I currently work as a physical commodity trader at a large, international, trading house. Trading is dead. Most desks are printing massive loses. There is no volatility in the market and most commodities we trade suffer from massive oversupply. Baring a massive exogenous shock, I don't see it changing in the next 5+ years. Unfortunately the skills learned in trading physical commodities are pretty specialized. My question is, have other commodity traders switched career paths? What have you switched to? What skills transfer and which should I emphasize on my resume?
Is commodity trading dead?
Certified user @marcellus_wallace" on liquid natural gas and energy markets.
Expect massive changes in 2019 forward once LNG becomes a main focal point. I disagree that trading is dying, is it harder? Yes, its super hard these days and consolidation has finally started most places. But on another hand, we are seeing assets finally get locked up for 20 plus years in lots of markets which means vol will be coming back. Lots of people are running models from 2008 or even 2014 still and need to move on already. There have been probably 4 major trades this year that killed or some did well on for natty/power vs in 2012 when literally there was zero vol.
Certified user @nofundforoldtraders" on market volume, the death of trading and remaining stoic during tough market conditions.
I'm a prop trader at a firm that I see people mention on this board from time to time. Plenty of volume and vol in crude oil futures, as well as TBond futures.
Often, when a trader can't figure out how to make money in the market, they will say "trading is dead" or "humans can't compete with the algorithms" but this is bullshit...It's really just a failed trader saying "I don't know how to adapt to this market environment"
It is very common for a young trader to learn one technique to make money trading, and then exploit that technique for as long as they can...but when that technique stops working...you either adapt...or die (well, in this business, retiring feels like a death). I have seen this many times, and I'm sure I will see it again. Traders who have "failed" and conclude that nobody can make money in this environment. What they really mean to say is "I do not know how to make money in this environment" but that is a very emotional and difficult thing for a trader to say.
As a trader, you must be confident that you will be right...that you know better than the rest of the market (else, you would never put on a single trade)....and when that confidence turns on you, it really does feel like a death. So, either you learn how to adapt (or your trading model does the adaptation for you) or you lose money until you quit. I've seen this happen to friends and colleagues of mine....some were able to adapt...others were not. Those who failed never were able to say "I don't know how to adapt" ...they would always say "these markets are untradeable" but that is their ego talking. This is a very emotional business. You must understand and conquer your own emotions if you are going to survive.
Skills learned in trading are easily transferable into other industries. The commercial experience can be applied into a lot of career paths
1. International commercial experience Regional/domestic sales & marketing at large MNC
2. Sourcing Procurement/buyer/sourcing for raw materials companies e.g: ingredients, food, stockfeeds
3. Shipping and freight/port operations working in terminals, shipping lines or brokering houses.
4. Rail/barge/truck in land operations working at a freight forwarder in operations or sales like Expeditors, DHL etc.
5. Derivatives/hedging Working at a BB on a derivatives desk; market making
Re: Nat gas - Its been a tough year no doubt. Almost everydesk is having a tough go this year, I know quite a few gas guys who have stopped out going long HH & Dom earlier this year. But we are making money trading spec + optimizing out assets. Those who are still around will have a good opportunity ahead of them. Vol is picking back up for sure and there might be some big trades coming up as fundamentals are finally starting to shift.
Our power guys are killing it though
Nat gas just suuuuucckkks right now. I've been on both sides this year bank and hedge fund in ng trading.
We won't see meaningful vol pick up until fed sufficiently raises rates and Wall st stops financing shale players cash burn. Otherwise, ceiling at 75 where you'll see biggest drilling boom in history in response and definitely lower for longer.
the fact that we have seen 1bcf pick up since rover gives me some concern. The fact that Rox prod is also holding steady and REX is discounting again makes me lean bearish ng, esp midwest basis
this is ridiculous...have you looked at an intraday chart of crude oil futures recently? Great trading environment
We're not talking about your personal day trading account here...
I've been loving it, absolutely and undeniably in the driver's seat there. Physically and basis wise.
Back to the topic, is commodity trading dead? Right now, yes, from an aggregrate level at least in gas. It's dead, it's as dead as it's as been. Will it remain dead?
I'm bullish. Three big reasons-- we never know what to expect, and I'll elaborate on this below. And the second is LNG, this is kind of like reason 1 but a little more transparent. And third is Mexico.
With LNG on the scene, no idea what countries/global merchants(with zero footprint in the US trading atmosphere NG wise), come in and want to play ball. It also add geopolitical risk and brings competition to NA market entirely. Some companies are shaping their LNG stance as we speak.
Mexico, breaking this border I've seen a surplus of companies trying to find some mexico-SW traders and actually shaping up positions, assets to play this. How this drives other NA america gas regions basis(and phys) wise is going to be interesting.
And the third reason, you never know what to expect? What if the Volcker rule goes, what if Dodd Frank goes, what if a massive merger happens, What if we go past Mexico, and down even more south. What if a bank or merchant starts to become a physical player and changes the shape of how things are played(hinting at one big bank becoming more physical every month).
I know some of this sounds unrealistic, but that's exactly what changes positions and causes volatility. Unrealistic stuff coming to fruition.
very noteworthy comment Butterbean.
What you say is that commodity trading is not static, it's Dynamic.
The situation overseas or the changing behavior of the bank, financial institution (so true what you've hinted) or others traders can entirely impact NA, Europe or Asia. I was here when a trader changed the situation of a pipeline post-10' and it was day and night.
Mexico- most of the Majors, (BP,Exxon) and Traders (Koch...) have hired people focused on the trading and supply of Mex-market and the boutiques like Elbow River, Integral Petroleum S.A who also have an office in Mexico City.
-Traders are condemned to constantly adapt to the harsh conditions of their profession, without right to error in the complex stages of trading, which combine reactivity and understanding of the workings of finance, logistics and of the game.
The rule of the game in this market is that there is an arbitrage until there is no more. So any business model has to start on that premise and plan the downsides in advance.
Coming here in 2022 and this post hasn’t aged so well
Boy you aren't kidding!
Wanted to bump again just for some laughs