Journey from investment bank to independent automated trader

Quote from lolatency:

I'm shooting for $30 a day, which isn't really that difficult.
More...

Hi lolatency,

Let's suppose you can make $300 a day, $300 x 5 days/week x 52 weeks/year = 78k per year. Isn't this number tiny compared to what you can make at an investment bank? Or are you really willing to give up the sure income in return for independence?

I am asking because I am trying to take the opposite route as you. I have been developing automated strategies using retail software. Retail automated strategies are generally limited to lower frequency simply because high frequency data is much more costly and better software tools are needed to handle high frequency data correctly. My impression is that in an institution all these IT issues would be taken care of, more or less, and the trader can just focus on researching profitable ideas.

BTW, you mentioned you have BS in Computer Engineering and MS in Statistics. So what kind of position did you start with at the investment bank? I also have a BS in Computer Engineering so I am curious as to how I can leverage that to get into the industry.

Thanks,
 
Quote from ezbentley:

Hi lolatency,

Let's suppose you can make $300 a day, $300 x 5 days/week x 52 weeks/year = 78k per year. Isn't this number tiny compared to what you can make at an investment bank? Or are you really willing to give up the sure income in return for independence?

I am asking because I am trying to take the opposite route as you. I have been developing automated strategies using retail software. Retail automated strategies are generally limited to lower frequency simply because high frequency data is much more costly and better software tools are needed to handle high frequency data correctly. My impression is that in an institution all these IT issues would be taken care of, more or less, and the trader can just focus on researching profitable ideas.

BTW, you mentioned you have BS in Computer Engineering and MS in Statistics. So what kind of position did you start with at the investment bank? I also have a BS in Computer Engineering so I am curious as to how I can leverage that to get into the industry.

Thanks,
More...

I can't speak for others, but my compensation has never crossed 200k annually. My bosses and such have told me that it's because of my timing and such, and that people with my exact same position have crossed the 400k mark in good years. To me, there's no difference between 50k in a cheap suburb vs. 200k in Manhattan. Others my disagree, but that's their opinion. So to run around making $50k independently to me is quite great. Fantastic, actually. I think would feel better about myself in that scenario.

Second, I'm not really comfortable with the idea that my career can top out at 300-400k helping some trader. I don't think that's enough money to put up with crap from things like middle-management. I'm more confident in my own ability to scale a 50k operation than I am confident in my ability to play politics with the sorts of retards that float around in IB-space.

I started off doing the grunt work in an options trading group, basically facilitating all of the bottom-level things an options trading group needs to do. I was on the business side, so that helped.
 
Quote from lolatency:

I started off doing the grunt work in an options trading group, basically facilitating all of the bottom-level things an options trading group needs to do. I was on the business side, so that helped.
More...

By grunt work, do you mean like IT and operational stuff? I assume those positions are not directly related to trading. So did you learn about the trading aspect by observation and exposure to other traders? Would you recommend that route to someone who wishes to get into institutional trading?

Your thread is very informational. Thanks for sharing your experience.
 
Quote from ezbentley:

By grunt work, do you mean like IT and operational stuff? I assume those positions are not directly related to trading. So did you learn about the trading aspect by observation and exposure to other traders? Would you recommend that route to someone who wishes to get into institutional trading?

Your thread is very informational. Thanks for sharing your experience.
More...

I did a bit of everything, from exchange connectivity to strategy development, to working out hacks to improve our bottom line. The difference between me and your usual software/hardware guy is that I was in a business group, not in an IT group. That's the distinction.

To say I gained nothing in terms of knowledge about trading from grunt work in an IB would be a lie. I learned so much about market microstructure that my vision of the markets is a thousand times clearer than it was in 2004, before I started supporting various prop traders.

The underlying point you should be aware of: don't ever take an IT job on Wall St. unless that IT work has you looking and interacting with the PnL and lists of trades. If you don't get to see the PnL, tell them to f off and find some other stooge.

As far as me going back to retail trading and try it, ... well, part of it is emotional. I kind of sympathize with the kids who come onto this forum thinking they are going to make a million dollars with their $2000 accounts. I know people on ET are douchebags and sometimes they have issues, but, ... I somehow feel for retail traders. I feel bad for the guy who tries his moving average cross-over strategy, or thinks some magical combination of technical indicators will save his finances. I feel bad for the guy who signs up for junk training programs.

Maybe I have this fascination of the retail trader because the guy who becomes a day trader is taking real risk and dreaming, maybe dreaming much more so than the usual cubicle grunt. It's that dreamer aspect of day traders that I love.

The other guys at the options desk I was in used to ridicule retail traders and call them "Joe Bob in Kansas." People would look at some of the customer flow and just laugh.

