Physical Trading to Proprietary Trading?
*Im a junior working in physical trading. Can't say more otherwise someone here might recognize me.
How difficult is it for traders in the physical space to transition to a financial trading role?
Many of the new hires by hedge funds in the commodities space come from investment bank S&T backgrounds.
Are physical traders at a disadvantage given the difference in skillsets? I focus more of my time on executing sale and purchase contracts, managing customer relationships , handling logistics (storage, shipping, trucking), originating new flows and hedging financial exposure. I hardly have time to originate trade ideas on spreads, outrights and volatility. Even if I do many physical shops eschew proprietary trading altogether.
Is there a pathway for physical guys like me?
You have time…if you do not think you have time, you wont last at a hedge fund anyways.
But commodities is a super cyclical industry right? What's to say that the good environment right now won't turn to crap in 3-5 years?
This is something I'm struggling with right now. What does a mean reversion look like?
If this is your framework you are in the wrong industry truly and should use this as a chance to exit. All the people who did well now are the one's who did okay the last 5 years. If you were not ready coming into 2020 for this volatility you did not do great and if you worried the volatility ends you won't know how to invest/prepare.
Trafi/Mercuria/Castleton/Hartree as examples have spent 3-5 years preparing for "energy transition".
I entered this industry in 2020 as part of big push in this vol. So I don't know what a normal environment looks like. Hence my concern
there is no normal environment things change all the time.... for better and worse
Ahh some reason sensed more earlier. If you entered you in 2020, you are seeing stuff never seen you will learn way more than others if you enjoy it zero reason to exit. When things slow down you will be ahead of the class. Normal environment is actually better for some people cause capital easier to get, customers more confident, assets can be bought for long-term cheaper and so.
Problem is people who enter in a super quiet period, do not get excited and do not want to push to learn to prepare for well this environment now. Then its super hard to catchup.
Think of it similar why some people argue about MM vs SF in other threads the first few years of your career sometimes key to shape the future.
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