I'm Trying to get into Prop-Trading From a Non-Target School

Warning Long Post Ahead

Hello WallStreetOasis,
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?

  1. 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.

Comments (45)

Aug 31, 2017

Spent the summer in prop trading and likely coming back as I can't land an associate role in S&T. Take this advice with a grain of salt.

A 3.4 from Hofstra is not going to cut it for prop trading. You need to go to grad school to have a realistic chance. The typical profile in my cohort was 3.7+ (or equivalent) from MIT/Harvard/Princeton. I was one of the few people from a lower tier target school (Cornell, Columbia, etc.).

Networking in prop trading only works for successful experienced candidates. It is very different from S&T in that regard. You can get an interview if you worked somewhere else with someone and they know that you're good, but the entry-level process is very much targeted to reducing adverse selection rather than giving people a second chance.

Aug 31, 2017

Thanks for your response and honesty. How much do you think my chances would increase if I became fluent in Python and gained experienced developing algo trading strategies on a platform such as Quantopian?

Aug 31, 2017

The people I know working in prop trading are all proficient in some coding language (mostly Python), and have been trained in competitive mathematics from a young age. This typically takes the form of a target school graduate with a high GPA in a quantitative field, with work experience that could include academic research or software development/data science.

Truth is, given your background and stats, you will be at a significant disadvantage when it comes time to recruit. Generally, prop trading firms will administer math tests to screen candidates initially (with a very significant failure rate), focused around mental math and problem solving. Advancing past this initial screen will typically result in quantitative interviews of ever-increasing difficulty, until finally you're presented with mental math exercises that are more typical of hardcore national math competitions around probability and statistics.

You've also forgotten a bunch of high profile prop trading firms from your list: DRW, KCG (which used to be Getco), DE Shaw, Citadel Securities, Jump Trading, etc. Typically, people who aim for prop shop jobs also aim for quant hedge funds (DE Shaw, Two Sigma, Rentech if you're willing to get a PhD, Citadel, AQR, etc.)

If you are completely and absolutely serious about pursuing this career path, you should consider going into a graduate program in mathematics and working in a more academic setting. I've also seen people jump into the field from software development backgrounds, although those people tend to be more code monkeys than traders.

    • 8
    • 1
Aug 31, 2017

I don't think it would help very much. The education profile needs to match first. You might be able to get a seat at an arcade on a first loss basis or on a very short leash, but that's not the same thing as "real" prop trading.

Aug 31, 2017

From someone working in prop trading - apply everywhere you can. You are definitely at a disadvantage in terms of getting an interview, but if you can make it to that stage, that will give you a chance to prove yourself. If you're able to ace the math tests etc. that are part of the applications for many prop trading firms (especially options trading), your background will be much less of a hindrance. Networking is more difficult in quant trading because most of the people who work in this field did not go through the same networking process that many working at BBs did, so there is less of a "pay it forward" attitude, but give it a shot. If you keep hustling, someone will eventually give you a chance - you just have to prove yourself once they do.

Learn More

Boost your resume and land a finance job by passing the FINRA SIE. 264 pages & 1981 smart flashcards written by a former 8X top Fidelity instructor. Try it for 0 bananas here.

Best Response
Sep 1, 2017

2 things right off the top

1) you are mistaken...hedge funds are often in the same class as "prop trading" firms. The 3 types of trading are really:

(a) HFT market makers
(b) medium term (intraday) day-trading (lots of hedge funds in this category, as well as most prop firms)
(c) institutional positioning (this includes some long/short hedge funds, as well as larger outright funds like pension funds, mutual funds, insurance companies, central banks). Trades are large in block size, but not very often.
(d) S&T (investment bank market makers)

S&T are market makers...just like HFT firms (and they try to manipulate markets in the process of making markets and providing liquidity, just like the HFT firms do...but that's harder to do at their size and scale...dirty little secret)....they mostly make markets for larger blocks to the institutions from category (c) but they also take short term prop positions sometimes, tho they are mostly required to exit those positions by the end of the day...so they fall into both buckets (a) and (b).

So, first you need to decide which if the 4 categories you want to go into.

(a) HFT is all math and programming...its more of an engineering role...but with a markets twist.
(b) is what most people think of when they talk about prop trading...equal amounts art and science
(c) requires pedigree...years of experience at an investment bank usually...sometimes also an MBA
(d) has a formal way in (summer internships) and a backdoor (internal recruiting, usually from technology/quant/research groups)

All 4 categories are hard...very hard..to get into the real "decision making" roles where you can make real money...lots of competition at every level. Since you don't have any experience, and you don't yet know "how to make money" in any kind of consistent way....its a bit of a crapshoot. However, there is a way to overcome that obstacle...you need to learn (yes....i know...duh). Either you need to be taught in some kind of semi-formal process (usually an internship followed by junior role on a trading desk where a senior trader takes you under their wing and teaches you)...or you need to backdoor your way in (technology or some kind of junior analyst).