I didn't laugh too hard, because I also see myself in retail traders. In my mind, I see a young married guy with no kids telling his wife he's going to make it big, only to fail over and over. Maybe his marriage will survive, maybe it won't, ... and I think about how maybe no one understands why he takes risks. Sometimes I wonder if he (the retail trader) even understands his own risk in the game. The whole dynamic of deciding to bet life on this "game" intrigues me and fascinates me so much, that I just feel that I need to beat the game and make it as a retail trader before I die. As far as getting rich in and of itself, I'm not too worried about that.

In a way, sometimes I see a post here on ET and I want to tell people why they are wrong and how to improve their operations, but I can't. Even in this journal, I can't say too much about where I am looking. I also have a kind of hatred for large institutions, because they're so inhumane. Lay-offs roll around and every stays silent the next day and doesn't mention the name of the laid-off guy. There's also that whole lay-off rumor mill, and the sickness associated with people being glad they weren't the ones who got axed.
 
Hi lolatency,

I think you are writing a great thread, I will be following it with interest.

Just one thing, you said "there's no such thing as a good paycheck" but I bet you haven't refused one. All paychecks are good, its the "job" we have to get right.

Keep up the good work and good luck!
 
Quote from lolatency:

I didn't laugh too hard, because I also see myself in retail traders. In my mind, I see a young married guy with no kids telling his wife he's going to make it big, only to fail over and over. Maybe his marriage will survive, maybe it won't, ... and I think about how maybe no one understands why he takes risks. Sometimes I wonder if he (the retail trader) even understands his own risk in the game. The whole dynamic of deciding to bet life on this "game" intrigues me and fascinates me so much, that I just feel that I need to beat the game and make it as a retail trader before I die. As far as getting rich in and of itself, I'm not too worried about that.
More...

This is great insight.

The more I work on my retail trading "business plan," the more I realized that the odds are stacking up against the retail traders due to various reasons that you are well aware of(infrastructure, support, among others). That's why I try to go the opposite route as you, but I think once you know the risk associated with each option, then it becomes more of a personal preference than anything else.

Keep up the good work and best of luck.
 
I found an edge in R and I know how to trade it now. It took a bit of the weekend, and the code is only partially complete for testing. I think my edge is sufficiently odd enough that institutions won't bother and simple enough that I can pull it off with home-brew retail-idiot technology.

Now the question is whether the retail framework I use will be fast enough. I put $5000 into TradeStation, just so I could use their platform to grab data. I don't think I will be executing through them, though. I'll just keep that account for back-testing and data gathering.

The trading system actually attempts to collect ~$10-$12 at a time, and losses tend to be on the order of 2-3 cents. There's about 3-4 opportunities per day. The risk to the system more or less comes from breaks in the time-series models. I think, on my core products, I will be able to pull out my target profit of $30/day. Size isn't really something I'm going to consider, because with my small account side, I really don't want to trade with more than 500 shares at a time anyway. In fact, it's more logical for me to trade 100s, which is what the profit numbers are based on anyhow.

I will likely end up going via a prop group as my execution platform, because, surprisingly, my latency from my shitty cable modem to their broker is under 10ms, and their execution claims to be on the order of 1.5ms; so, for me, I've got 11ms to run a bunch of cancel replaces. This won't save me from the fastest players, but it will limit my "blow out no liquidity" losses.

I have roughly 1-mil in buying power, of which I plan on using, initially, only 30-40k or so.

I intend to have this system running by August to mid-August at the latest.
 
these monkeys are trained to laugh at retail traders just like pavlov's dogs can be trained to salivate when it sees a triangle.

retail traders challenge their social status. that's why they ridicule. the reality is that they can trade no better than the retail trader. subconsciously, they refuse to accept it, yet they can't produce any proof that they are better, so they resort to ridiculing.



The other guys at the options desk I was in used to ridicule retail traders and call them "Joe Bob in Kansas." People would look at some of the customer flow and just laugh.
More...
 
in one post you champion the retail trader but in another you speak lowly of them as if you're above them. hmm, lets see.

you are aiming to make $50k a year with a strategy that makes $30 per day. you haven't actually made a dime yet. so far the only thing you have is back tested results.

lol

i know what you should do. you have big time institutional experience. damn impressive. you're rolling with the big boys while everyone else is behind you. you know what you're doing. you have a strategy now. why bother programming for your stupid boss and those stupid traders any longer? quit your job and trade. make $50k a year auto trading and go to the beach all day. go go go.

Quote from lolatency:

I found an edge in R and I know how to trade it now. It took a bit of the weekend, and the code is only partially complete for testing. I think my edge is sufficiently odd enough that institutions won't bother and simple enough that I can pull it off with home-brew retail-idiot technology.
More...
 
You must log in or register to reply here.
Back
Top