Traders Background

You make it sound like that is something easy to accomplish. Although I'm not a S&T guy, I would imagine the reasoning would be the same across the board - people want experience. In order to get the great P&L, most people would try to gain experience working for the best firm they possibly can. That experience would teach them how to be the best, resulting in a good P&L down the road.

If you can hack it on your own, go do it - but if it was really that easy, everyone would do it. Also, in order to start a fund you would need backers who value a track record in addition to pedigree. Not to mention all the contacts you would acquire from actually being in the industry that you couldn't easily find without pedigree.

I see what you're saying. I do come off sounding like it is easy to do such a thing but for those who do have a profitable strategy and do have the trading experience, albeit not a lot but enough to show they have an edge, could that speak louder than say a degree in finance from a top-tier school? Because no school, top or bottom can teach you how to trade. A trader evolves from actually trading and countless hours of screen time. I just think that way too many people focus on the things that matter very little rather than actually getting their feet wet and learning the markets. Wouldn't you agree? It seems to me a person who has a proven strategy would be able to get into the firm much more easily (loosely used) than a person who is just starting right?

juice24:

My question is where is the actual trading experience? If one were to open his or her own mid-sized account, traded it on their own, developed a profitable strategy and gained experience in most markets and then decided to join a prop trading firm for the purpose of managing more capital, why would such things as where they went to school matter? .

They don't.

If you are trying to to join a prop shop as an experienced trader, all that really matters is that you can make money. However most reputable shops want to see a track record of success at other firms--trading your own small account isn't the same as trading firm capital.

If you have an established track record and plenty of wealthy friends, sure you don't need any school. But its easier said than done. At the beginning of ones career working for a firm is usually the only option future traders have.

If you trade like the next Soros, then they will eventually flock to you. If you can do it on your own, you are golden, education/firm experience wont mean anything.

It would make sense for a prop firm to be more inviting to those who have a bit of experience trading rather than newcomers whom of which they'd have to spend time and money teaching how to trade don't you all think? Just my two cents.

I was also wondering if banks such as Goldman and J.P. Morgan use charting and technical analysis or do they trade in a completely different way?

Thanks everyone.

With regards to technical analysis, I've spoken to prop traders at BBs who swear by it and others who find it laughable at best. It entirely depends who you're speaking to. Go figure.

In prop trading having a track record takes precedence over everything else.

Awesome, thanks for the input Macro and everyone else :).

I find technical analysis pretty useful. I was looking at two in particular over the weekend. There was one that kept touching a strong resistance line and when it broke through it shot way up. Must have triggered many stop loss orders as it passed that level. Another way was creating a symmetrical sideways ascending triangle. Once it broke through, it shot way up. Good long positions to have gotten in to.

Me too as well brianklk. It's amazing what kind of system you can develop simply by spending the time studying price action alone, no indicators or anything of that sort.

Help please?

Of course- to practice flow trading you need a B.D. (doctor of business).

no-look, seriously, business is not something with a currently finite amount of knowledge and only one correct technique taught in schools.

It's not about learning a trade and sitting and doing it with no passion or interest. Goddamn, people without passion looking for vocational training annoy me (no offense).

I completely agree with you,

I was just wondering what types of licenses/skills traders USUALLY look to get

Although you may not need the MBA and stuff for IB/PE/HF, most people dop go that route...

Im just trying to gauge what would be the most appropriate path to help me along the way...

Thanks

You forgot the Series 55. That's a major prereq for doing S&T. That exam pretty much allows you to sit on the trading desk!

Series 7 & 63 are required

Series 55 is a specific exam for equities - you don't need to take it if you've got the 7; the only thing you can't trade with a 7 & 63 are commodities and futures. You need a registered firm to sponsor you for the exam...a lot of people new to this site think they can impress their employer by getting the license done ahead of time.

Business schools do not grant licenses, though some have courses explicitly geared towards the CFA level 1 (I'm studying for level 1 right now and i'm finding that my standard wharton curricula prepared me well).

I think certifications - proof that you have hard skills - are going to become more valuable as college degrees - which genearlly don't say anything about your vocational knowledge - become more commonplace. I'd clearly recommend the CFA since I'm taking it.

55 IS required for equity trading.

maybe somebody from equities can comment - i took the 7 with my incoming FI class

isn't the point of the 7 so you don't have to take the more specific exams?

Series 7/63 allow you to execute securities transactions.

Equity = security. Fixed income = security.
Future/commodity = not security (series 3? not my realm)

55 is required to trade equities.

