How to break into prop shops
Currently FT at BB in a markets related role. Looking to lateral.
What kind of background do you need for a prop trading role - most roles I see available now are quant trading that require a CS background.
How similar is prop trading to day trading? Does my previous experience day trading help at all?
Saying you have a background in Day trading will get you laughed out the building.
There's a few different items to tackle here:
If you've had markets related experience in a BB then that should provide a a great starting point for breaking into prop trading. I guess the deeper question here is - what type of markets role was it? Trading, sales, risk, quant etc..
With prop shops, there tends to be a general skillset that everyone has but depending on the role, people will be more specialised in certain areas. The general skillset is; numerical excellence, great problem-solving ability, some creativity/outside-the-box thinking, some technical skills, some markets domain knowledge/experience, mental resilience, and intellectual curiosity. Here are some examples of roles:
A pure trader, which usually means you're monitoring/tweaking the algos, managing risk, and keeping track of conditions/news/events - this will require exceptional numerical ability in terms of speed and accuracy along with excellent markets knowledge/intuition/experience. Although, you won't necessarily need to have amazing technical skills e.g. basic coding should be suffice.
A quant trader, this differs a little in each shop, but generally means you'll be devising new strategies, optimising existing ones and potentially running them as well. This will require better technical skills e.g. coding in multiple languages, and great creativity to come up with new ideas, but still have the practical know-how to run the strategies. This role is a bit of "jack-of-all-trades" position since you need to be decent in most areas.
Then with being a pure quant analyst, quant developer or software engineer, you can probably figure out what areas of specialty you'll need with these.
You mentioned your day trading experience and I don't think is a negative at all. Assuming you traded on a live account, this will show that you have experience managing live positions and the psychology that goes along with that. It doesn't matter if it didn't make any money. It will also provide you the chance to explain your thought process from coming up with new ideas, entering/exiting/managing positions and reflecting on the outcomes. There are similarities between day trading and prop trading, but I would say the main differences are scale, robustness, signal quality and automation.
I would say the biggest mental obstacle you will need to overcome when moving from a BB S&T into prop trading is the switch to a more "eat-what-you-kill" mindset. This has fairly large implications on how you approach your job, meaning it will change your decision making process and there is now more risk attached to your seat in a prop trading firm. If you're not making the firm money, then you will be on the chopping block. A BB maybe more willing to hold onto an flat/unprofitable trader and to give them a chance (although it can sometimes be difficult to compare BB S&T with prop trading because BBs tend to generate revenue from market making flow, as opposed to directional bets).
My feeling is that in 2024 most decent to tier 1 prop firms have moved pretty far from "eat what you kill" not because an unwillingness to pay traders who can generate substantial profits but because it's become very difficult for individual traders to make large (10MM+) pnls and it's both difficult to assign marginal value when many people are contributing to the pnl and it doesn't necessarily reflect value added to the firm given the seat which increasingly matters a lot. If someone improves a strategy from 500MM to 520MM it's not even clear that they are doing a very good job in that seat and I don't think most firms would pay them anywhere close to 2x what they pay someone who improves a strategy in a weak market for the firm from 10MM to 20MM as the latter is probably harder to do and potentially of more strategic long term value. There are certainly some exceptions as there are some large multimanager prop shops who have contractual payouts for PMs similar to multimanager hedge funds but even those are usually for fairly experienced hires and other trading firms might pay senior desk heads etc based on desk pnl even if there isn't a contractual payout. Smaller/arguably lower tier trading firms may also compensate individual traders based on personal pnl.
If you feel confident about generating pnl by yourself without any infrastructure or flow then you go to one of those firms that will pay you a fairly high cut of pnl but I think that is difficult for most traders. The most common case I have seen bank traders hired by tier 1 trading firms is when the trading firms are expanding into new markets and the bank traders have experience in those markets. The trading strategies would generally be more like the established trading strategies of the prop firm but having someone with experience in that market can help e.g. a quant trading team with experience in equities/futures wants to expand to FX and hires a bank FX trader to better understand the nuances of FX markets so they can optimize the quant strategies. If you have experience in products that are heavily traded by banks and that prop firms are expanding into this may be a good opportunity for you. It may also be possible for a bank execution trader to transition to some more operational trading role in different products at a trading firm as well.
In my experience many bank quants tend to focus more on pricing illiquid or exotic derivatives and less on statistical alphas which can make it tough to transition to prop trading as few prop trading firms trade much in the way of illiquid or exotic derivatives due to lack of flow and liquidity in those products. In the past some banks did stat arb as well which would be a relatively easy transition to stat arb at a trading firm but I think that is increasingly uncommon at banks.
I'm assuming the OP isn't a developer based on their post but for developers I think the gap in job descriptions is generally less although being a developer at the best prop trading shops is more difficult/competitive than at a bank
Thanks for the response! To give you more context I work in a s&t role, have very little coding experience and did manage a personal live account with roughly 500k under management with decent pnl.
How do I even bring up my live account stats without sounding like some clown day trading guru?
What prop firms would you suggest I target? I assume less technical firms if they even exist?
An S&T role is relevant and it's great to hear about your success in managing a personal live account.
In terms of trying to bring it up, I'd suggest referring to it at opportune times e.g. if your interviewer steers towards discussing execution, you can mention: "hey, I found these things to be interesting/useful for execution when I was managing my own personal account". This may prompt your interviewer to dig deeper into your live account experience.
You said that you have very little coding experience - I would highly recommend improving your skills in the area. If you don't, it will likely hamstring you for the rest of your career and will limit access to a range of roles. Trading is only ever going to get more technical and automated so you want to swim with the current and not against it. The alternative is that you end up either; spending far too much time manually managing positions (which could be automated) or you become apart of management where you manage people and make some higher-level trading decisions but don't get involved with the technical stuff. These are both fine outcomes but there will be less of a need for these types of positions going forward purely due to technology (you always need management though!).
The difficulty with targeting "less technical" prop firms is that they're a dying breed. Most prop firms understand the benefit of technology and automation so they gravitate towards these improvements. In saying this, there are still a few prop firms that are more manual e.g. Gelber, First New York, Geneva. However, by limiting yourself to just these firms, you're cutting out the majority of prop firms available and making it that much more difficult for yourself..
I think what products you trade will have a big impact on where you should apply and how much success you will have although not much you can do about that now. Applying widely is likely wise as well. Some firms may care more than others about your PA especially if there are large (probably at least 100k) gains and some verifiable track record. Other firms may not care much about this for experienced hires especially if they restrict/prohibit daytrading among their employees. Even very systematic quantitative firms tend to have some traders who usually are often decent at linux command line and can write basic scripts/Excel/VBA but don't typically write production quality code so I don't think being very good at coding is a requirement although it does help.
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