What is the traditional course of study for a career trader?
- Thread starter kmiklas
- Start date
I think the word "trader" means a lot of different things to different people, so while you're asking what you think is a straightforward question you'll get a lot of different answers because the people answering are all thinking of a different position.
For example, to be specific hedge funds are one entity that make a number of directional bets on markets. You enter the hedge fund business as an analyst out of undergrad, generally with a very technical degree like match, stats, electrical engineering... To go direct to a buy side job like this you likely needed to graduate at the top of your class from a top 10 engineering/math school, i.e. MIT, Princeton, Cal, Stanford... Even then the acceptance rate is very low. Alternately you can go to a sell-side job at an investment bank, a slightly less desirable job but requiring basically the same prerequisites. After 3 or 4 years there you try to move over the the buy side. Finally, you can get an MBA from one of 5 or 6 schools (Stanford, Harvard, Wharton, Booth, maybe Columbia and a couple of others) after getting the technical undergrad and 5 years or so of work experience, get a buy-side internship between the two years, and get hired as an associate at a hedge fund if you didn't have any previous buy-side experience. Again uber competitive to get the job in addition to what you had to do to be accepted to the school and get the internship. In all those cases, you're not given a lump of capital and told to go forth and do good things. The fund will have an investment thesis, you will research and make recommendations based on this thesis. If it's an HFT firm it will be slightly different as you'll be designing algos, but again based on the thesis of the firm. An investment committee will look at your recommendations and use them or not. Eventually you'll be on this committee.
In all cases base comp is high but the price you pay is high as well, expect 80 hour weeks doing a bunch of crappy work with much of your comp tied up in a bonus earned for the previous year but not paid until the following June or July and only if you're still there then. A very high proportion of the people who go this route come to the realization somewhere along the way that money isn't nearly as important as they thought it was and move on to something else.
For example, to be specific hedge funds are one entity that make a number of directional bets on markets. You enter the hedge fund business as an analyst out of undergrad, generally with a very technical degree like match, stats, electrical engineering... To go direct to a buy side job like this you likely needed to graduate at the top of your class from a top 10 engineering/math school, i.e. MIT, Princeton, Cal, Stanford... Even then the acceptance rate is very low. Alternately you can go to a sell-side job at an investment bank, a slightly less desirable job but requiring basically the same prerequisites. After 3 or 4 years there you try to move over the the buy side. Finally, you can get an MBA from one of 5 or 6 schools (Stanford, Harvard, Wharton, Booth, maybe Columbia and a couple of others) after getting the technical undergrad and 5 years or so of work experience, get a buy-side internship between the two years, and get hired as an associate at a hedge fund if you didn't have any previous buy-side experience. Again uber competitive to get the job in addition to what you had to do to be accepted to the school and get the internship. In all those cases, you're not given a lump of capital and told to go forth and do good things. The fund will have an investment thesis, you will research and make recommendations based on this thesis. If it's an HFT firm it will be slightly different as you'll be designing algos, but again based on the thesis of the firm. An investment committee will look at your recommendations and use them or not. Eventually you'll be on this committee.
In all cases base comp is high but the price you pay is high as well, expect 80 hour weeks doing a bunch of crappy work with much of your comp tied up in a bonus earned for the previous year but not paid until the following June or July and only if you're still there then. A very high proportion of the people who go this route come to the realization somewhere along the way that money isn't nearly as important as they thought it was and move on to something else.
L
lovethetrade
That's correct Keith, there's different types of traders.
There's prop traders that are simply click traders, I.e trade using the depth of market (DOM).
There's traders that execute trades on behalf of investment portfolios.
There's trader/analysts
There's system traders, high frequency traders that work for HFT firms and medium frequency traders that spend all day coding/refining their strategies in C++ and/or Python.
There's hedge traders that hedge physical delivery of commodities. (but may also speculative trade)
Just to name a few.
Edit: There's prop traders that trade for the investment banks
There's floor traders also
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An edit to the edit, after the Volker Rule investment banks aren't allowed to prop trade, so you won't get hired as a prop trader by an investment bank. You may take some directional bets when hedging a bespoke product you produce for a client or when market making, but you're certainly not going to be compensated based on your trading performance at an investment bank post Volker.
Hi G, it's been a while. Are you suggesting that we are already at a place where coding and programming are the drivers and not just the tools? While I would agree that we are headed there eventually, I would like to think that the faith of the independent trader has not been sealed just yet. Though, I've been a little out of touch with your part of the industry lately.
I would offer an alternative path with odds that are, IMO, in par with those of the guy who can actually afford MIT, Cornell or has done something so impressive so as to have the tab picked up for them.
Study math/stats in high school/college -> get a job related to your degree and be financially responsible -> trade on the side until you are relatively sure that you have alpha not luck -> push leverage to the max while such alpha exists. Clearly, it would probably take a little longer but an Ivy League school is simply out of reach for many.
If you really want to retire as a multi-millionaire by age 42 STAY away from the markets. A quick look at statistics will tell you that FAR MORE millionaires are made by any number of businesses rather than trading. Heck, even a small cleaning business has a better chance of making its owners wealthy than the financial markets.
No doubt, trading and the markets are a blast and great fun and challenge BUT
Trade AFTER YOU make your money, NOT BEFORE!! Heed my words kids
No doubt, trading and the markets are a blast and great fun and challenge BUT
Trade AFTER YOU make your money, NOT BEFORE!! Heed my words kids
That's what Marketsurfer told many times. His profile is dead but he still is "gezunt" I think.
As much as I hate to agree with you, because I'm pro-markets/trading...I would have to agree
If you want to retire a Millionaire...generally speaking...Slow and Steady wins the race, to that goal. -- Not crazy, or bold, ambitious ways