Most banks have everyone working in capital markets take the Series 7, just to have it. I know people in everything from Real Estate IB to Convertible Origination to Corp Fin to Syndications across a broad spectrum of banks who have the 7/63.

Series 3 is Commodities/Futures. Separate rules governing those transactions, with 3 major bodies splitting time in charge. You've got the CFTC, CTA/CTO and the NFA running the show. Technically, they are securities, however they trade on different exchanges ran by different groups, so they require a separate exam.

The 7/63(66) allows you to both execute and speak to clients. Just having your 7 allows you to technically execute, as you are a registered rep in the eyes of the SEC. Once you pass the Blue Sky portion (either your 63 or your 66, which also covers investment advisory [which I would take over the 63 anyways, as you never know when you need it]), you can accept orders from clients in any state but the one your office is registered in.

People still take, IIRC, the series 5 to trade interest rate options if they arb in that particular arena.

The 55 is required in order for you to trade as part of an equities trading desk as it covers all of the laws associated with equity trading from an SEC and NASD standpoint.

I'm going to forgo the Principal exams, as few people need them.

People still do take the limited Rep exams. A friend of mine works at JPMorgan, doing WM Advisory on the Chase side, and he two limited rep exams, plus insurance and one other.

As far as IBD requiring the 7/63, I don't know about that one. Everyone I know that deals in S&T and S&T advisory has the 7/66 combo + either the 5,55 or 3 depending on what they trade. Everyone in ER I know has the 7, 66 and 86/87 tandem (Research Analyst exams). On the IBD side, it does not hurt, but it's not required unless your a principal or are in a trading position.

it depends what kind of job you want post-b school.

Between the three I would say risk would look definitely better than trade support. I know some guys from top M.S. FEng. who work in risk and I think it's fairly quanty so you could build some useful skills. In all honestly I'm not too sure what market risk does in a bank but if it's similar to the role in commodity trading houses (monitoring trades, VaR, stress testing etc) I would also definitely pick that over credit risk.

I work in a brokerage house, so market risk would be monitoring the positions we have on our books, and credit risk would be counter party credit risk. My initial reaction was the same - that risk would be a more technical and demanding job (brains wise) where as in trade support I would be a traders bitch :)

OK well then it's what I thought and I'd definitely go for market risk, could be a pretty interesting / technical job. My impression of credit risk is that its a lot less technical eg. monitoring rating changes, stock price changes etc for counterparties etc...

What do you mean by no background? High school dropout? College dropout?

Regardless, tough with no educational pedigree. Think of it like this; in trading you are investing other people's money; they need some sort of confidence you can deliver returns. Given the high risk, it would be extremely difficult for someone to take a chance with a "troubled" individual.

i always refer people interested in trading to this trading seminar given by Mark Fisher. Fish is a legend, and this seminar (6 videos in all) is required for all new traders. You can even trade these strategies (intraday) in a retail account.

I can't give you the best answer, but I know friends that applied for finance positions took intermediate accounting because their potential employers asked for it.

Hello I worked at a prop trading firm in NY and I would say that the fixed income securities class would be much more relevant to trading. In trading from my experiences we didn't utilize as much accounting in our analysis to buy or sell at my firm had a much more technical approach as opposed to a fundamental approach to trading especially withing the intraday. Also, the fixed income securities class may give you a good foundation should you look to trade fixed income securities. I hope this helped.

Fixed Income, no doubt. Accounting is pretty useless.

Depends, for high-yield accounting would be very useful, but in general, the fixed income class is probably better.

engineering/math ,and computers are far more important. You should be able to do pretty large calculations on the fly. Need to be able to develop solid hypothesis from large data sets and be able to effectively test these hypothesis in a relative short span of time.

Institutional trading at banks is not very fundamental. Even high yield is not really fundamental anymore. Do you consider ER as IB? That is one area. Along with special situations when you have to predict corporate actions. That's literally it.

Other than that everything is going the way of algos including OTC (believe it or not!). CS has started putting in various fixed income into their ClearWater aggregated pool and tradeable through their AES. And then you have BlackRock asking for standardized bonds in yesterday's WSJ. And then on top of that all the international regulation calling for central clearing of swaps "SEFs"- do you really think all that data aggregating won't make Algos inevitable? Parsed out into bits and pieces even the most complex bespoke solutions can be engineered with algo trades- we all know this on a fundamental level. But people underestimate how quickly it'll happen. I'd go so far to say the future of S&T is salespeople and IT. Maybe it should be called S&I.