The easiest way in (assuming you can't get an internship) is a job in trading technology or operations. Understand, this will not be a "trading" role...but it will get your foot in the door...and give you the opportunity to learn from the inside...and you'll be getting paid to do so. Quant roles will require Masters or PhD education in math/tech. These are lucrative, stable, and well paying careers (because it takes so long to accumulate the necessary knowledge to get in)...but this is not for everybody...takes YEARS to learn the math.

It sounds like, from what you wrote, that you just want a prop trading firm (like Gelber or the other mostly chicago based firms) to just give you a shot...but you also know that rarely works out...its competitive, and it is their money...they don't want to risk letting you lose it without a good reason. So you need a way in. They have internships (that you should apply to)....but they are also very competitive.

My advice...try to get an internship (everywhere)...and if that fails, try to get a technology job that you can handle (tech jobs are plentiful...just look at the job boards like Indeed to find the skills in demand...maybe learn whatever programming skills are listed for the jbs you want and think you are qualified for). I know plenty of people who started out in a tech job that had some kind of connection to trading and capital markets...who took the initiative to learn more skills, then got a different job with an even closer connection to trading (usually after 1-2 years...during which time they learned everything they could) and THEN get a shot as some kind of junior analyst on a trading desk, where they had the opportunity to really learn how to become a trader. This is a long road...probably 5 years if you really backdoor your way in (but at least you get paid to learn).

The other faster backdoor route (Masters in Financial Engineering + Programming classes) is probably faster....but you take economic risk. Only go this route if you can get into a top 10-20 program...otherwise you might not be able to get a job in your ideal company.

    • 11
Jan 9, 2018

.

"The markets are always changing , and they are always the same."

Oct 10, 2017

your goal is to lateral to an entry level trading/research desk analyst position. Regardless of how good you get at Product Controller...you will learn nothing, absolutely ZERO, about trading in that role. "Trading" means "taking risk decisions"...it has almost nothing to do with calculating "value." Its all about judging the emotion of the market...and its very hard to quantify. However, all is not lost. You will be employed at a major bank. That means you have access to industry education. Choose a market (equities, interest rates, commodities, etc..) and then

1) learn everything about that market and the securities that trade within...and everything about the underlying things that make up those securities (pricing, liquidity, derivatives, complex structures, fair value, different behavior of different market participants, etc..)
2) learn everything you can about risk management (hedging) of different instruments in that market
3) learn all the math and programming that you would need to be skilled in #2

4) after all that (probably at least 2-3 years) you should be qualified with the knowledge for a junior analyst role, either on a trading desk, or more likely, on a quant / research desk.

Quant Research desks are breeding grounds for the trading desks. Many quant researchers get promoted to trader / portfolio manager. However, NEVER have i seen or heard of a product controller (thats a fancy work for accountant in the ibanks) getting a position directly onto a trading desk. You will need "something else." This is partially a personality issue, and partially a self selection issue. Why did you choose Product Control (accounting) over IT, or getting more intense math education so that you could become a real quant ? Usually its because you had a low tolerance for risk, and Product Control is a "low risk" job. Trading is a "high risk" job...and they want people with "high risk" personalities (to an extent) because if you can't stomach taking risk, then you'll be frozen and paralyzed like a deer in headlights when they throw you into the deep end (that's what trading feels like when you don't know what you are doing...and this can last for years)

Without knowing you, its hard to give accurate advice, but use this as a starting point.

    • 3
Sep 2, 2017

My first thought was about https://numer.ai/
I advise you to give it a shot in case you have not heard about this project before. I have been in Prop Trading (not a quant shop), for 2 years now and am trying to study my way into being capable of achieving decent results in Numerai, because plenty of doors will be open afterwards.

Good luck!

Jan 9, 2018

If you have strong and quick mental math/problem solving skills, most prop trading firms won't care where you went to school. My advice would be to look into some of the firms in NYC and Chicago and try to reach out to traders/recruiters to get on their radar. Feel free to PM me if you want more advice

    • 1
Sep 2, 2017

@jasonpark136" , @7xEBITDA , @nofundforoldtraders

Excellent posts. I would like to contribute to this thread as I come from a background in engineering.

  1. Programming - Python is a highly versatile tool to learn. Majority of the companies (including my old one, think technology - telecommunications, IoT, etc) are switching their automation programs from C++/Java to Python currently. I am learning the basics right now and ordered more Python books to work with.

Recc'd Text for Python - Python Crash Course: A Hands-On, Project-Based Introduction to Programming.

Amazon'd it - $32.20 for a brand new one.

Next book after will be this -

Python Data Structures and Algorithms ($72.10 on Amazon).

This should at least get you to intermediate level with Python. I plan on developing some games (gamer here) and do scientific programming in Python for my own research. I do plan to publish at some point.

  1. Network. I have had success in phone screenings and interviews with shops such as DE Shaw, Chimera and a few others for internship or Software Development and/or Quantitative Trading. I have a long standing communication relationship with a top trading firm in NYC that initially started as a cold call.
  2. Experience - One thing that worked well on my part was gaining industry experience. @nofundforoldtraders made a lengthy but very well-written post about advice and the specifics. I would follow his experience on it. Some of the interviews at technology companies will give you logic games/puzzles to solve, technical questions, etc. Not exactly a walk in the park, I know this because I was involved in providing questions for the panel to provide during interviews.

