit. I always make a point to push my piss stream as hard and fast as possible so as to remind the old fuck, who more likely than not gave me shit for something I did at one point or another, that he may run the office but at least I can run my own dick.

Hiring of buyside analysts: 

yes different funds can certainly have different philosophies about hiring...where I work we really only hire research people to be analysts and they tend to stay as analysts for their careers. When we hire portfolio managers/risk-takers they are almost always people with trading experience either on the sell-side or at another hedge fund.

I tend to think of all the big multi-manager macro names as more trader-dominated...ie Tudor, Soros, Moore, Brevan, Fortress, Caxton, Millenium etc. Thats not to say that occasionally they dont have analysts who become PMs but these places tend to hire traders to run risk in my experience. These places have big research arms and analysts can be very well paid but generally its traders making the final decisions. I tend to think of more equity and credit funds as places where people who are in research or called "analysts" can be responsible for making the actual portfolio management choices.

Analyst vs PM personality type:

yes managing risk properly and understanding the various products and markets is a skill that takes a long time to master and very few people have it...and it has only partial overlap with the sell-side trading skillset. So is proper data analysis and understanding how to do macro research. Generally an analyst doesnt get enough exposure to PMs and the market to be good at both.. I find most of our analysts are extremely inteligent, probably higher IQ on average then the PMs, but when you talk with them about markets they have glaring weaknesses...you can just tell they havent had the market contact/experience to run a book. Also, there is still in an old-school mentality where the PMs are generally very big personality-types...its kind of the swaggering risk-taker mentality. Generally analysts are more cerebral and introverted which rightly or wrongly I think turns people off to them as potential PMs.

Risk management books:

Those are tougher to find..Good risk management is really pretty simple and some of the best insights I have gained into the subject came from interviews with traders (for eg covner and paul tudor jones in the original Market Wizards) and from watching how succesful traders with long track records and no blow-ups tend to operate. One of the advantages of spending my whole career on buyside trading desks (even tho the first half was in ops) is that I have seen many many traders come and go and seen how the succesful ones run their business and just as importantly how the shitty ones operate. I think if you dont have that advantage the best way to start is to use simple money management rule such as "never risk more then X% of capital on a trade" and go from there...there is a book called Trading For a Living by Elder that has a good way to structure such a rule...that book is not geared to professionals and some on here will be too snobby to take it seriously but a simple rule like that is a good place to start. I know many respected, professional traders for whom i thin just using simple stuff like that would be a vast improvement.

one other thing on risk management...learn about the concept of Risk of Ruin. A good book on the math of blackjack card counting will familarize you with the concept. I first heard the term while reading Ken Uston's "Million Dollar Blackjack" back in the day...not sure if that book is even still in print but im sure there are plenty of others. its important to understand perfectly clearly (like 100% crystal clear) that if you size your trades wrong (or in blackjack bet too much per hand relative to the size of your bankroll) you WILL go bankrupt even if you have a significant edge in the game and a positive expected value on every hand. You would be shocked how many people dont even understand this concept and think that if you have good trade ideas then you basically cannot lose your shirt. not the case.

Sizing trades:

Obviously the smaller the perceived opportunity relative to the volatility of the product the harder it is to get on sufficient size and the less attractive the trade is. If a trade provides such little opportunity for gain that I have to do a ridiculous size to make a signifigant amount of money then I simply don't do that trade. I risk signifigantly less then 2% of capital per trade but even at that level of risk per trade there are plenty of Eurodollar and other STIR trades that present enough opportunity that the size doesn't have to be absurdly large even in this low rate environment.

Career advice:

Good post except #18...best thing i ever did in my career was leave a job that i could have convinced myself to stay in if I had some antiquated notion of "committing to the firm". My own list would only be 2 lines long: #1 Work herder then everyone else 100% of the time #2 Think differently and never be afraid of questioning consensus ideas about what you can and cant do

Sell-side vs Buy-side

...the difference between the buy side and the sell side is that on the sell side you are involved in the process of selling securities (bankers originate them, salesman sell them, and traders execute the trades) whereas on the buy side your job is to buy (or sell) securities for the purpose of making money. For eg a banker goes to a company or government and creates securities to raise financing for that entity. Those securities are sold by the firms' salesman/traders to buy-siders (like a hedge fund or mutual fund) who evaluate the deal and decide whether they have interest. In terms of lifestyle it is generally agreed that people on the sell-side work more hours although that is not always the case. Buy-siders also can make much more money if they are stars. the downsides to buy side are that it is completely results driven, there is no BS or being good at politics...u are judged by your profit or loss on a quarterly/monthly/weekly/daily basis. Because of this it is extremely, gut-wrenchingly stressful. Having risk in the market is different then anything else on wall st., it will keep you up at night and take over your life if you are doing the job with the right level of commitment. You may leave at 5pm or before that but it is no less stressful then banking....in fact i would argue it is much more stressful then pecking away at an excel spreadsheet for 20 hours a day.

