Finally leaving the industry - last Q&A

Hey WSO,

It's been a few years since I last logged on, things sure have changed a lot! I did a Q&A about my trading journey back then with a lot of positive reception and figured I'd do one last one to help out as much as possible. I've also gotten a ton of messages since and I'm sorry I haven't gotten back to any of them really - I'll try to address some of the common questions on here but if you want to try bumping your PM's or just ask again here, I can probably get back to you faster.

Long story short, my trading career's finally coming to an end as I've already dialed down to a part-time basis, most likely pulling the plug completely either this or next year. Truth be told, I actually hit a major breakthrough not too long ago and been flying solo since i.e. trading my own capital without a firm. I've been incredibly blessed to be in this spot and have already started working my way back to school for a completely different field, something I've been wanting to do for years. 

But enough about me, there seems to be quite a lot of buzz and uncertain sentiment these days. Happy to do my best in providing my thoughts on any matters as best as I can whether it's the interview process, detailed trading related matters, or even just general life perspective. Since it's my final AMA, I'll be very liberal in terms of what I can answer provided it doesn't compromise my anonymity significantly 😇 - fire away!

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Comments (40)

Mar 1, 2021 - 11:40am

It's honestly going to sound more degenerate/WallStreetBetesque than some cool "I constructed this trading algo that churns insane returns", but I basically took out a substantial loan, had strong conviction the bottom was in for crypto and timed it almost perfectly (when Bitcoin was around $3,500). Probably not something you can replicate, but that one trade gave me enough capital to work with and after that, it's honestly just been doing a lot of follow up trades + taking advantage of many other opportunities the world of crypto has to offer.

Mar 1, 2021 - 3:37pm

What was it that gave you the confidence to make such a levered, concentrated bet on a singular asset? Was it a unique setup per your process? Experience? Simply a lack of risk aversion - combined with the priors? 

Mar 1, 2021 - 4:10pm

Yeah, lot of factors though it's all "Trader intuition/feel" at best and nothing too scientific, quantitative.

1) I happened to stumble on this

and agreed with a lot of the author's thesis: 

tldr - Bitcoin tends to move in 4 year cycles, where 3 years of bullish PA, followed by a massive crash. You can get nitpicky but overall, it's held true so far: 2011-2013 massive price appreciation followed by 2014 crash, same idea for 2015-2017 and 2018 crash. If the narrative continues, 2019-2021..? FYI, I am NOT advocating past results guarantee future events, but history does tend to rhyme and cyclical behavior is just extremely prevalent in crypto I've realized

2) I spent a lot of 2017-18 first getting into crypto and got to witness firsthand the extreme manic euphoria followed by the catastrophic crash into 2018. I guess the closest term would be called behavioral finance. On top of all this, a lot of fundamentals were starting to line up (lot of institutional interest, more crypto adoption, many projects gaining traction from a technological perspective, etc).

3) Even though hindsight will be 20/20, I took out a loan such that even if shit hit the fan and went to 0 at worst, I'd probably be in debt as much as the average American and given my degree and work experience, I could make it all back within a few years. I did a spreadsheet of what my monthly expenses would be for the next X years and it was something I could totally stomach given the expected cash inflow. I take a shot, fail, and have to work another few years to get myself out of debt like the average American, I could live with that. It was that or shot taking for a seemingly decent risk/reward ratio based off history and I ended up getting quite fortunate. Lot of people seemed to be taking out loans at the top, I figured, why not do it when no one's talking about it, it still clearly has potential, and near psychological, historical lows? I mentioned earlier that the returns on this market are unheard of when you compare it to other traditional asset classes. I basically thought the risk/reward was way too asymmetric and figured I had higher odds than most people made out to be. 

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Mar 1, 2021 - 11:48am

I made enough money that I don't have to worry about it for awhile and can afford to try other things in life. I feel like I still have lot of untapped potential that I want to make the most of (which is what got me here in the first place) so I wanted a fresh new challenge, which currently involves going back to school and doing quantitative research on medicine. Kind of similar to what DE Shaw did to be honest. 

