Quote from Batman28:
hello,
prop traders USE the banks money to trade. They have a buy-low sell-high strategy.
sale-traders - as theyr known (not sales people) execute customer trades, and aim to make profit on the spreads.
prop tradres are typicaly the big dogs. theyr kinda oldish.. theyr the dadys. they make the most money - and lose most too. they get paid the most too.. some bond traders make millions a year.
they dont use sophisticated technology. actually if u havent met one, ud laugh how 'normal' they are.. nothing out of this world about them.. they use the same ideas as everyone else but with more expereince and gut feelings.. i met some big dawg couple of weeks ago, he didnt even look at technicals. he was weird though, he told us how the market speaks to him like a person, and he made himself and hes traders make notes on what the market was telling them every day lol he was nuts.
but generally, props buy low, sell high. no shorting.
having said that, recently banks have started seting up hedge-fund like teams..like GS and MS.
see below a recent news:
"April 13, 2006 -- Morgan Stanley has created an all-star team of bond traders to wager its own cash in the market, a move that is raising eyebrows of its crucial hedge-fund clients.
Bond executives at Morgan told The Post the change will put clients' needs first, rather than focus on longer-term trades for the investment bank's own account, which is "kind of opposed to the idea of customer business," according to one trader.
All told, about 30 of Morgan's asset-backed bond traders, analysts and technology specialists are moving to a different floor at the firm's headquarters.
A senior Morgan executive told The Post that feedback from mutual and pension funds "has been excellent. They are always concerned about us being distracted or putting ourselves first."
However, he acknowledged that hedge funds "might have some concerns."
The chief investment officer at a $5 billion Midtown hedge fund called the arrangement "a hedge fund with a lower cost of capital, pure and simple."
Morgan, he said, "will compete with us for product, and their best traders are off the desk."
The move comes as Wall Street's biggest firms have evolved into something close to hedge funds. They are using massive capital bases and access to cheap capital to place huge bets for their own accounts.
Proprietary trading might be the last great gold rush on Wall Street. Morgan's primary competitor, Goldman Sachs, earned $16.3 billion in net revenue trading for its own account last year.
The hedge-fund executive said fighting the trend toward greater prop trading was useless.
"What's the difference between having a separate [prop] group versus a Goldman that takes the same kinds of risks on the various trading desks?" the executive asked. "
