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Post Prop-Trader Life - Vol. 2
- Thread starter SilverBullet
- Start date
Originally posted by daniel_m
For those considering going the I-Bank route, it may be worthwile checking the book, "Monkey Business", by John Rolfe and Peter Troob.
http://www.amazon.com/exec/obidos/t...f=sr_8_1/002-2556307-8952017?s=books&n=507846
Although they might come across as a couple of immature malcontents, I think they shed some light on the duties performed by entry level I-Bankers. (not that I'd really know though).
i-bankers are NOT traders!! they work on deals like IPos, M&A, and other advisory work.
You are talking about apples and oranges here...
Originally posted by traderman
excuse my ignorance on this ...
when people talk about institutional trading vs. prop trading, do they mean at IB's as market makers (listed and/or OTC)??
if so, aren't the functions of MM and day traders totally different?
Yes, they are totally different.
There are 2 types of institutional trading:
1) Market-Making - like specialist and Market makers merely provide liquidity for large institutional fund managers
2) Prop trading - which actually risk firm's capital in pursue "excess returns"
Day traders/prop trading are in many ways similar to institutional proprietary trading in a sense that they take either directional or arbitrage bets.
But the way most "scalpers" trade 100-300K shares a day, it seems like they want to behave more like the specialist/MM, which I think defeats the entire purpose of proprietary trading.
Unless scalpers/daytraders think their function is to provide liquidity....
-99
thanks trader99 ...
from reading the various posts on these boards, it seems that many people are prop. traders at the many shops out there.
How many market makers would you say browse these boards?
On another note ... do MM conduct the same type of technical analysts as do prop. traders? Or since they trade based on order flow (as opposed to prop. traders), this type of analysis is not really necessary.
Also, why does it seem that it's easier to get a prop. trading job at one of the shops, than it is being a MM at one of the BBs?
from reading the various posts on these boards, it seems that many people are prop. traders at the many shops out there.
How many market makers would you say browse these boards?
On another note ... do MM conduct the same type of technical analysts as do prop. traders? Or since they trade based on order flow (as opposed to prop. traders), this type of analysis is not really necessary.
Also, why does it seem that it's easier to get a prop. trading job at one of the shops, than it is being a MM at one of the BBs?
Originally posted by traderman
thanks trader99 ...
from reading the various posts on these boards, it seems that many people are prop. traders at the many shops out there.
How many market makers would you say browse these boards?
On another note ... do MM conduct the same type of technical analysts as do prop. traders? Or since they trade based on order flow (as opposed to prop. traders), this type of analysis is not really necessary.
Also, why does it seem that it's easier to get a prop. trading job at one of the shops, than it is being a MM at one of the BBs?
Traderman:
Let me try to answer your question one by one then I gotta head to bed and trade tomorrow. hehe.
You wrote,"from reading the various posts on these boards, it seems that many people are prop. traders at the many shops out there. How many market makers would you say browse these boards? " I wouldn't know how many MM browse the boards?? Who would know? And why would it matter?!
You wrote,"On another note ... do MM conduct the same type of technical analysts as do prop. traders? Or since they trade based on order flow (as opposed to prop. traders), this type of analysis is not really necessary."
To put it simply NO! MM do NOT conduct any kind of TA. I mean I'm sure some of them have some kind of TA on their screens and stuff. But for the most part they just trade off of order flow. If a large institutional client has a 200,000 shares buy order , I'm sure it doesn't take a rocket scientist to see where prices should be heading.. hehe.
You wrote,"Also, why does it seem that it's easier to get a prop. trading job at one of the shops, than it is being a MM at one of the BBs? "
Well, for one, most prop trading job makes you put on capital. In the case of ECHO and Bright(I'm not affliate with either), they are kinda like a souped up brokerage account where you have to take the Series 7 and you put your capital and they provide huge leverage. Well, have you ever seen Etrade or Charles Schwab decline a customer from opening an account with $?
The other prop trading model like Worldco, Schonfeld,etc. where you put up a little to nothing, and you trade the firm's capital. Their logic is that they don't know who will be a good trader so they have an open door policy.
Now as to why being an MM or any institutional trader/fund manager is so hard to get in, I think it's just traditions. Because they have always recruited at top schools and expected top grades, personality, analytical skills,etc. so it just became that way. When I was an undergrad at a top school, I thought it was all like badass or whatever to be in a BB,etc.
