Major Recommendation

Hey I was wondering what type of major would be most helpful for someone looking to break into trading.
I know this is a ridiculously general question but I know very little about specific types of trading and what they require, and if this question is absurdly general feel free not to respond.

But for arguments sake lets say I have the choice between math/comp sci/finance/econ
(if there is a 5th major that would be more helpful please let me know)

or any combination of the 4 (double major, major minor...etc.)

Thanks

 

Well, I'm interested into what type of trading you would like to get into or in what capacity. Obviously, for Quant trading, I would pursue Finance and Comp Sci, or most big schools will have a Operations Research & Information Engineering program (financial engineering). If you want to pursue a more fundamental trader, if you are going into fixed income, it would be beneficial to have a finance and math degree, and for equities, I like finance and statistics.

----------------------------------------------------------------- “It's all nonsense. Firms use titles to pander to the egos of the employees without giving away the store. If you are getting the money, who cares about the title?"
 

If I truly do not know what specific type of trading would you recommend math and comp sci, because I feel like finance would be much easier to teach myself, or pick up as an AT then it would to try to figure out comp sci if I have a change of heart.

And is economics a useless major for a trader? Or is it just less useful then finance?

 

Well, first off, although finance is very easy to teach yourself and on the job, it helps to break into interviews if you have a finance background and can show that you have a genuine interest in the field. Econ, although is a popular major to get into banking/trading, in my mind unless you are a macro-trader or a behavioral trader, it's irrelevant. People who have math/econ degrees are those who come from liberal arts schools that don't have a finance degree ie. Princeton for undergrad.

----------------------------------------------------------------- “It's all nonsense. Firms use titles to pander to the egos of the employees without giving away the store. If you are getting the money, who cares about the title?"
 

Econ, math, computer science, engineering, finance are all good. Finance basically breaks down into two main categories: the capital markets side (closer to econ) and the corporate finance side (closer to accounting). If you choose finance, you want to pursue the former category, which focuses on markets (courses like fixed income, international finance, derivatives, investments, etc.). The latter covers topics like valuation/modeling and capital raising, which are useless for S&T but very helpful for IB. I'm sure you know all this already, but I just thought I would mention it.

I also wouldn't dismiss econ, which gets your mind thinking a lot about cause and effect in the macroeconomy. Understanding macroeconomic forces at a deep level can help anyone in trading, whether they trade currencies, commodities, or fixed income. For example, interest rates is a big topic in macroeconomics. Econ departments tend to offer many financial market courses, particularly international economics, so you won't have to major in finance separately unless you also want to learn corporate finance. My personal recommendation would be computer science with econ, but it doesn't really matter as long as you choose out of that mix. Just remember that what you want to signal is "quantitative with an interest in the markets."

 

jaclee317,

What I never seem to understand is why does everyone only seperate between S&T and IBD when it comes to banking. Where does research fit in? From what I've heard it seems like it works with both teams but actually tends to center around S&T.

However, wouldn't a research analyst/associate be creating valuation models? so wouldn't both capital markets and corporate finance classes be beneficial for someone who wants to break into research/strategist etc... Or is that where equity vs. FICC comes into play?

I'm also interested in possibly breaking into Trading, but research also seems very interesting to me. I have one year left of classes and have solely been focused on Finance classes/business classes this entire time. Now with essentially 6-7 elective classes left, I'm wondering which would be most beneficial for me to take. (Also, I haven't taken a math class besides business stats because I passed my AP Calc test back in highschool and math classes weren't required for a finance major)

The ones I've been looking at are:

Fixed-Income Securities Valuation International Economics Money & Banking Business Math (to refresh my math skills) Calculus for Economics (to refresh my calculus) Multivariable Calculus Linear Algebra Differential Equations Additional statistics courses (don't have a particular one in mind)

Also thinking about taking a masters at London School of Economics in Accounting and Finance (with primary focus being on Finance). I don't think I'd be able to get into the Finance and Economics course which is apparently more quantitative and I'm guessing would look better to banks recruiting on the Trading/Research side. :(

 

halamadrid,

If you're referring to Equity Research positions, that is actually closer to corporate finance than it is to capital markets finance. An investment bank's Sales team might use the reports to pitch securities to clients, but the role itself is nothing like S&T. TRADING stocks and researching them for INVESTMENT purposes are different. (There is of course fixed income research as well, but I'll just describe ER because that's what most people think of when they hear "research.")