Death of Macro (11y ago from 2024)

beware this isnt the first time in my career i have heard about the "death of macro"...late 2006-2007 comes to mind and we know what happened next. Strategies move in cycles and generally when fixed income volatility is low as it is now macro tends to be a poor performer.

yes discretionary trading is dead just like it was 10 years ago when i graduated college and everyone said the same thing. Soon the only opportunities will be for robots who will do everything from analyzing the news to sexually harassing the secretaries.

Just FYI every technological advance since the dawn of time has displaced some workers, and every one has created this same debate. In the 1600s in england there was whole movement of workers breaking machines because they thought the industrial revolution would make us worse off for the same reason. In reality it lifted millions out of pverty. Technology and automation may make some profesions obsolote but at the same time it frees up human beings to move on and create new opprtunities...it has been that way since man invented the wheel and didnt have to spend most of their energy dragging shit across the ground....my guess is that back then the caveman draggers worried that the would be out of jobs. Automation and increased productivity are our friends.

Just so you guys know this same debate was going on when i graduated in 2002 with the same group of people saying that finance would soon be a battle of robots. It reached its zenith in 2006-2007 when vol was extremely low and tons of quant funds popped up...back then to raise money in a discretionary strategy one literally had to make up some BS that connected it somehow to the quant World. Then in 2008 quant funds got obliterated relative to discretionary funds and many of them including big names like GS Global Alpha were exposed as being highly ordinary and mostly involved in pretty simple strategies. Today i am surprised quant funds arent more in vogue given how low volatility is especially in fixed income, and my guess is that they will continue to grow in popularity until the next time vol spikes. It's just another strategy and when vol is low and a historical data set is a good aproximation of the future then computers do well finding inefficiencies, but when vol spikes and the Worlds changes rapidly those datasets only pick out regime shifts that should not be faded or they find good trades but employ levels of leverage that are inapropriate and get stopped out before the tardes can work.

Best way to impress MD:

DO: Show initiative by putting on your best trade ideas while your MD steps out to get coffee.

World of macro:

the world of the large macro funds is out of 1975...all the old school guys like Tudor have southern roots and its a very male-dominated world. where i work we have approx 25 portfolio managers and I do not think one is a woman or even a minority unless you count white western european males living in the states as a minority.

Blackjack more like trading than poker:

I think that advantage blackjack (card counting) is much closer to actual trading then poker is just because the real advantage is gained in bet sizing and having the right sized bet out at the right time, as opposed to the playing strategy which varies very little in blackjack between a pro and someone playing at a disadvantage. I find that in trading the art of it is in the risk/position management and the trade ideas are less important on a reletive basis.

Healthy days of Wall St:

I dispute the notion that wall st is any healthier then the old days. Everyone always says the old days were "wild and crazy" but i have seen plenty of insane consumption including many three martini lunches, large steaks, drug use, etc. I actually think its probably worse now because the money is much bigger. On normal circumstances I dont even leave my desk for lunch and neither does anyone else because we are trying to make money, but especially in summer i will occasionally slip out for a lunch that starts innocently enough with a drink and ends 4 hours and many many drinks later. I often have stumbled out into the bright summer of an August day feeling no pain and trying to figure out how to tell my girlfriend why I was completely plastered and why whatever plans she made for tonight arent going to happen (at least not the way she had pictured them happening).

The thing is that you have to know which colleagues and especially which salespeople (since they are paying) will be discreet about it and not go crazy telling people. I have at least two or three counterparties that will leave the office on 5 minutes notice anytime after 7am to go get drunk and will not say a word. You've got to know who you can trust these days.

Anyway, on fitness I am in very good shape and I do it by working out 5 times a week and trying to avoid bread and pasta. thats all you need to do unless u r trying to be in the "top 1%"...im just going for "above average".

Friends:

this is good advice and i will take it a step further. most of my friends in high school came from very working class, blue collar families and as i became somewhat successfull (im not even talking anything major, just graduated college, got a decent job, etc) I would get alot of shitt from them about having changed, being a pussy, etc. The bottom line is that most people have herd mentality and they do not want others to succeed even if they are so-called friends because it highlights their own failures. This isnt just about finance or your job its about everything in life. When people see you doing something new or unique to better yourself you ALWAYS will get pushabck...as I get older in fact I realize this pushback is actually a great indicator that i am doing somehting right, not wrong. Experience has actually taught me that alot of success is just about being able to plow through the negativity of others and being strong enough to go your own way.

