Hi Guys - Long time lurker here. I wanted to ask a quick question b/c i couldn't find the answer via search. My question is this - If one accepts a sales and trading role in an equity, commodities, or rates group on wallstreet. Is it reasonable to assume that after some time working on wallstreet, said trader would be able to successfully transition into trading on his/her own account. I.e., can I accept a wallstreet gig, learn a bunch of shit and then apply it to my own personal trading account and have a higher probability of being successful?
In a perfect world, i'd love to work in s&t for a few years then eventually trade for myself. Thoughts and comments welcomed.
No. A S&T trader makes his money by connecting someone who wants to buy a share of AAPL (for example), and someone who wants to sell one share. He then takes a commission off that transaction, and makes money with virtually no risk (this is in a perfect world, usually it’s slightly more complicated).
As a retail trader you would have to take positions in the market, and have no capacity to provide liquidity (connect a buyer and seller) like a trader at a bank can. The only way you can make money is if you’re able to sell what you bought for more than you got it for. This is a lot harder than it seems.
Do your research on how many hedge funds underperform the market every year. Those places invest millions into finding good ideas, and most of them end up failing to beat their benchmark even with an incredible amount of resources and some of the smartest people on earth.
Thinking that making money as a retail trader is easy is very very far from the reality.
@kiwi351 - thank you for the response and insight here - its much appreciated. So it sounds like there are little to no direct transferable skills as trader that I could pick up while on a desk?
Mostly agree with kiwi here - especially in equities S&T experience isn't going to help you much. the banks still make lots of money in having positions in commodities etc but they can do this due to the enormous flow of info they have access to from the market making. Take away the valuable info and sure you're left with people who are good traders but unlikely to beat the guys who are good AND have info. Not to mention you will lose access to most of the OTC markets, and the enormous balance sheet that are very useful when trading.
It can be done but you need to be exceptional - There's a reason most really good traders end up setting up hedge funds when they want to go alone. They at least keep the balance sheet and access to markets.
If you mean stuff like learning to read charts etc then absolutely not - walk around a trading floor and you wont hear anyone(almost) talking about 'head and shoulders' or 'falling hammers' or whatever pattern is the rage these days. That's for retail traders and traders who are desperately looking for ideas
Dang... ok. I understand. I'm just a little bit worried because i won't want to accept a role in which i will learn nothing and have no other real transferable skills if I need to leave. I'm especially sensitive to this b/c I've spent the last 10 yrs in commercial banking and haven't really learning much (other than sales). Everything else done in my current field is "elementary". Feeling trapped already.
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Its not learning nothing - you will learn how to be a trader and the learn business inside out if you do it right. This is transferable to other businesses just not making money trading at home. A surgeon doesn't worry because he isn't able to do surgery outside a hospital ( Not that I think our job as a trader is as noble as that lol)
Additionally, would like to add most of the strategies you're able to deploy at the institutional level are not very transferrable to the typical retail portfolio. You're going doing relative value volatility trades between two assets if you can barely afford the delta hedge or underlying shares to dynamically hedge your exposure.
I saw your other comment about learning skills that aren't transferrable. You're learning about how one should think about the markets, how macroeconomics and the broader environment impact the microstructure of your asset class, learning how to solve problems, etc. What kind of skill does a mechanical engineer building a bridge have outside of their actual job as well. They're a bridge builder/designer forever. But the underlying skillset they have re: quantitative skills, thought process for solving problems, ability to think under pressure, translate to other opportunities and it's all how you spin your story.
You said you had spent the last 10 years in commercial banking and haven't learned much other than sales, that's on you. Just because you're not learning it on the job doesn't mean you can't go out of your way to learn things on the side and continue learning and growing as an individual. I'm a trader and watch Python courses and Math lectures outside of the job so I can constantly grow and apply my knowledge. Just because it's your job doesn't mean that's where learning stops and those are the only skills you build on.
Some of the above information is incorrect. This really depends on which market you go into and risk tolerance of your desk. The more macro of a market you go into, the more "trading" ability you will pick up at a bank. Prop trading in equities at a bank has disappeared, with little risk taking on the bank's behalf. It's why macro funds mostly recruit from S&T and your equity/debt funds recruit from banking.
But, macro markets (rates, fx, commodities, etc.) are still very much "prop" at banks. This is mostly because it's impossible to define what a "hedge" is. Every position you enter into is as a counter-party to the client., or you can enter positions on your own and call it a "hedge" to something else in your book. Some desks, and some banks will have more risk tolerance than others. If you can find a spot at one of these desks, you will find what you are looking for. I'm not saying it's easy, but the best guys are the guys who are able to facilitate customer flow effectively and make money "prop" using that flow or with their own ideas. Eventually, these guys usually make the jump to the macro funds at least one point in their careers.
Heard you can still take some prop risk on the equity side albeit not as much risk compared to pre volker
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