Quants vs. Discretionary Traders - which is more lucrative?
I have a tough decision to make and appreciate any advice. My goal is to make as much money as possible in the next 10 years and retire early. I’ve been offered positions on the following teams at a BB:
- Algo principal
- Voice principal (aka discretionary trading/manually picking stocks)
- Agency quants
Which of these has the highest earning potential? Which would be most likely to lateral to a top MM like Citadel? The plan is to start off at the BB, then exit to an MM HF to maximize earnings.
My assumptions so far (take these with a grain of salt):
- Principal quants have more earning potential than agency because they have a direct effect on PnL
- If you have the background, there are more seats available for quant traders than discretionary traders
Whichever one you can be the top 0.1% in is the real answer.
I don't know what a discretionary equity trader is at Citadel, are you talking about execution trading?
Citadel is an arbitrary example. I'm talking about the hedge fund industry as a whole.
TBH I'm going to reach out to another agency quant this week because I don't understand what they actually do. They told me that their job is to optimize execution for clients; it sounds like a purely technical role, or at least more technical than principal quants.
Also need to figure out the odds of switching from agency quant to principal. I really like the agency team - if I can, I would do agency at BB and lateral to principal at HF.
I don't know what a principal trader at a HF is either lol. I just know we have execution traders/PM direct lines that execute the trades we pitch into the book. THis is for equities though.
I believe in macro traders are risk takers
Should only be asking yourself which one you would excel at. I haven’t yet heard of anyone who needs to pick between algorithmic or discretionary roles in equities. The number of people who can truly perform well in both positions has to be minisculely small.
You’re using odd terms here that I’m not familiar with, but none of these jobs sound like they are what you’re looking for. You would likely just helping the bank trade orders that they get. Not sure how much PM-like autonomy there is
As per the description, I can suggest you a few things.
1. Understand the difference between a quant trader and a market maker. There are no quant traders at BB (explained below).
2. You say that you wanna start at a BB, then lemme clarify one thing, after the Volcker Rule, BBs are not allowed to trade their own money, in other words, they can't do prop trading (they might still do it, who knows!), so the role of Principal trader at a BB just gets out of the question.
3. If you start as a "Voice Principal" (you mentioned it), then you will most probably end up in L/S equity HFs as an execution trader, you won't manage your own book, so no P&L contribution.
4. Agency quants.... I'm assuming market makers at BB, then depending on the desk you will have options open for macro funds, and other market-making firms like Optiver (they pay a lot! if money is your sole motivation)
You are correct, I was confused about the difference between a quant trader and a market maker. Let me quote Investopedia:
Using this definition, it sounds like 'algo principal' and 'agency quants' are both market making roles. But note that Citadel, Jane Street, SIG are among the largest market makers in the world (bigger than BBs). So who makes more: a quant trader at Citadel, or a 'market maker'? And what does the market maker actually do?
I know a guy who does 'delta one trading' at a BB - I'll have to ask him what he actually does, since you've made me quite confused 😅
A good first step would be to stop using these weird ass terms and find out just wtf these positions actually entail. You’ve gotten offers already and you still don’t know the actual job duties and differences among them? Or you can’t explain them in a way that we can understand on here? Are you actually talking about S&T positions but think they are hedge fund seats? Idk what you’re doing bro
Lol. Exactly
If you're doing this job for the money you'll just burn out and never actually get paid. Imagine I told you I'd cut your lifespan short by 10 years (you die at 70 instead of 80) and in return I'll hand you $3M pretax would you do it? it's actually worse than that because you're forfeiting not the last 10 years of your life but the next 10 years which would be significantly more enjoyable.
No need to get stressed out so much...
Just do yourself a favor, and go through these terms (a simple googling will help)
1. Quant Trader (It's a buy-side role, not a BB role. BB only has market makers, reason "Volcker Rule")
2. Quant Researcher (In some funds it may overlap with Quant Trader)
3. Quant Developer (It's a tech-oriented role, responsible for developing the architecture for trading)
4. Market Maker (S&T at BB)
5. Execution Trader (It's again a buy-side role with no book and hence no P&L contribution)
After, knowing the exact responsibilities of these roles, it will become easier for you to choose what to go with.
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