James Simons was a differential geometer and David Shaw is a computation biochemist, thier phDs had nothing to do with trading or finance. A PhD really isn't something that you do just because you think there will be a sweet job as a quant lined up for you afterwards.

Well if you want to go into Sales and Trading, apply for bank grad programs now (when you are undergrad)

I agree with KillerMike regarding not doing a Ph.D. just for a quant job. There is a difference between trader, quant trader and a quant.

1. MFE afaik is best at NYU/CMU/Berkeley/Columbia/UChicago
2. MBA are hired as "associates" for trading jobs via the same grad programs, good schools for that are UChicago/Wharton/Harvard
3. PhD: you can do one at Princeton in ORFE or NYU maths or Chicago Maths
4. Best route; learn on your job.

Do an internship, you shall find out for yourself.

quants are seen as these demagogues that are the most amazing traders ever. look at stevie cohen. not a quant, but quite a trader.

You shouldn't have any trouble getting a full time in S&T with undergraduate EE degree. Taking some Finance classes might help. As long as you have an idea about what you're getting into, know about markets, be able to sell how as an engineer you can be a good fit, etc. you should be fine. You might have easier time convincing Alumni or people in the profession than HR for initial screening. I was told many of the guy in the floor are actually ex-Engineers.

If you're graduating in Spring, you might be little late for this route though.

That's absolutely fine for some positions. For a lot of positions, it would also be helpful if you had a math background going all the way up to Calc III, Differential Equations, Calculus-based probability, and linear algebra.

That said, if you've already graduated, it's not too late to pick this stuff up. It's more important that you know the material than where you learned it; a few courses at BMCC, Baruch, or UIUC's Netmath program will give you everything you need to know to demonstrate that you're competent with the material in an interview.

A friend is in FICC at a BB. Says his MD has an art history degree from princeton.

sure. but its definitely more true of certain desks than others. Exotic Equity Derivatives? Not usually. Spot FX, flow CDS and some metals desks? Sure. There's no complicated math you need to value those products (at least from a brokering standpoint). Market intuition and "quickness" is more key.

In anycase- are there traders on the sell-side, with "soft degrees"? yes. Can they handle the job as well as more quantitative people? Yes-as long as they are quick with numbers, interpreting graphs, keeping figures in their head, mental estimations, and can understand the gist of research reporters with that use intermediate statistical methods- (e.g. could you get an A in an intro statistics class at a good university?). So are they still at a disadvantage in job hiring to quant guys? Yes, they still are. Why? They are seen as not as smart. What about those from top schools? That helps lower their disadvantage considerably (see manbearpig's comment- if you HAVE to major in english/history/etc AND want to work in sell-side trading, then its one of those rare cases where a ivy league degree really is a must).

do trading floors have call outs? like

XX down YYY voliity increasing on Q

George Soros studied Philosophy. Carl Icahn studied Philosophy. Michael Lewis studied History and was employeed as derivate trader. David Einhorn studied Government etc..

They are not traders, but what I wanna say is that their works are also not related to academic subjects.

Internship and high GPA are only for the entrance and if you are in, you have to convince with your work.

^Michael Lewish was actually in sales.

I'm always astonished when people on this board call subject like history or philosophy 'soft.' Over here in Britain, most people consider those subjects to be difficult and worthwhile (at least at the good universities). Finance, on the other hand, is generally considered soft, business is what you do if you weren't clever enough to study economics, and accounting is thought of as such a joke that most of the good universities don't even bother to teach it.

The majority of the bankers, traders and financial analysts I know in London have degrees completely unrelated to their career - off the top of my head, I can think of chemists, psychologists, engineers, historians, philosophers and linguists. One of the most common degrees is actually Classics, which is about as far from 21st century global finance as you can get. Of course, there are plenty of economists, and some commodities people have degrees in geology etc, but mostly people just studied what they were interested in.

I suppose it's another reminder that, despite the shared language, Britain and the US are actually very different.

I know a trader who used to work at Barclay's and only has a 2-year degree

I know many traders with nothing higher than middle school education - not that big of a deal

I assume that many traders with middle school education are older than us. At their time, Investment Banking was not as competitive as our current time.

If you tried with middle school education nowadays, you would never get a chance to work as trader.

I am not from US, so I don´t know seriously whether there are any target middle schools.

Why should firms pick up middle school kids and not rather college students?..Because they are younger?..

It doesn´t make any sense.

I believe that middle school kids (even if they are not from target middle schools) can do a great work and maybe their effort could be even greater than that of college students, but there are always uncertainties about middle school purpils sothat it is really hard to trust any of them at first.