Equity analysts are concerned with stock valuation by looking into the company's "fundamentals," meaning they are researching its industry's prospects as well as firm-level characteristics like earnings growth, quality of management, market size, competition, etc. This analysis comes down to modeling (much like in IB) but with a particular focus on the firm's intrinsic equity value. And the target end user of these reports is an investor, whether institutional or retail. So you'll see ER reports that offer a simple opinion, such as buy/sell/hold, and then a detailed explanation of projections. You'll see EPS estimates and might also come across statistics like target high/low ranges over X number of years and other forecasts relating to the firm's stock price. Though all reports are different, take a look at a research report to get a feel for what it's about. (If you invest, your broker will most likely offer S&P research.) If you read news, you'll hear things like "ABC Firm misses estimates" or "misses Wall Street consensus" or something like that. They're talking about the ER analysts' opinions about the covered company compared to the actual quarterly result. In summary, you'll see that the kind of analysis you do in research is similar to IB. One major difference is that ER is not "deal-driven" as IB is. It's all about periodic coverage/reporting. Also, again, the focus is on the firm's projected stock performance more than anything else. Oh, and we can't forget that ER uses public information while IB is privy to private info.

For research, you don't need any of those above math classes. Valuation will be very important, and you should focus on taking more accounting if you can, such as Financial Statement Analysis. Understanding the market is important for ER, but "capital markets" courses go into a lot of detail on specific products (and market dynamics) you won't be looking at in ER. If you're going into investment management, then that may be a different story. If you're not sure what you want to end up doing (e.g. trading vs. ER), choose a mix of different types of courses you think sound interesting and that you would like to explore.

 
Best Response

Math, CS, Engineering, or the hard sciences tend to be stronger/tougher degrees and look better (overall) to most recruiters. If you can hack it in Math or CS (not everyone can- although if you can't, you may not belong in fixed income or quantitative trading), I'd focus on one of those degrees, and if you have time, double-major in Finance. Figure out which major your school is strongest at and which major you'd enjoy pursuing and make sure you've got a good compromise on the two. A third consideration might be backup options. Not a lot of backup options for a math major besides grad school; I have a friend who graduated in Comp. Sci. with a 1.8 GPA and landed at Microsoft.

Just as a warning, if you pursue a CS major, recruiters may typecast you for IT. If you go for computer science, you need to be able to talk about competitive sports that you've participated in. Football, Basketball, Lacrosse, Water Polo, Hockey, Formula One racing, etc (LARPs, WoW, and Dungeons & Dragons DO NOT qualify as a sport.). You just have to find something to break the stereotype that most recruiters have of programmers, or engineers for the matter.

 

You never know. Actually, a few people who got into Capital Markets from engineering programs were involved in some sort of motor sport during college. I know a couple of people on the trading floor who got prettty far racing dirt bikes in college as well as a former engineering student who interned for a formula one team. In any case, banks want to see that you are more obsessed with winning than you are with algorithms.

 
IlliniProgrammer:
In any case, banks want to see that you are more obsessed with winning than you are with algorithms.

I'm more interested in the quantitative side of trading(think of equity derivatives, fx exotics, etc) and if someone can elaborate more on this "winning" vs. "algorithmic thinking" in trading, I'd be appreciative. Pretty stupid as it may sound, but I want to know how banks in general treat people with quantitative thinking(or intelligence) against those with better social skills but, say, sub-par programming skills.

 
bluecoat:
IlliniProgrammer:
In any case, banks want to see that you are more obsessed with winning than you are with algorithms.

I'm more interested in the quantitative side of trading(think of equity derivatives, fx exotics, etc) and if someone can elaborate more on this "winning" vs. "algorithmic thinking" in trading, I'd be appreciative. Pretty stupid as it may sound, but I want to know how banks in general treat people with quantitative thinking(or intelligence) against those with better social skills but, say, sub-par programming skills.

Either way, the guy hiring you will be a trader with a killer instinct or someone hired by a trader who was looking for a killer instinct that will also want to see a killer/competitive instinct. This is starting to look like an inductive proof if you catch my drift. They'll cut you a little slack for an algorithmic trading position, but they're looking for someone who's two or three standard deviations more aggressive than the typical engineer.

Aggressiveness is something that you can learn. If you don't get the offer right off the bat, and you still want that trading position, you'll spend the next year or two working on being aggressive and then give it another shot.

In any case, the classic route into algorithmic trading is through analytics or quantitative development. My experience has been that banks tend to look internally to fill a lot of algorithmic trading positions.

 

um... I go to a target (if you like to call it that way), and I am definitely interested in quantitative trading, but maybe not to the extent of programming algo trading by myself. I think I am not sure whether I need to take a bunch of computer science courses when I am majoring mathematics and and economics. Compsci is very interesting to me as a field/academics, but it is also time-consuming and difficult without much background.

 
um... I go to a target (if you like to call it that way), and I am definitely interested in quantitative trading, but maybe not to the extent of programming algo trading by myself.
It's really tough to provide a lot of value for algorithmic trading unless you have a strong background in algorithms, AI, and fast execution. You can definitely work in a quant role supporting algorithmic trading if you've got a graduate degree, but the trading roles are going to go more towards folks with discrete math, CS, and Comp. E backgrounds along with a decent knowledge of finance.

It would probably be wise to take a few algorithms and AI courses before you graduate, along with a basic imperative programming course. Does your school have a strong engineering or math program?

 

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