Mar 1, 2021 - 12:06pm

It's definitely picking up more legitimacy and acceptance but we're still very early in the scheme of things. Still, the big theme this past year has been institutional investments just drying up the entire available supply including PayPal, MicroStrategy, Tesla, etc. Even the likes of Morgan Stanley, Guggenheim and some pension funds are looking to get exposure. I think blockchain itself (not to confuse with cryptocurrency) is here to stay and can be powerful additions for entities who can identify the values and potential it offers. 

From a trading perspective, the volatility of it is unparalleled to any market I've seen historically, which makes sense given how it's a) relatively easy just to create your own "shitcoin" crypto by copy+pasting code) + b) low market caps so price manipulation is rampant. Still, there are plenty of insane opportunities to profit off if you play your cards right - look up Chainlink, ticker $LINK. It was trading at $0.50 a couple years ago for quite some time and now at $25. I believe we're approaching the stages of another euphoric mania not unlike 2017 before we see another epic crash, though many people seem to argue this won't happen this time due to the large amounts institutions are buying. 

  • Analyst 2 in IB - Gen
Mar 1, 2021 - 5:41pm

Also have been paying attention to the crypto space but just for the past 6 months (more so alt coins and defi because I realize that potential gains are insane). Chainlink is definitely an interesting mention. Coincidentally, Citi just put out a report today about it potentially passing btc one day and Klaus Schwab, World Economic Forum founder, basically alluded to it in his book a couple of years ago. Despite its starting price and potential, I still don't understand how this coin never really pumps. Are you still active in crypto trading or more so a passive observer since you got your big win? Any tips or resources you can offer for someone looking to get a big win in the alt coin space? There's just so much coins that I come across that I don't know how to properly decipher whether they are promising, scam, shit and how best to diligence them. 

Mar 1, 2021 - 12:24pm

Dawg-nuts - sorry forgot to click "reply" to your question directly, won't let me delete so I'll just leave it here. 

1. Very passionate at what they do

I'd be lying if I said it wasn't the allure of money that got me interested but ultimately, the best traders are genuinely committed to this because it's something they love. Think about it - if you're someone like Kobe Bryant, you're probably going to be eat, sleep, basketball. He probably watched video tapes of the opposition he's facing. When he broke his finger, he decided to adjust completely to a new style rather than calling it quits. Besides just his technique, he was cognizant about staying in physical shape and revamped his diet, workout routine, and even went as far as consulting the top professionals for those areas. It might sound extreme but this carries over to trading. Are you fascinated by the looking at macro events and its implications for other markets? Do you think it's cool hedge funds are utilizing satellite data to generate some alpha for commodity supply/demand forecast? How do you "automate" some discretionary strategies that clearly has an edge but is otherwise extremely difficult to implement into a deep-learning algorithm? Trading has evolved substantially since 20 years ago and the best are always keeping up with the times whether it's being knowledgeable about the latest technological advances or even regulations. 

2. Being humble, open-minded

You'd be a fool to think "programming's not trading" and not giving second thought about improving your coding skills, all for your own benefit. You might think other departments like Operations, IT, are irrelevant but I think just like any endeavor, being a complete master really helps. Understanding all the different nuances opens your mind up and I'd argue, expand your creativity and the framework you approach problems. The best are never going to grow complacent and always be on the lookout to hone their edge. 

It's also imperative to be open minded and be adaptable to whatever you face next. I'm going off on a tangent but here's a great example from Psychology of Money:

The book begins with how your personal experiences with money make up maybe 0.000000001% of what's happened in the world, but maybe 80% of how you think the world works.

For example, if you were born in 1970, the S&P 500 increased almost 10-fold, adjusted for inflation, during your teens and 20s. That's an amazing return. If you were born in 1950, the market went literally nowhere in your teens and 20s adjusted for inflation. Two groups of people, separated by chance of their birth year, go through life with a completely different view on how the stock market works.

When you read other posts and comments about what stocks to buy, what startups to join, what's the economy going to be like, what's the best asset allocation, etc., remember that is just a single person's point of view. That person may be from a different generation, earns different incomes, upholds different values, keeps different jobs, and has different degrees of luck.

3. Not being results-oriented - being true to yourself

It's a lot like poker, trading is a game of incomplete information and just because you lost on one trade doesn't mean you made the wrong choice - conversely, just because you made a killing off of one trade doesn't make you a hotshot genius either. Even some of the best traders have losing days too, but they don't let that affect their confidence. Rather, their response in how they deal with adversity and bounces back from it shows a lot of their character. It's natural to be rattled in a very stressful high-stakes environment, but you've got to learn composure and keep a cool head. 

