Is trading dying out?

Maybe this view is a simple one, but as long as the markets are changing, there will be trading to take sides on the volatility. Profits may not be as abundant as in the heydays of late 2000's, but there is enough business to look forward to. You're right about the MSFE grads diluting the job markets, but many of these 'quant' wanna-bes end up filling BO/MO roles which used to be filled by less qualified folks, so that as a whole, the industry is getting smarter. (Maybe I think)

I came to a similar depressing conclusion as OP, curious to hear others chime in.

Curious - why do you think algos are dying? Obviously in the equities world, they can't really grow much more (I don't see this shrinking though), but what about other markets that currently are traded mostly by voice or bloomberg chat (IR Swaps, EM FI + FX, etc)? It may seem like algos are everywhere because of how prevalent they are in Equities, G10 FX, etc., but there are still products out there that have some catching up to do.

Also, traders do serve a purpose more than just making a market in some products as well. There are products out there that banks are some of the largest traders in, so they can provide further value to clients by discussing that product and their perception. That's worth some consideration as well... an algo can't provide that.

Overall, though, I do agree that conventional trading seats are shrinking fast.

There have been traded financial markets since Ancient Egypt. Rules and players may come and go, but you can never stop the game.

basically banks used to execute and manage huge client orders, the management was mostly done through prop traders who had to beat an index or give some premium for some sort of order type (like vwap minus a few ticks or last price minus some ticks, etc). These large order executions are now done by HFT and Algo trading. VWAP algos and other types are very competitive products where banks compete for the smallest execution cost of large clients. These traders or flow traders, who used to prop trade around client orders aren't around as much anymore, but these guys used to front run the market anyway and anticipate flows, i.e. making some profit on knowing trends in order types that typically come in. This reduction in internally swappable client flow mostly due to competitive activity between banks and the Dodd Frank regulations have caused banks to cut down on derivatives activity as well. This has overall shrunk the trading industry with just a few traders and a few analysts who run the entire banks trade floor market specific teams.

My understanding is somewhere between post #1 and post #2.

There will always be money to be made in trading, but it won't be nearly as good as before.

Prop Traders - Rapidly declining. I actually wanted to do this when graduating college but told myself the industry is shrinking too quickly (not like my current one isn't shrinking either, but at a slower rate. also have real exit opp. in equity analysis).

S&T - Banks have been moving more towards execution trading. Not that true prop trading doesn't exist, but as you can all imagine they are shying away from this, at least in part due to legislation. From my conversations with fellow graduates at S&T programs, it's extremely difficult to find placement.

Algos - Their heydays were a few years ago. You can look at the revenue shrink for (Either KGC or Getco) when Getco announced merger. All I remember was that it didn't look pretty. For this it's all about being 1 millisecond faster... which you can imagine is very capital intensive whether or not it's on the hardware, software, or location side of things. On the algo side I get the impression that that the top will do very well for themselves but most of the candidates/people are unqualified and will go BO/MO and second poster said (true for all industries, but you only need very few good algo guys as opposed to a lot of people working on it).

A lot of people don't understand HFT and algo trading and this leads people to believe trading is dead. But let me pose a question...Can a computer interpret current events that affect the market? No they can't because they look purely at numbers. As my teacher use to say in comp sci class, "Computers are stupid"

Eddie, I thought Bankerella had that picture of her taken off the internet. Good find.

Trading is dead. What does it mean? Nothing. More and more people really on technicals thinking they are some holy grail and if you want to get in the city and are prepared to do real work. The title is called an analyst, where you 'invest' not 'trade'

I started as a Sales Trader and have transitioned to analyst

Maximus - well put. Couldn't have said it better myself. +1 SB

I'd also like to add that any sort of computerized trading requires LOTS of historical data/information from which recurring, statistically significant phenomena can be extracted...there are too many trading/investing strategies which take advantage of non-statistical, non-recurring, and highly situational inefficiencies (L/S equity or credit, discretionary macro, special situations/event-driven, certain RV strategies, etc.).

I appreciate all the input. What I am finding is close to what cqxu said. Maximus,thanks for that run down. It clears up a lot and gives me a lot more to look into. What I am taking away from here is that trading isn't dying, it's just evolving. (which I guess I knew it wasn't "dying", but the realistic opportunity of employment after graduation was looking like shit.) Also, the people who hire traders aren't doing well right now, so hiring sucks. College students however, are ignoring that and still fighting over the scraps. Eventually, who knows when, this will turn around and hiring will pick back up. Opportunities are still there now, you just have to know where to look .