You are quite young and ambitious, stay hungry my friend. I will still pursue graduate school, it is helpful, a lot of the firms are asking for MS/PhD candidates for Quantitative roles.

Jan 9, 2018

You will definitely be competitive coming out of Harvey Mudd. I know my firm would take your application seriously. You may have to do your own legwork though since most prop firms are not going to be recruiting directly on your campus. That means reaching out directly to the firms that you are interested in, I think. PM me if you want to have a more detailed discussion. I have some experience with west coast schools/trading.

    • 2
Jan 9, 2018
GoCard:

You will definitely be competitive coming out of Harvey Mudd. I know my firm would take your application seriously. You may have to do your own legwork though since most prop firms are not going to be recruiting directly on your campus. That means reaching out directly to the firms that you are interested in, I think. PM me if you want to have a more detailed discussion. I have some experience with west coast schools/trading.

GoCard - what kind of prop trading do you / your firm do?

    • 1
Sep 2, 2017

Protip: You should probably change your username from your actual name to something else, because it was very easy to find out who you are. If you don't care, all good.

Sep 6, 2017

Why do consultants love stalking? :P

Also, do consultants frequently have sex with their colleagues in MBB? At least that's what I heard, so I'm just doing some fact checking here.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

Sep 6, 2017

Because years of hunting down data from clients will make you rather good at sense checking small things.

You make MBB sound like a giant orgy. It's not really; people do hook up but that's what happens when you put a ton of young people too busy to date in close quarters. I'm too senior to know or care much about what's going on at the junior levels.

    • 1
Jan 9, 2018

Basically I am just wondering if I wasted my time applying to the main prop shops, and if I should focus other (still good) mid level ones?

Jan 9, 2018

So you're at a non-target, with bad stats in a relatively easy major, I somehow foresee that being an issue. Network.

Jan 9, 2018
futurectdoc:

So you're at a non-target, with bad stats in a relatively easy major, I somehow foresee that being an issue. Network.

^^^

You're not in good shape, OP

Jan 9, 2018

Well isnt this just great.

Jan 9, 2018
Forex509:

Well isnt this just great.

Not saying it's impossible, but networking will be key

Jan 9, 2018

Prop firms are generally much more interested in how you think under pressure than your GPA. That's where the barrage of brainteasers, probability and mental math questions kick in. As others have mentioned, networking will be key to get your resume look at, but it is far from sufficient. Focus on your mental math chops, brainteasers and product knowledge (ex: read natenberg if you're @ an options market making firm, burghardt for rates rv etc), and completely forget about your GPA and other limiting thoughts cause you can't change it right now and they really won't matter at most prop shops.

    • 2
Jan 9, 2018

How about a physics major gpa of 3.3 from a non-target?

Jan 9, 2018

Depends on how bad of a non-target we are talking, if you have a good physics department you should be fine. Most of these places look for IQ and intellectual curiosity, not GPA. Physics fits both of those criterion perfectly. I think that a 3.3 in physics (as long as is from a decent school) would stand out much more than the standard finance kid with a better gpa.

Also you may want to consider an MFE if you can't break in from undergrad. Physics majors typically have a strong background in continuous processes which is very useful in quantitative finance

Jan 9, 2018

It's a good school overall, but the physics department is very small and unknown. I'm currently studying all the classic quant interview books, and reading up on a much financial info as possible. Most likely, I'll target the mid level prop shops just as Forex was saying. Also relevant, I have taken some programming and have a minor in math.

Oct 2, 2017

My biggest question is would it be easier to break into prop trading when you already have a consistently profitable trading strategy or do a lot of firms not care about how consistent or profitable you are trading a personal account?

I ask this because I have been trading FX since high school (I am now a junior at Baruch) with the same simple strategy and I have finally become consistent with it. The strategy is medium-term intraday day type strategy. Setups form after new york and the majority of all my trades are executed in the London session and I am taken out for profit by the next day's new york session. In addition, I know this strategy is scalable because of a lot of my other acquaintances trade the same way with at least a few million in their account.

Returning 4-6% a month while risking only 1% of my account per trade is a pretty average with the strategy. On average, I take about 7-10 trades month and each of those trades usually targets about 2% reward. I will also add I do only have about 4-5 months of consistent results to show but I can confidently say that the strategy works and I have no doubts that I won't be able to continue showing consistent results.

I have been applying to a lot of firms for internships and I have heard back from two but I feel like the internship application doesn't weigh on personal trading at all compared to the experienced trading application. I have a feeling that after I build up at least 2 years of consistent results, it would be a lot easier to get into a shop.

If anyone has any advice, I would greatly appreciate it.

Oct 13, 2017
Comment
Oct 11, 2017
Comment

What concert costs 45 cents? 50 Cent feat. Nickelback.