Comparing prop trading to other industries...?
I'm looking at a few different FT offers right now. Some prop trading, and some in other industries. I was wondering if any FT prop traders can talk about their job with no bullshit. How competitive is it within the firm, or within the industry? What is the range of possible pay opportunities? (If you don't mind me asking, how much do you make, or give a rough range? and how long have you been doing it? ) If you suck, do you get fired or just get delegated to menial jobs? What do you love/hate about it? What kind of people have you seen fail and what kind have you seen succeed?
Thanks a lot.
I've done some consulting engagements for prop shops, and have a number of friends that trade in Chicago. It's super competitive, but not necessarily within the firms from what I've seen (although there is a bit of that). They are just really gung ho about sniping traders at other firms. Comp is all over the board. A few years back, as an example, starting base at DRW was $45k, with expected bonus being at least that but likely more. The bonus ramps up more in y2, y3, etc. I'm not sure about the base. All in, if you're good you can clear 6 figures your first year, and start pushing 200, 300 after a few years. I know a few guys that had been trading for 5-7 years and were making high 6 figures (700s). If you suck, you're out. It's the truest form of meritocracy. There aren't really menial jobs to be had. I mean, most prop shops are pretty small. They have basic HR, Accounting, and the IT guys. If you aren't one of those, or a successful trader, or a quant, then there isn't much use for you. I can't pinpoint the attributes that make someone successful. I've seen super aggressive alpha males be awesome at it, and the shy quiet nerdy computer geeks. My opinion is that there's something intuitive that you're either inclined toward, or not. Identifying if you're one of those is a matter of trying it.
These threads have come up before, everyone has a lot of differing experiences with comp at prop shops, so take mine as a single data point.
At math-intensive/quantitative prop shops, sub-6-figure base salary for straight out-of-college hires is pretty much the industry standard (pre-bonus). Trust me, it doesn't say much at all though, because bonuses will range to many multiples of that.
To answer your question about sucking, don't. As long as you're good, you have nothing to worry about.
"As long as you're good" is fantastic, except it seems people won't really know how good they are until they actually start trading, is that fair to say? I guess I'm talking more about screen trading and not HFT shops, if that matters at all.
So, I'm just finishing up college, I haven't traded much on my own. How do I get a sense if I'm any "good"?
Plop 5k into a futures account and trade for a few months, one contract at a time. You may not know whether you're truly good but you'll have a much better idea at least.
You get a lot of training up front as an undergrad new hire at a prop shop, so I don't think it's a fair test to just jump into your own futures trading account cold, and use that as your barometer. In fact, that's why a lot of prop firms hire math / cs undergrads as traders - sometimes it's better for them not to have to "undo" what you think you know. They'd rather just teach their strategies to someone with a demonstrated quantitative background.
There is no good way to measure what your ability will be in a prop environment without doing it. They have technology and techniques that are obviously the difference between success and failure. Trading your own individual account with no support, and drawing a conclusion from that is a terrible way to judge whether or not you'd be a successful prop trader.
You either take a chance and try your hand as a real trader, or don't.
Ok, I agree to an extent, but I think you can learn plenty by trading a small amount, particularly in terms of risk management and knowing what to look for in a market. If you trade on your own for 3 months and absolutely hate it, do you really think you'll enjoy being a prop trader?
It's entirely possible. If you're floundering by yourself, not coming up with any market insights, and not utilizing cutting edge technology, and you fail as a result, obviously your view of trading is going to be skewed through that lens.
If on the other hand, you start at a prop firm, learn everything they have to teach you, trade using their systems, their priority with exchanges, their technologies, their software, then you may very well be extremely successful and end up loving it.
The point is, the things that turn you off of trading when you try it by yourself, might very well be remedied in a situation where you aren't doing it by yourself.
Like the movie "Margin Call" said, there are 3 ways to make a living in this business.
Ask yourself if you can do at least one of these 3? If so, you can make money. That's how you "know" if you are good.
I guess I'm not really into the kind of trading where systems, exchange priority and technology would be the determining factor in doing well.
Prop firms are 100% about those things. The image of a bunch of guys just doing point and click trading are long gone. The prop shops that are thriving today are mostly running automated strategies and have execution times in millisecond range because they pay millions of dollars for colocation drops to park their servers 6 feet from the exchange servers.
From what it sounds like, here's my assessment.
GoodBread should consider working at a Big Bank. It sounds like he has little or no understanding of technology, nor a desire to learn. Perfect BB material!
Also, happypantsmcgee, I would argue that all those toxic mortgage slangers were pretty decent at cheating. They knew just how to pad those CDOs and game the rating agencies to get those AAA ratings. They helped America a lot! They helped fuel the greatest economic boom in American history! If it's not securities fraud, it's not a real strategy.
I hope you didn't take it personally, GoodBread, I'm was trying to give you advice. If you want to work for a place where technology is not held in high regard, go work for a BB. I mean it.
However, if you choose the BB route, keep in mind that at BB's the profit doesn't come from being smarter or faster. Ever heard of "Structured Products"? I'd rather deal drugs than deal Structured Products.
Its be first, be smarter or cheat. Your lack of attention to detail makes you a poor candidate 7roaster
I'm playing the BB recruiting game as we speak, no worries.
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