Prop trader vs. trader @ major IBs

There is a new book on the shelves called "House of Money" where they interview a few traders, including a prop trader at Goldman. It's pretty interesting and he goes into a little of the history of the prop group. From the early days where they were encouraged to take risk. Describes one meeting where the research department told the prop group that there may an opportunity in Spain, it was shot down because one of the traders was just in Spain and when he went out on the town there was nobody at the bars. Now it has progressed into much stricter risk management.

Another story that jumps out is when he this particular trader was talking with one of the new guys. The new guy was up $50 million and worried about his position. He advised him that if he was worried he should take the profit because it was very good for a newbie. He said he would in a second but if he did he would be down $50 million (liquidity!!)

There's a big time FI trader at Barclay's who has a PHD in psychology and likes to hire people with backgrounds outside math (athletes, musicians, etc.)

What I really enjoyed was that almost all of the interviewie's lost huge money at some point in their careers, plus $100 million at some points by doing the same stuff that gets the small timer, hanging on to a loser, moving stop loss, etc. Obviously these guys were able to take the loss, move on, and make enough to cover the loss and then some.
 
I know it`s easy to look down on the prop traders @ places like Schonfeld etc. but the truth of the matter is most ( 60%) are consistently profitable month after month after month.At least @ my firm.
In late `99 i approached a firm here in No. Jersey,at the time i was trading my own options & futures account,the head trader there was an options trader as well....an MIT mathmatician that focused exclusively on probabilities....needless to say he looked at my track record & took an immediate liking to me.Probably more so because we started discussing stategies like straddles,strangles & butterflies, so they took me on.
Some really good traders there that plunged consistent 20K to 60K monthly returns.I learned alot from them but the most important thing i learned was that i was`nt a stock trader.Basically their software was used to trade my own futures account,which they allowed me to do.....eventhough they gave 1.2m to play with i`d only be long or short 2 to 300 shares of common buti`d be long/short with 20 to30 cars on the ES .....scaling in & out & they`d wonder why i did`nt capitalize on the move.Being that i`m brutally honest,i told them the truth & had a laugh.this went on for almost 2 years.Great experience & would`nt change it for the world.I was fortunate enough to be placed at the top desk with the top traders.They even payed me out on months where i` was`nt net profitable in my firm account.Very rare for that to happen.My last 6 months there i sat next to a former Denver Broncos OLB.....was great to hear what really goes on behind the scenes of the NFL.everyday is a learning experience in this game & a "prop" firm is a great way to start so don`t think it is beneath you.You will need a 7 & 63,though & most firms sponser you.........good luck.
Steve
 
Quote from Batman28:

hey listen, BRO. firstly, im not a trader. I've said that in a good few posts. BTW, dont assume im 28 because of my id. I'm actually still a student. i do want to be a trader. and i bet i know more about trading & the markets than you do? huh? but maybe you're a better trader tho.

now regarding trading sir. I gave an outline of the difference between traders at IBs. i assume the guy who asked the question alreday knew about prop houses ..

i gave a clear outline of different traders at banks, as he assumed theyr all flow traders.

now you come out of no where naggin at me i don't know anything about prop trading? WHAT THE ?

anyways, whatever u ment, you didn't contribute to the thread.

let me tel u most big prop boys at banks arnt trend following peanuts otherwise theyll short ur little margin in seconds. although more recently we're seeing more hedge-fund-like teams set up. anyways in general, props are not all identical as prop-house traders, and they dont scalp with millions. other IB traders r solid hard workers.

anyways im not wasting my time on this any further.

have a nice day.
More...

Batman,

welcome to the threads....

Lesson 101, no need to repeat that, you just learned it...

Lesson 102, doesn't pay to argue with someone with over 1,000 posts to his name. Steve T. has weighed in on many a complex subject and held sway with the best of us.

Lesson 201, this forum benefits from all traders, not just the successful ones.

Welcome....

Uh, so what B School are you in, and what types (names) of the Business classes have you attended?
 
PROP TRADERS at major trading firms make the most money by far compared to all the deals/mergers/arbs/business type.


If you understand goldman, you know they make around 30-40% [disproportional vs employees] their revenue , use to be higher in the 90s from prop trading, not from their M/A , acquisitions etc. Probably around a B in 93 before they blewup. Many partners/employees from other departments all wanted to move to the PROP traading department mainly because of the OBSCENE profits being pulled down by the traders.

A Partner at goldman would have to keep their money invested in the firm for a long long time, while a PROP gets their 2,3,5,10 million bonus each year and not care.

They do it with one thing everybody on this board don't have:

Order flow info/Other legal knowledge. (the investment trading firms)

Not all of them trade with that though, But a whole lot do.
<b>
This is the only difference between a
MAJOR IB PROP (LEH,GS)and a PROP SHOP (GENESIS/BRIGHT).
</b>
Prop shop needs to rely on pure skill, while major ib prop shops have lots of infosupport from their other depts + skills.
--------------------------------------------------

I was surprised when I heard this information,
but the simple fact is still simple in life.

Take the risk make the profits.
Theres low risk in doing a M&A deal, In fact they have to compete to get the business with other M&A banks. Compettion = low margin. Low margin = Low profits (for them)

Prop trading = 100% risk 100% profits.
 
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