ALL YOU EVER WANTED TO KNOW ABOUT PROP TRADING!

Ask your questions, whether they intellectual or asinine, and I'll do my best to answer and give you my opinions on them. Mind you I can't really comment on options/Chicago shops and whatnot so maybe someone else (Jerome etc) can fill in on that.

 

Does your desk have research analysts? If so, how many analysts per trader? Do they hire from the buyside, internal investment research, or wherever else?

If you don't have research analysts, do you have a strategy head who gives general guidance?

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
 
Best Response

Cash4Gold- You have to look for the odd little intraday movements that youll most likely have filters set up for. Even though the overall index may only move a certain amount, there will be plenty of intraday movements in sectors themselves that will be volatile or have news that you can trade.. the education stocks today for example.

Ben- mikeinbrazil.com . silverbananas kthx

LIBOR- Hmm it really depends but it can be a few minutes to a few hours depending on the liquidity and if there are certain levels/resistances/support that im watching.. sometimes things will be rangebound in a certain area but im waiting for it to break one way or the other... so its usually more about the 'rules' of the trade that you set up when you enter... a deadly pitfall is to change your reason for being in a trade when youre in it so that you can trick yourself into thinking youre right

but in terms of REAL long term (not intraday in my case) trades? ill do some of these now and then but usually with illiquid stocks, some of the more portfolio manager type prop traders would prolly be best to answer this.

kenny- we dont have any research analysts other than ourselves, a lot of the traders are very in the know about a lot of the various sectors and keep tabs on biotech pharma etc kind of event driven things, M&A, etc so that we have a good idea of the overall field. we may not be experts in one area and know exactly how the price of cotton going up a penny a bushel will effect hanes' long term outlook but we will know the secondary, sympathy plays in case such a thing happens

 

In general, HFs have trouble beating the S&P 500, how do you guys fare? What makes prop trading different from trading at a HF? How are you guys organized? By product or by sector? What kind of strategies are popular in prop trading-spreads, pair trades, straddles, butterflies...? If you are at a BB how has fin reg impacted you?

Appreciate it!

 

whats the typical background of junior prop traders?

how does your firm/industy view personal account performance as far as breaking in? would your typical ivy, high gpa bb experience etc be better credentials?

A buddy of mine in FNYS says his program basically two years as a trader assistant, then in your third year you get $500,000 your trade. Is this fairly common in the industry or could you possibly be given capital to trade as a 1st year?

Could you talk about a typical day/week?

 

could you call my cell and tell me what you're wearing in a deep husky voice so I can have it as my outgoing message?

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

Skier -- Can get you guys a nice big long book on trading. Mind you, I abhor reading. ADD goes haywires. Video games = good, help you get quick on keys and thinking.

Marc -- Don't have any experience with this and i think most prop traders execute through their own clearing places that are linked to their shops, may be diff at a BB?

Back in 08 it was decent madness, rang up 600 dollar bill at the Galway hooker between 4 of us on a monday night (which isnt omg bottles but most of us arent that type -- prefer the bars and chiller scenes. ) and im not a big drinker.

Happy - when we are in houston can do that no problem

Already rich -- I know a lot of them tend to be very smart/quick math, strong GPA from solid school (the definition of which can vary, some will only go ivy or other super top while we like kids from such schools to solid state schools like Penn State, UConn, Maryland, Cornell (laugh) etc as well. can find smart kids here and there as well), competitive, passion for markets and have followed or traded in competitions on paper basis etc, hungry. and i think a real 'want it' attitude and will want to grind it out to become successful. trading isnt easy money, its actually tough no matter the product. (at least on prop bases)

Different firms are structured differently. We start our guys off with a chunk of cash and want you to learn by doing where as FNYS likes people being able to watch and learn stuff for a while, thus their trading assistant program. But that is also because they are more long term oriented in their trading and I would imagine you need a longer horizon to learn from with all that to be initiated into the fold. And then you have the trading arcades which are the chop shops..

We have guys from varied experiences -- a guy coming in next year was orig going to be going to do a phd in physics, 3.8 physics major from decently solid school and affinity for poker. wasnt orig interested in trading but he put two and two together. another guy is from indiana (sorry if you guys dont like having your details out here like this :P) with also a high gpa, extremely hard worker who we feel will grind it out and has interned at. i personally had a 3.4, did well in trading competitions and was very passionate and hungry in my pursuit of the markets and finance-- i definitely wasnt a pro but did well in trading across both commodities and in equities competitions.

