Self-Assess Aptitude for Physical Commodity Trading
hi guys,
so I am considering a career in physical commodities (order of preference: energy/oil > metals >>> ags). short bio: quant/data science background, extensive programming experience and capable of speaking a few european languages. STEM degree unfortunately from a no-name/non-target in europe although with stellar grades.
there is a wealth of information nowadays on how to break into the industry but at this point I am more interested in finding out two things:
1) how do I know I will ENJOY this line of work PRIOR to getting a gig in this business? is there a proxy for it (e.g. if you enjoy trading derivatives, chances are high you will enjoy moving barrels)? in programming/tech careers, fortunately, this is less of an issue b/c to a large extent you get what is advertised.
2) and perhaps even more important: how do I know that I will EXCEL commercially in my role? There could not be anything worse than spending time and energy getting into a TDP and either get stuck in middle office or $uck at trading.
disclaimer: read king of oil, world for sale as well as depression, oil trading and a mind at war with itself so I may be blinded by the outliers of this industry. nonetheless, I think many things play into my strengths (numeric ability, salesmanship, soft spot for obscure places and different cultures etc).
I would appreciate any advice/input/anecdotes about your career and how you found out that this career is for you.
That's true of any career you choose. If you think if career possibilities and this one is at the top of the list give it a try. You can always go back to school or try something else if you don't like it.
On your questions about fit: Coming from a more fundamental/prop trading perspective, you would likely enjoy/excel if you like trying to understand a complex system, think about how different pieces connect (energy commodities often influence one another for example), represent such a system in a program or model, and find asymmetrical opportunities from the result of such thinking.
Enjoy and excel are kind of the same thing. You find enjoyment when you are good at something (because no one likes to be incompetent) and you are good at something when you enjoy it (because you won't be motivated enough to be good if you don't enjoy it).
It sounds like you are in a good spot, worst thing that can happen is that you don't like it and do something else after a few years. Having a big company TDP on your CV is not really what I would call "could not be anything worse." If you really want to trade and fail the TDP, you can move to a smaller company (have seen this occur) or you can just pivot (it's only 2-3 years).
if one were to spend more years in ops roles, would age become an issue at some point? how often do you see people start trading in their mid-30s? is this the norm or a little above avg?
Not out of the normal but on the higher side. TDPs can take people up to 10 years of experience normally.
The answer to both of your questions as mentioned above is you can't. Passion will help get you through the slog of the learning curve but there is just no way of knowing ahead of time whether you will like it or be good at it.
I think as long as you like solving, things, talking to people and talking markets, you should be able to find something you like in the industry. But as to the perfect role, product, geography... the grass ill always be greener.
First u have to find what is driving u, do u want to win or do u want to work with people (internal or external) and be closing deals. That will greatly determine whether u will enjoy the work or not.
First type, go work in trading
U need to be right most of the time and not blow your risk limit. Requires a lot of reading, thinking, and experimenting. Position sizing. If u blow your risk limit, it’s gonna be hard to recover.
Second type, go work in orig, or sales in some way
Talk to people, make friends, and sell them product with premium—look for options in contracts. A lot of legal, credit, and some pricing.
Honestly I just feel you just need the guts to jump in. I'm an econ major from a T20 school and most of my peers went into IB/PE/VC/HF (or at least tried to) so there's lots of group think at that level. As much as I'd love to please my ego by attributing my "success" in the industry based on my numerical ability and people skills, it really was just guts and luck. If it doesn't work out, try a similar role.
read king of oil, world for sale...if you did read those books and still have these questions this career is probably not for you.
This is not banking/PE/HF/tech bullshit to say "There could not be anything worse than spending time and energy getting into a TDP and either get stuck in middle office". That is basically an auto ding anywhere I have worked if you cannot appreciate why the TDP exists you probably are not a fit.
as for the first statement, I disagree on the grounds that reading/fantasizing about sth and actually doing it yourself is not the same and there can be a mismatch (hence my post). I once worked on a cybersecurity project which, at surface level, sounded amazing but in reality it was way less spectacular - something that was impossible to foresee and know with certainty unless you were in the trenches.
as for the second paragraph. I admit my formulation was a little too dramatic and douchy. obviously working for a supermajor/trade house is something to be proud of even if it is not a trading role.
anyways, I would like to thank all of you for your input. I guess the way forward is to give it a go, develop along the way and pivot into an enjoyable role that I might not even know about at this point. thanks!
I told my friend to read World for Sale few months ago and he got all hyped up physical trading after reading it haha. If a books like King of Oil and World for Sale can excite the common person, then they're too unrealistic even for a fantasy for a aspiring physical commodity trader.
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