Bottom line: friends who dont support your goals arent friends, they are selfish people and you need to ditch them ASAP and find new friends who are positive people. And the converse is that you should always be supportive of other people...when a friend tells you some plan he has to do something new your first reaction shouldnt be "you cant do that" it should be more like "that sounds fukking awesome, how can i help?"

(there is also an outside chance you are just acting like a douchebag in which case the above may not apply)

Exercise/Diet:

i really feel like i hve grooved my diet/exercise thing to a point where its easy:

1) Diet is at least 80%, probably more. Skip breakfast and on normal days consume all of your calories between noon and 8pm. This is unorthodox but it makes it much easier to eat good full meals while still keeping your calories at the right level. It may sound girly but as you get older you need to be aware of what your daily calorie burn is and how much you can eat w/out gaining weight or you will drift fatter. Keep protein up near a gram per lb of bodyweight (use shakes) and avoid processed carbs. I follow this strictly during the week and then on weekends i basically free-style the diet. Read "Eat Stop Eat" for the science behind the 16 hour/8 hour daily fast/feed thing. 2) As long as u arent ingesting too many calories,weightlifting is much more important then cardio. I lift 3x/week focusing mainly on big, compound lifts such as bench, squat, hang clean, etc. These workouts are very minimalist and usually take 30 minutes or so....usually just three exercises, 5 sets/5 reps of each focusing on trying to lift as much weight as possible with good form. 3) I do conditioning because i like to be in decent shape and it gives me a little more room/margin for error on my diet. I stick to very short and intense interval training. Either treadmill intervals or intense bodyweight circuit-type stuff....stuff like burpees/jump-rope/heavy bag punching circuits. I get a lot of it from "Full Throttle Conditioning" by Ross Emanait which is a book written by a guy who trains fighters...highly recommended by me. My conditioning literally takes 10-20 minutes and then i tack on some ab stuff for a total of less then 30 mins...i do these workouts twice per week on the weekdays i don't lift. One day per week, on the weekend when i have more energy, i also go to a boxing gym and do a full workout that usually takes over an hour and probably burns 800-1,000 calories...this allows me to not worry about diet on the weekend.

I am at the same weight i was my senior year in high school, and have been for a few years after having packed on a few lbs in my mid 20s...and i spoend a total of about 3.5hrs per week in the gym which is manageable.

Importance of sell-side with decline of prop:

This question is one that gets harder and harder to answer as sell-side risk-taking has declined...I think that sell-side S&T in fixed income is still a great place to start because you get the requisite product knowledge but truly good jobs on that side of the business seem to be fewer and fewer. I came from a prop trading operation at a dealer...that job doesnt really exist anymore. Nowadays I dont think there really is a set path...I think the future of this business is much more creative and diverse....my personal opinion is that you need genuinely unique top-down thinkers married with really good bottom-up country-specific analysts and so as a perspective employee it is about trying to come up with your own unique story as to how your background fits into that. The fact that I cant even answer this question clearly should tell aspiring monkeys there is opportunity here...come up with your own path because the business is in flux and actually there is a shortage of younger talent right now due to the lack well-respected street rates traders out there.

Reading news:

i agree that just the economist and following the data doesnt seem to be a viable process but i also dont discount top-down thinking so long as it genuinely produces unique ideas. I have never picked up the economist, read an article, and done a trade on it, but i have read articles that have spurred interesting thoughts that have eventually led to great trades. I often find primary sources of information like newspapers, magazines, and non-finance websites create more of these opportunities then reading street research which tends to represent consensus, herd-like thinking. Something as simple as reading local papers (or english language news websites) in other countries is often overlooked by traders...you'd be amazed how many seeds for divergent trade ideas come from this kind of stuff as opposed to slogging through "The JT Marlin Interest Rate Weekly" to learn that 7yrs are cheap on the 5/7/10s fly.

...i am a big reader so will be interesting to see if i find anything new from everyones lists...here's some of the public (ie not subscription research) stuff i read daily or weekly:

Newspapers: WSJ NYT FT economist barrons international herald tribune NY Post for celebs and coverage of stories like Travis the Chimp!

Blogs: dealbreaker clusterstock accross the curve bondheads (just an aggregation of other news but sometunes has something i missed) for what its worth (mostly about greenwich real estate but still fun) lewrockwell.com (just b/c im a libertarian) page six (because i have to know which celebrities are fukking each other)

Best sell-side govt bonds desk:

...I am not saying govt bonds are the best product to trade on the sell side...quite honestly it varies firm to firm. I do know that govt bond traders can make alot of money if they are good...millions/year.

...it's tough to say which are best, depends how you define it...Goldman, JPM, Greenwich Capital, Morgan Stanley, Lehman are all very respected...Citi also often comes up on top of rankings lists which i can't figure out since i think they basically blow.