As one of the biggest rules of thumbs that are mentioned across the board : its not a cookie cutter xyz is better than abc to get a job or into ab school. its a summation of your whole package. if you have a 4.0 from princeton but nothing else (okay prolly bad metaphor :P) then might be hard vs someone from another good school with a 3.6 but solid ECs and internships.trading experience.

no firm is going to look at your performance on trading and be like OMG THATS HOW THEYRE GONNA DO HERE because its always a much better . and from what i know, they generally dislike people who have traded their accounts and think they know it all about everything -- its good to show u have interest but dont be too haughty about trading your 5k account :) lol

Ben -- mentioned this above. and also varies for group and product :)

Ambition -- sounds like youre asking more about options -- im more intraday equities so cant say much in termso f butterflies and straddles. but from what i know most of those guys are making the markets in those options and hedging along every way possible with their algos/discretionary feeds. jerome would be better to comment on that. i think certain HFs and trading shops can outperform because they arent linked to the performance of the market necessarily and have a lot more flexibility and nimbleness on a much smaller (comparatively) spec of cash than the whole S&P 500 -- plus the fact that leverage is allowed even before trader payout is figured in creates a multiplicative factor.

Typical day -- get in early, read up on news and become aware of what may be in play in terms of industries sectors companies and economic numbersso that i have a good understanding of what to be careful for and what to profit from, make adjustments to my filters to help me pick up on things that i may be looking at.. market opens and traaaaaaaade! personally i do a lot of the volatility related trading at the open and then i sit and look around for more event driven momentum plays caused by catalysts to happen but everyone is different.

 

dan - no idea about hong kong? :X im sure there are but chinese markets need to be a chinese national to trade the securities, no?

mr b - the psychology can be very tough. in the beginning when you are being destroyed day after day and losing money doing what you THINK is the same thing as the other people on your desk it can be very draining and damaging on your morale and psyche so its important to keep your head up -- because this morale damage will effect your overall trading as a result. the changes in the market can also be very difficult to grasp at times too.

qwerty. i make enough ;p i like knowing that i dont have to have my own livelhood at risk which is helpful when you are an aggressive contrarian trader like i am :p.. plus my own money is tied up in long term trades so in a way i am.

 

What are most firms looking for? Is it just all about the school you go to for some firms? Also only want mathematic majors?

I'm not getting interview ops at the Jane Street, Jump, Optiver, Belvedere, etc type places even with pretty good EC's and the 4.0 and programming experience, so was wondering what keeps one from getting interviews at the top firms.

 

How have you adjusted to the changing equity structure the past few years - specifically dark pools and broker internalization? Do you have access to dark liquidity and/or algo execution? Or are traders in your office constantly yelling, "FUCK! How do I get that fill!?"

 

do you believe that humans are "genetically hardwired to misattribute the results of human endeavors to skill and knowledge that are, in fact, just coincidental, random events," and if so, how do you know you actually possess a skill to predict short-term price movements?

 

south - im not sure? but its made money for me over the years.. so something is working lol

spork -- nah we havent had much issue with that -- at least i havent. i know some people have bitched about it but i havent heard much of i since a year ago.

schwallie -- does your resume suck? :P not to be crude or rude but ive seen great credentials shoveled together in a hideos manner.. if u arent getting iviews might be an issue.. what school are you at

 

Can a trader run several different strategies of their own at the same time like they were operating a small fund within the firm?

I know it varies but how soon does it take for an above average trader to start making mid six figs gross?

Also is trading only intraday or they take longer term positions?

 

As a young prospective trader at a target with previous experience and demonstrated relevant interest and achievement, how do I make the final decision between prop and agency/flow trading? I'm going to be interviewing for a number of firms (both prop shops and BBs) for a SA position in the coming months and I'm still unsure about the path I feel I should take.

Long-term, what are the compensation prospects for prop vs. BB? Is making partner at a prop shop easier/more difficult than MD at a BB? Are the rewards the same? What about time-scale? Is the HF transition still viable (BB to HF) given the dwindling number of prop operations at BBs?

