Warning Long Post Ahead
I am a recent graduate of Hofstra University with a bachelors of science in mathematical finance 3.4 GPA trying to get into prop trading even though I am aware that all odds are against me. This is my first post in WSO and it is going to be a long one. Hopefully, at least one person can help me out because I really need it.
Little bit about myself
I am 22 years old graduated college recently May 2017. Originally started off as a finance major like every other business student because I knew I wanted to get into business but didn't exactly know what I wanted to do. As a result, choose finance right? Because it seems pretty 'safe'. It wasn't until sophomore year I decided to switch to a more quantitative major (mathematical finance) because I found a lot of curiosity in automated trading involving algorithms. With this new curiosity, I researched more about trading and began to trade equities and eventually equity options on a small personal account to learn. I had some success but many more failures and ended up losing all my money (but definitely learned a lot... the hard way). I felt defeated after losing all my money several times which sparked my interest in algo trading even more; I wanted to learn how to code my way into profit because all my failed trades were mainly due to human emotion. But the thing is I only learned VBA during my college career and to my understanding, it isn't very useful for prop trading.
What I Know About Prop Trading
Let me tell you what I do know about the industry from my own research and please correct any misinformation.
First thing is I believe there are three distinct categories of trading: proprietary trading, hedge fund trading, and IB sales & trading.
Prop trading is when a firm is trading for themselves for profit. In other words, they have no clients that deposit money for the firm to trade. These prop shops provide capital and leverage to their traders. I am not too sure how the compensation model works in 2017 for most prop shops because I know that it has changed since 2008 crisis. In terms of strategy, one way prop shops can make money is by trading in smaller markets because of the fact that they generally have less capital than hedgefunds or IBs. By entering smaller markets, the prop shop may perhaps be the biggest market-maker in the specific market or at the least, have strong market-making influence which, in either case, gives them an advantage to make profit. However, I do understand that market-making and prop trading is not the same thing; market-making profits off bid-ask spread and prop trading profits off betting.
Hedge fund traders on the other hand trade capital pooled by private clients. In terms of strategies, there are various that exist within hedge fund trading but I believe they tend to be more directional oriented rather than market-making (ex: longing or shorting positions in hopes that in the future the bet was correct for crazy profits).
IB sales & trading, like hedge fund trading, generally involves more capital than prop shops. Definitely more risk management-oriented than prop shops or hedge funds because IBs are inherently more conservative.
Why I Want to Get Into Prop Trading instead of Hedge Fund or IB Sales & Trading
Well the obvious reason is because coming from Hofstra a non-target with a 3.4 GPA there's no way I would get into the latter two. But still, I think prop trading is becoming increasingly more difficult to break into because they are hiring from top schools similar to hedge funds and investment banks. The other big reason I decided on prop trading is because trading is a true passion for me. Yea I know. You hear that from everyone that wants to get into trading. But after researching various different industries of finance that I might be interested in such as equity research, consulting, public relations, and investment banking, I seriously thought about each one of the different industries and came to a conclusion I would be miserable if I ended up in any of them because all of them are not something I truly enjoy.
My Questions Regarding Proprietary Trading
1. Is this still a viable industry to get into today? Where is the direction of prop trading going?
2. With my background how do I break into a prop firm?
3. Is it possible to break into prop trading with no coding background with the rise of algorithmic and quantitative trading?
4. Should I learn Python or C++?
5. Are there any prop firms that would even consider taking me in to train (not hire) as a recent college grad with my background?
6. Can you explain the Volker rule and how it affected prop trading as a whole and also how it affected the compensation model of most prop firms after it went into effect or is it something that more so affected BB proprietary divisions rather than private prop firms?
7. What are prop trading interviews like? Are they similar to IB trading interviews? How should one go about preparing for one?
8. What do prop recruiters look for in a potential trader that makes him or her stand out from the rest?
9. Which prop firms are the most respected and profitable?
10. Which prop firms are the ones most likely to take up recent college grads to train?
- Lastly, I have a list of prop shops (in no particular order) that I am familiar with that I believe are respected and well-known and hopefully one day be working for them (please let me know if this is a good list or if I should add or remove any firms):
Susquehanna, Wolverine, PEAK6, Avatar Securities, Optiver, Jane Street, Archelon Group, Alliston, Getco, Spot Trading, First New York Securities, Bear Capital Partners, Belvedere Trading, Chicago Trading Company, Chimera
Also which 'prop shops' should I avoid such as T3 Trading? I heard to stay away from prop shops that require you to put down your own money? I believe most prop traders frown upon such firms like T3? Could you guys elaborate why they are not 'legitimate' and other firms to avoid that are similar?
Anyways, if you read up to this point I really appreciate your time and would be love any feedback, comments or advice even if you want to tell me I won't make it or stop wasting my time. But comments like those make me want it even more. People want things that they are told they cannot have. I want to get into prop trading more than anything. I've been jobless since May after I graduated and I've been applying and networking 24/7 since then with no luck but I understand a big factor is because of my background but hell, I will work for free or even be a janitor for a prop firm just to get my damn foot in the door. Yes, I sound desperate but when you are starving for days with no food the ONLY thing you want is food and I am fucking dying of hunger to get into this damn field.