Basically, the best traders I met were typically very humble (not pretentious or condescending based off their success), curious, inquisitive, outside-the-box thinkers with a very cool head regardless of how bad or good the markets are.  I'll come back and add to this if I can think of more, but these are the first traits that come to mind 

Mar 1, 2021 - 12:28pm

As someone who has been on both sides of the coin, what is your opinion on retail trading?  Maybe more specifically, do you think its even possible for someone to make some sort of consistent income day/swing trading public markets?

Mar 1, 2021 - 4:15pm

It's certainly doable but no doubt getting harder as time progresses on. I still know of pure discretionary traders that are doing well (some of my former bosses) but it's obvious that their edge has died down over the years. Won't be surprised if 5-10 years down the line, they won't be able to turn profits, but hey, they've extracted enough money from the markets already they probably can retire comfortably when the time comes. 

Mar 1, 2021 - 4:22pm

One of the obstacles is how obscure this industry is, and that's understandable. Any edge can be the difference of millions of dollars so firms aren't going to be too keen on shedding light on what they do. You'll get a general idea that trading is "buy low sell high" and you need to "know computer science and be mathy" but it's also really hard to know what to expect until you actually get your foot in the door. I know my first year, I probably wouldn't have been able to tell you the difference between trading at a BB S&T Desk, execution at some AM firm, or doing prop trading at some HFT firm in Chicago. Compare this to getting a job at Google, there's probably 100's of guides and gurus who've been there and done that and can probably outline to you all the steps along the way whereas we work with much smaller sample sizes and higher variance.

If there's one thing I'd do differently, I really wish I polished my computer science/technical skills. I've been praised by almost all my bosses for my unconventional creativity, high (but calculated) appetite for risk, outside the box thinking, and trading intuition, but it would've been even greater if I had the full capacity to be able to "automate" or programmatically implement these in our strategies. So far in my career, it's been rare to meet someone who excels heavily in both the CS/Math part as well as knowing the more "old-school" trader mindsets, you usually meet one or the other. My technical skills are proficient enough to do basic exploratory data analysis and stats but not savvy enough to do intensive Deep Learning/NLP/AI implementations, if you catch my drift. I might understand the theory at a high level, but if I really want to combine the best of both worlds, it would've been sweet had I excelled in both. 

  • Associate 2 in IB-M&A
Mar 3, 2021 - 4:29am

As someone who has never invested in bitcoin before, would you recommend I make an investment with the aim to liquidate sometime in the next 5 years?

And if so, what resources should I use to get smart on bitcoin? Finance professional starting from scratch.

Mar 3, 2021 - 3:11pm

Oh boy, please read this carefully:

I'm not a financial advisor, nor is any of this financial advice. There's probably thousands of similar disclaimers warning of the substantial risk Bitcoin poses. That being said, if you're willing to spend a small portion you can afford to lose worst case scenario, I can provide you my opinion and general take on it. Disclaimer - I'm going to be bias towards Bitcoin in a bullish way so take that into account.

I'm a pretty strong believer in the "4-year cycle theory" where Bitcoin tends to behave bullishly for 3 years followed by a massive crash. This has happened in 2011-2014, 2015-2018, and finally, we might see it repeat again from 2019-2022. Assuming the pattern holds, we could see Bitcoin hit a new ATH sometime this year (I personally think way past $100k+) followed by another crash. To answer your question, do I think Bitcoin will be worth much more 5 years from now? Yes, but that's just one man's opinion, I stress I'm not a professional, this is a hobby for me at best (there have been plausible theories this might be the "final" bull market for the time being followed by a new 4 year bear market, but that's a completely different story) before we see another new ATH's way later down the line. 

For Bitcoin educational content, there's a lot of free content out there to be honest. This guy is one of the most reputable and famous evangelists:

And some other resources

Feel free to ask me any follow up questions, I don't want to hijack this thread into me just shilling Bitcoin LOL, so I'll leave it at that for now. 