 

northeast - yes, why not? as long as you can manage all them then yes. firms may wish to see you scale into more 'long term' plans or certain black box kinda trading strategies than going all in right away with massive cash amounts but overall dont see an issue. for making that kind of money i think it depends on the market and many other factors?: cant really comment on it FOR SURE. the market is a huge indicator of how much money people can make. we mainly trade intraday but have long term stuff too and port managers etc... firms like FNYS are the opposite.

jchris- shouldnt be hard to guess from all my posts :P

gravity - i guess it depends on your itnerests long term -- do you like having client interaction and dealing with flow and that type of thing as a trader or do you want to be actually trading strategies and whatnot? i think that therein lies the answer.

as someone said, IB will be more 'safe' cuz you can blow yourself up in a trade or lose an edge due to the market changing for xyz reasons, but a superstar trader will prolly always outperform a superstar banker. better hours as well :> i dont know about the whole 'partner' thing unless you mean making a ton of money and throwing your winnings into the general fund, we dont really have that here since we are kinda family office. time scale? what? lol i think if you can perform well and trade and show knowledge of the market that you can transfer it.. as long as your strat is applicable/scalable

 

First of all, kudos for shorttheworld for doing this.

However, just wanted to point out that this isn't "all you ever wanted to know about prop trading" since that often includes HFT, options market makers, prop groups in BBs, day trading, and even paid-to-join chop shops and it's impossible for a single person to know all about them. Some of the questions being asked can be answered very differently depending on what kind of prop trading we're talking about and for some it's not even relevant.

 

On average, how many hours/week do you work?

What are some pros/cons about becoming a trader that you wish you knew beforehand?

Do you ever have regrets about becoming a trader? How often do you wish you didn't have to go trade today?

I'm a junior undergrad thinking of becoming a trader, but find the general idea of 40+ hours a week working a job not appealing. There are very few things in life I can imagine I'd want to do at least 8 hours/day for years (video games is probably the only exception). Obviously, like 90% of all jobs require 40+ hours/week, but I wanted to know how you feel about where you're headed in life as a trader. Do you see yourself still excited about being a trader 5+ years from now on?

Thanks so much!

 
vectorkid:
On average, how many hours/week do you work?

yeah I'd like to know this too... haha

The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee WSO is not your personal search function.
 
vectorkid:
On average, how many hours/week do you work?

What are some pros/cons about becoming a trader that you wish you knew beforehand?

Do you ever have regrets about becoming a trader? How often do you wish you didn't have to go trade today?

I'm a junior undergrad thinking of becoming a trader, but find the general idea of 40+ hours a week working a job not appealing. There are very few things in life I can imagine I'd want to do at least 8 hours/day for years (video games is probably the only exception). Obviously, like 90% of all jobs require 40+ hours/week, but I wanted to know how you feel about where you're headed in life as a trader. Do you see yourself still excited about being a trader 5+ years from now on?

Thanks so much!

Try 60-70 hours a week for a BB trading gig.

You cant imagine doing anything except video games for 8 hours a day? that is really sad

 

derivs - thx and i would say that sounds right. and i concur roger davis -- need to get a credit trader to answer, i have no idea on that realm but i have some high yield buddies who prolly do 12 hours a day? maybe more maybe less depending future - no idea, again someone in this area needs to answer vector- youre fucked if you dont want to work 40. might as well be an entrepreneur but thats tons of hours. part ime at starbucks?

numm-- i pointed that out before :P thats why i was saying i do short term equities and that people in options or other areas would have to hop on board to give commentary on that haha

spencer-- i dont think we recruit @ UT but i think UT has a good brand name to be able to get a job if they want -- we recruit at penn state uconn maryland michigan for state and UT is on the higher end of those

 

How much money can you lose before you get fired? What do you do if you're on a string of losses?

Wall Street leaders now understand that they made a mistake, one born of their innocent and trusting nature. They trusted ordinary Americans to behave more responsibly than they themselves ever would, and these ordinary Americans betrayed their trust.
 

capitalist - a macro desk? lol im not sure to be honest maybe commodities and rates? total crapshoot of an answer though

heister- sure. apply.

qerty-- i dont personally but guy who sits next to me has a pairs trading black box but he paid a guy to code it.

beef- differs for each desk, and if youre new or old... also depeends if youre showing improvement or what :) lots of losses hmm figure out wtf beens going on and change your trading around and tweak it from there?

 

Hey, I saw the brief answer to how many hours a week it is on the job. But, more specifically how many hours a week at one year in? 5? 10-15? And also what is typical first year comp for a undergrad? Also how about 5/10 years down the road?

Thanks

B.
 

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