But once you are in it, it's just ANOTHER JOB! I repeat that. I think a lot of the people on this board want to be in BB etc. It's not that big of a deal. But since some many people want these jobs because they paid relatively decent for even new grads and easily 6figures if you have advanced degree(MBA,MS,Phd), they have to make FILTERS to select people. That's it. Just a GAME! How else would they select one candidate from another?? And because of these hoops you have to jump through, they of course have to pay you salary, bonuses, benefits,etc.
I think the best way is to do this: 1) go work for a BB or a fund company for a few years and learn the ropes etc. 2) then become independent and be a prop trader and getting most of the profits.
That's the path that I went.. IRONICALLY, Part 2) is a LOT HARDER than part 1 for ME! I did all the educational credentials and hardwork already so getting into 1) was given. But now that I want to be independent and a kickass prop trader in this tough intraday environment takes some SERIOUS efforts...
good trading to all!
-99
99 said: "To put it simply NO! MM do NOT conduct any kind of TA. I mean I'm sure some of them have some kind of TA on their screens and stuff. But for the most part they just trade off of order flow. If a large institutional client has a 200,000 shares buy order , I'm sure it doesn't take a rocket scientist to see where prices should be heading.. hehe."
The trick is that a MM has to fill large institutional orders at the best volume weighted average price (VWAP) for the client. If the stock is strong for the day, this can be a challenge! Technicals and fundamentals DO play a big role in MM trading. You don't want to buy your 200K shares at the top of the stock's daily range if you intend to keep your customer for long.
"I think the best way is to do this: 1) go work for a BB or a fund company for a few years and learn the ropes etc. 2) then become independent and be a prop trader and getting most of the profits."
BB or fund company trading is almost completely different from day trading with respect to the strategies, money size and risk tolerances involved. I don't necessarily think one is a good prerequisite for the other. It does help to understand technicals and fundamentals though!
Ahhh, I'm beginning to get some color on the distinctions between day trading and MM. But I have some last lingering questions ....
It sounds like being a MM is like being a "one trick pony" (no disrespect to any MM that is reading this ... i'm just trying to understand the nature of the job) Prop. traders probably have better exit opportunities than MM do (for those that want to leave that is ... i agree with many posts that talk about going into MM then running your own prop. trading shop ... makes sense)
Reason I'm being incredibly curious is that I'm trying to break into the profession myself. After ungrad, I entered an analyst program in corporate finance at one of the bulge brackets (just completed three years of it! hellish, but well worth the lack of life ... great experiences) But i don't like it, and it doesn't excite me (model building, valuation analysis, roadshows, bank books, etc. just don't do it for me). So, I'm trying to learn as much as I can on trading .... unfortunately working my way on to our trading floor (at the BB) isn't as easy as I thought it'd be. But i find myself faced with many opportunities at many prop. shops. However, i'm more inclined to go the MM route, then prop. trading (if necessary)
Nevertheless, the posts here have been helpful.
It sounds like being a MM is like being a "one trick pony" (no disrespect to any MM that is reading this ... i'm just trying to understand the nature of the job) Prop. traders probably have better exit opportunities than MM do (for those that want to leave that is ... i agree with many posts that talk about going into MM then running your own prop. trading shop ... makes sense)
Reason I'm being incredibly curious is that I'm trying to break into the profession myself. After ungrad, I entered an analyst program in corporate finance at one of the bulge brackets (just completed three years of it! hellish, but well worth the lack of life ... great experiences) But i don't like it, and it doesn't excite me (model building, valuation analysis, roadshows, bank books, etc. just don't do it for me). So, I'm trying to learn as much as I can on trading .... unfortunately working my way on to our trading floor (at the BB) isn't as easy as I thought it'd be. But i find myself faced with many opportunities at many prop. shops. However, i'm more inclined to go the MM route, then prop. trading (if necessary)
Nevertheless, the posts here have been helpful.
99-
I was on the gov. desk at a BB and eventually migrated to a hedge fund. Like others, I got tired of the politics etc...
Currently I am taking some time off, trading my own account trying to determine my next move. Start a hedge fund?? Small trading firm??? Other??
I think you should point out to those seeking employment at IB's looking for the huge $, that compensation isn't what it once was and may not be for quite some time. I know several traders trading their own accounts, making comparable $ to what I made on a desk w/o all the b/s.
