Can you save money your first year out of undergrad as a Trading Analyst? What are the best opportunities to pursue?
I understand that commission rates have fallen substantially over the past 15-20 years considerably, and prop. trading has fallen off significantly at investment banks because commissions are supposed to be used as collateral. Is it possible for 1st year trading analysts at Investment Banks to save money while living in NYC?
Does it make much more sense to try to go to a hedge fund? I'm trying to assess where the opportunities are in this area, and it's not that clear to me. What kind of hours and pay do traders have at IB or Hedge funds to start out? I can't tell if it's common for traders to jump from investment banks to hedge funds or it's a direct route. Is it possible to go to a hedge fund right out of school?
Spike Spiegel, pure crickets, that's where I come in. Any of these useful?
Hope that helps.
the star performers from trading desks at an IB goto trade at hedge funds...usually takes a min of 5-10 years to see if you are a star
Apparently, the secret of prop trading before the crisis was that prop traders at investment banks knew everyone elses' trades because of the market making activities, so they would copy smart investors' ideas and short bad investor's ideas. There's still some discretion at investment banks, but not as much as before, so how do traders manage to make a lot at hedge funds without this information advantage?
Also are you a certified trader? How far in are you?
this is not entirely accurate...while some IB traders from the interest rates desks used customer flow to make money...customers would generally spread around their trades, so no IB knew the entirety of their strategy or positions. I've seen a variety of IB traders have success...the best learned to build an intuition of how the market would move based on taking in everything...technical analysis, response to economic data, customer flows...everything...but ultimately, they would say "feels like xyz is about to happen" and then xyz would indeed occur and they made a boatload of money. Eventually, those IB traders were offered PM positions at the big macro hedge funds. On avg, an IB trader would make 50-100mm in a year (avg PnL stop of 5-10mm to start the year) before getting these hedge fund offers (from what i saw). The IB would pay them 3%...and after doing some quick math (15% is 5x bigger than 3%) the traders would bounce to the hedge fund.
I was once an IB sellside trader...i'm now a prop trader as a customer...about 15 years into my career fwiw.
what do you mean as a prop trader as a customer? Thanks for the info. When it comes to P&L, commissions have hammered equity desks. What about equity derivatives, credit, sovereign credit, and commodities desks?
i'm an interest rates prop trader at a proprietary trading firm...and i'm now a customer of the sellside IBs.
Traders on the sellside desks don't make commissions...transaction costs are free...there is the bid/ask spread (which is infinitesimal)...but really you make money as a sellside IB trader by prop daytrading / position trading (we call it "pre-hedging"). If you think customers will buy...you buy first...and then hope that either the market trades higher...or customers lift you. You have no real knowledge if customers will buy...you make an educated guess. Some people are better at this than others. Its pretty much the same on every desk...some have more leeway than others.
So I take it that you think that rates trading is the best desk, since you're currently doing it? Or would you move to another if you had the option right now?
if i could do it all over again, perhaps i would have specialized in some kind of derivative...or a particular equity sector...rather than linear rates...its hard to say...but it also really depends on your interests.
A career in trading becomes all consuming...you think about markets all the time...7 days a week...you become addicted to it...not too different from a gambler in a vegas casino.
So, you must really be interested in the underlying market (for me, its geopolitics and the economy...i was an econ major in college and really liked it). One thing i will say...choose something that you can also do outside of big finance. For example, you can't trade credit default swaps as a retail trader at a broker like E-Trade....but you can trade equities, bonds, FX, energy, really anything with a CME/CBOT/NYMEX futures contract. That way, if you get fired from the institutional business, you have a fall back (the majority do get fired...so that should be your baseline assumption for career protection).
Is it a translatable skillset or does it really pigeonhole you? It seems like the sales and trading roles have been blurred together over the past few years, but it's not clear what the difference is besides traders getting to push the buttons.
What about the strategist roles on the desk? They seem to be more research-focused, but it's unclear if it's in-depth research or more of a "this happened so buy or sell this thing" type of role. Where is the place to be on the desk? Is pay comparable across those positions?
Way more junior than Faceslapping, but from the little that I do know his advice is very very sound.
IMO my thoughts are the old ibank prop trading is now at the platforms. Millennium was tiny in 2007. Prop at banks died and suddenly millennium and citadel are massive in that space. The biggest difference is some times the banks had shitty risks systems and these guys don’t.
So are these firms making their money on short term or long term trends or both? Are these types of companies causing volatility in the short term to fall?
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