Edit: Link to S2F model -

tldr - I personally think it's a good investment, but everyone has different thresholds and risks for appetite they can sustain. Please proceed cautiously and responsibly. 

  • Associate 2 in IB-M&A
Mar 3, 2021 - 3:47pm

Thanks. Appreciate these pointers. I'm looking for resources to get smart on the area, and will be researching it in my spare time in the next ~2 months. And I only plan on putting some cash in that I'm willing to lose entirely. I'm just trying to diversify and think this is an area I need to start getting smart in.

Unfortunately there's no bogleheads-type strategy for bitcoin that says "if you invest in these 3 funds, you'll do just about as good as anyone else". So have to spend more time here...

Mar 3, 2021 - 4:52pm

I just want to say ive been following you for some time and thanks for your insights and experiences! As an incoming derivatives trader, I'd love to hear more about anything that you did not expect that you wish you had known when starting out?

Mar 5, 2021 - 6:33pm

Thank you for the kind words, I'm glad that I could help some people out.

I think I really underestimated the unpredictability, or volatility of this market. It was a naïve, but understandable mindset but once I landed my first gig, I thought I had my life set out. Nope, my first firm went down and under a year later. Even my most recent firm I worked at (quite a long standing reputable firm) went belly under not too long ago, no one saw that coming. Trading's a hard way to make an easy living. I also didn't realize how niche some of my skillsets were (purely trading alone) and in hindsight, wish I did have a backup plan whether that was padding up my developer skills or being ready to transition into any other industry since turnover in ours is high. 

This is going to be broad but still applicable advice but stay humble, don't take things for granted. Be a lifelong learner - even if something seems completely unrelated to the derivative markets, you never know how you might be able to use it to your advantage. Take care of yourself, remember that this is just another job at the end of the day, and it's only the start of a long journey :) If there's one thing I learned there's no "one right way to do it". I've done a lot of unconventional shit, for better or for worse. Some obviously failed, but the others really helped me limit test my boundaries and excel in my own unique way. It might sound vague but it also applies to life in general, so you don't have to feel like you're "behind compared to others", or if you're "doing it wrong". That's not to say you should ignore constructive feedback, but I think you catch my drift here. 

Mar 13, 2021 - 12:48pm

Career/academic advice: do you think is it possible to get into a trading firm having a MSc in Economics? Nowadays the various programs offered are pretty quantitative (Advanced econometrics, time series analysis, bayesian statistics etc.) and since trading firms look for quant boys I was wondering if an opportunity is possible. Can 2/3 years in central banking open market operations can help? 

Thank you and good luck with your future projects! 

Mar 25, 2021 - 4:44pm

Apologies for the late response, I thought this thread died out and realized it was pinned to the top lmao

You're correct, the trend is that the baseline for a lot of trading firms these days has risen above for quite a technical background, with emphasis on programming and math skills. That being said, there still are successful firms that are less demanding on this aspect and I would recommend looking for these (sums up my career in a nutshell), or consider ramping up on these technical skills, be it through another masters, data science "bootcamps", etc. Flow Traders and Jane Street for example, don't really care about your background but more so how well you can think on your feet and a demonstrated proficiency quantitatively (simple math, some probability, but nothing rocket science). I think having a market operations background will be something nice to have, but not a significant hook unless that role is ops heavy. Virtu for example, has all their hires start in an ops role before getting anywhere near a trading capacity. That being said, it is also Virtu and their technical expectations for candidates are rather high. One advantage you can have is trying to lateral in within the same firm, but you have to show sufficient domain expertise and competence as well as "networking" with that said dept. 

  • Analyst 1 in IB - Gen
Mar 23, 2021 - 3:36pm

Hey, sorry if you mentioned this previously but what was your transition into prop trading? Were you in a S&T role on the sell side first or a ER/valuation role? I come from a non traditional background and wanted to know my best way to get into a prop trading role.

Mar 25, 2021 - 4:46pm

I went straight from undergrad to prop trading. Know a handful of colleagues who worked non-trading before transitioning into a TA role, it's certainly doable. Just got to show you're capable of the basics (solid probability/math understanding, genuine excitement/interest for the markets, some base programming is nice, and just overall a good team member attitude). See my comment in previous post regarding applying to very technical shops vs less intensive ones (this is what I did basically in all my jobs). 

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