Just for clarification - I wasn't suggesting Silver trade on the floor of an exchange. Merely pointing out the contradiction to his dissatisfaction with daytrading and interest in trading in a futures pit (where the majority of traders are in fact "daytraders").
BTW - What is your general location?
I was on the gov. desk at a BB and eventually migrated to a hedge fund. Like others, I got tired of the politics etc...
Currently I am taking some time off, trading my own account trying to determine my next move. Start a hedge fund?? Small trading firm??? Other??
I think you should point out to those seeking employment at IB's looking for the huge $, that compensation isn't what it once was and may not be for quite some time. I know several traders trading their own accounts, making comparable $ to what I made on a desk w/o all the b/s.
Just for clarification - I wasn't suggesting Silver trade on the floor of an exchange. Merely pointing out the contradiction to his dissatisfaction with daytrading and interest in trading in a futures pit (where the majority of traders are in fact "daytraders").
BTW - What is your general location?
Originally posted by Bond Trader
99-
I was on the gov. desk at a BB and eventually migrated to a hedge fund. Like others, I got tired of the politics etc...
Currently I am taking some time off, trading my own account trying to determine my next move. Start a hedge fund?? Small trading firm??? Other??
I think you should point out to those seeking employment at IB's looking for the huge $, that compensation isn't what it once was and may not be for quite some time. I know several traders trading their own accounts, making comparable $ to what I made on a desk w/o all the b/s.
Just for clarification - I wasn't suggesting Silver trade on the floor of an exchange. Merely pointing out the contradiction to his dissatisfaction with daytrading and interest in trading in a futures pit (where the majority of traders are in fact "daytraders").
BTW - What is your general location?
Bond Trader,
You wrote,"I was on the gov. desk at a BB and eventually migrated to a hedge fund. Like others, I got tired of the politics etc... "
Gov't desk. That's cool. I remembered years ago during college when I interviewed at Citi's gov't bond desk out of fun(I already had offers at MER and GS by then). One of guy who interviewed was an ex-physicist from Cambridge University. Asked a few math related question and was pretty cool about it. The trader and salesman were just cooler since they were not as geeky and just like to talk market.
Anyhow, like you, I got tired and went on the buyside and was at couple of medium sized funds($1b-$30B). And now doing prop trading. I must ADMIT that prop trading is 100x(!!!) harder than my other jobs combined since there's no salary, and the intraday noise level is a lot higher. But I think in the LONG run, I'll be better off with this.
You wrote," Just for clarification - I wasn't suggesting Silver trade on the floor of an exchange. Merely pointing out the contradiction to his dissatisfaction with daytrading and interest in trading in a futures pit (where the majority of traders are in fact "daytraders")."
Yep. It's almost CONTRADICTORY, because pit traders are like the ULTIMATE daytraders for the most part. They are in and out in seconds even and has the execution edge. If he doesn't enjoy daytrading on the desk how would that be different than daytrading on the floor?
As to my whereabouts, I'm on the left coast(west coast). Got tired of the East Coast weather. I grew up in the west coast and went back east to a prominent school and worked at a major ib then went back to west coast and stayed since then.
We have very similar backgrounds. Cool. Tell me the progress of your hedge fund and stuff. And good luck with it.
good trading
-99
Originally posted by goldenarm
The trick is that a MM has to fill large institutional orders at the best volume weighted average price (VWAP) for the client. If the stock is strong for the day, this can be a challenge! Technicals and fundamentals DO play a big role in MM trading. You don't want to buy your 200K shares at the top of the stock's daily range if you intend to keep your customer for long.
Yes, MM has to beat the VWAP! That's why you see a lot of "shakeouts" on an intraday basis especially on the Naz when a stock drop 40-50cents then bounce right back up. It's because the MM is forcing the bid down to fill large institutional orders at an AVERAGE price.
But for the most part, I wouldn't say they need to know that much technicals/fundamentals. They are basically LIQUIDITY providers right? It's not like they are fund managers betting on retail or semi sector or whatever. They try to be neutral! Their earnings come from the bid and the ask! Sure, it helps a little to know what's going on. But they for the most part just put their capital at risk to earn the bid/ask and hedge any directional bet.
It might not be as evident in equities, but in other markets like fixed income and derivatives, MM do lots of hedging and just want to earn the bid/ask. In fact, that's why the Black-Scholes formula is so popular!
-99