That's at least the point I think most of you are trying to make. Feel free to correct me though. Thanks again.

I generally skimmed through this. From what I know, if you're trying to make it rich by going to a prop firm, I suggest you rethink that strategy. I have a number of friends who went into prop trading right out of college with the CMT exam already passed and had extreme ups and downs. They would have some decent weeks and some weeks where they have nothing. They all work in NYC and a lot of them found out, "why bother trading for a firm making a portion of what I could make on my own, in my own home rather than an office." So they transitioned into starting their own Hedge Funds, moving to BB firms or just trading from their home that's NOT in NYC.

As for schools, there are tons of people wanting to get into the trading gig, and a lot of them don't make it. The reason being is because a lot of the bigger firms want to see that you're not only have the knowledge but the passion to do it on your own free time. So many students have traded only a handful of stocks in college or have played with mock portfolios and think they know it all. But what I found that helps prior to an interview is having a spreadsheet of all your trades, the size of them and reasons for executing that trade. Why did you trade it then, what did you see, how long did you wait to trade, what have you learned from your loss/gain?

I think everyone here has said it, and I hate to be the echo. If there's a market, then there needs to be traders. Right now the market is small and still uncertain so not many companies are hiring unless you're from a target school or have high connections. When the market picks up, so will the hiring. Until then keep looking and trading on your own time to develop some credibility, gigs are out there but you just have to find them!

i went from trading vanilla equities to trading exotics

and by exotics i mean wine grapes and latin women

nawmeaaaaaaaaan

trade has been around since the dawn of mankind. only the way in which we do it has changed. just because the way it has been done is shrinking and evolving does not by any means denote trading is dying out. this transitional period actually may indeed have much more opportunity than you may think, Fausty. The decentralization of trading to electronic markets and the continuing rise of emerging markets is going to make many new millionaires.

thus, Fausty, I am not calling bullshit perse', but only asking you to view your information and research from a completely different perspective. Where one career area is shrinking is where another career area is booming. Find that area. The research you have gathered so far is not the full picture, I would contend.

FI trading is alive + well (equities is the product that is gettin downsized) and more specifically, research sales + sales trading... logically, there is room to cut since in fixed income for example, ur sales coverage will be responsible for distributing research + discussing potential trades while also providing execution services... Specifically, the big fixed income firms are still making a ton of money in FICC trading (though commodities has been getting hit hard) if you look at FICC numbers (credit, rates, mortgages, FX, and the structured side of those products are doing quite well this qtr as well as last year...

logically, most stocks trade with around a penny bid/ask --- while spreads in fixed income products are drastically larger... leaving more room to make money.. i read something that on average, a person in fixed income departments of S+T generate around 5x as much revenue per individual as someone in equities (though GS makes a ton of money in equities still)....

as someone in the biz, I'd say avoid salestrading + research sales in equities if possible (and go toward the credit products (loans, distressed, structured), rates, or securitized) as they have are the least automatable products... and pay the biggest bid/ask.) also, given the lack of liquidity in alot of those markets, bank traders must take on a good amt. of risk/judgement since its difficult to trade in/n/out of the product (in fact, one section of the firm trades such an untransparent product that the desk is in effect able to run a quasi "prop desk" only by putting ridiculusly rich offers on bonds in inventory) and only showing many bonds when the time is opportune for them.

One of my mentor told me that since 2008 all the technical analysis does not work as good as before, which i think explaining why S&T industry was shrinking in the past few years (to be more exact, equities)

The reason is that the market has changed, in my opinion, and waiting for its fundamental momentum of economic growth to restore as this is an industry highly correlated with economic performance (EU is dead, US is in deep sxxt, China still has way to go, ASEAN is immature, BRI are not open or inflated, and you will see the market do not have good chance at the moment)

Still I am talking about equities market, FICC is still making a killing these days as mentioned above, it is kinda like risk diversification of trading business

Therefore despite the fact that Prop trading is really dead due to regulatory matter, I think it is only a time problem. This world needs a good trading floor to work properly.

Anyway, i still think buy-side will have brighter future than sell-side S&T, given the changes in business model of banks in recent years

Intraday trading in equities and futures are largely done through algos, but there'll always be demand for longer term traders, asset managers. I mean there'll always be rich people, right?

This might be a stupid question, but I want to ask it anyway. I've heard of some people online talk about trading "cash products"; what does that term mean?