Entirely disagree. You are looking at scaling simply as increasing position size. You can scale in many more ways than that.
What's the difference between trader and portfolio manager?
- Thread starter ezbentley
- Start date
Entirely disagree. You are looking at scaling simply as increasing position size. You can scale in many more ways than that.
It's not just personal freedom, but creative freedom at work. The number of firms that will let you make your own approach and knock up a strategy from scratch, then trade it, is pretty low.
Another drawback is when you have a great year, and earn no bonus because the group lost a lot, had a lawsuit, closed down etc (seen all 3 happen). There's also the opportunity cost of giving up your solo trading income - if you make a lot in a typical year, then it is going to require a pretty high salary to offset that. Most firms won't pay $500k base to a new hire.
The financial risk of going solo, if you have an edge, is minimal. Your worst case is your edges disappear, you can't find a new one, and have to re-enter the jobs market. I think the biggest downside of going solo is the problem of being in a bit of a bubble - the lack of competition, it's hard to measure your performance against others, harder to exchange ideas etc. That is the biggest downside I have found.
IMO the best arrangement is a group of 2 or 3 people collaborating. That avoids all the office politics, pay/performance issues etc, but you get the benefit of idea exchange, motivation etc that comes from being around other smart people who are hungry for success and passionate about what they do.
I have a somewhat contrary, and somewhat unorthodox view on this. "Traders", in the sense that we usually think of him, is forged in market inefficiencies. He makes his buck by having better information, quicker access to goods and products, and better analysis than others. To me, the Rothschilds trading govn't bonds on the news of waterloo victory getting to them via their private network faster than the news is the arch-typical trade.
In a highly liquid and visible market, what's the point? Whatever tradeable micro structure is demonstrable so small that PhDs spent years arguing whether they exist. In the CDS market back in 06, there was NEVER a single doubt in anyone's mind there it was full of inefficiencies to trade.
I personally don't believe there's any viable inefficiencies to trade in a liquid market. So to take position, you need to hold fundamental or macro views to trade longer term views. But then, the vast majority of "traders" here don't have analytical skills, background knowledge, and tools to do that.
In a highly liquid and visible market, what's the point? Whatever tradeable micro structure is demonstrable so small that PhDs spent years arguing whether they exist. In the CDS market back in 06, there was NEVER a single doubt in anyone's mind there it was full of inefficiencies to trade.
I personally don't believe there's any viable inefficiencies to trade in a liquid market. So to take position, you need to hold fundamental or macro views to trade longer term views. But then, the vast majority of "traders" here don't have analytical skills, background knowledge, and tools to do that.
Global macro speculators and deep value investors can trade every asset in the world. A scalper can profitably trade any non-efficient market in the world. An options market maker can trade every options market in the world.
There are strategies which are not particularly dependent on specific knowledge of the individual market in question.
Well, a successful options market maker should be able to do well in other markets - by virtue of him being a smart guy with experiences and can pick up whatever specific knowledge needed.
But, trying to use whatever options market making skills he learned there to run, say, a synthetic cdo book (which is quite similar, in a lot of ways), won't fly at all.
My disagreement with you is that I don't believe there's a universality of "strategy". Rather, there's a universality of analytical ability and background knowledge. If it seems like I'm splitting hair, I probably am.
But, trying to use whatever options market making skills he learned there to run, say, a synthetic cdo book (which is quite similar, in a lot of ways), won't fly at all.
My disagreement with you is that I don't believe there's a universality of "strategy". Rather, there's a universality of analytical ability and background knowledge. If it seems like I'm splitting hair, I probably am.
You're just very funny and simplistic in your limited thinking.
Be happy.
Good thread, probably a must read for all those "What should I do with my life" threads that appear on ET regularly.
Nothing sj says is untrue. But what the vast majority of institutional people don't understand (because they don't come into contact with it) is the opportunity set that exists at the small capital base level.
There are day traders who make a very good living, better than most analysts beavering away at funds today. And there are individual traders doing all kinds of bizarre things in the markets. Some of these people have accounts so gigantic that they might be classed as institutional, but the manner they operate in is still the same : one guy behind a desk, and that's it. Some buy foreign sovereign debt, some do risk arbitrage, some do quantitative work. When you only have one account to service, your own, you simply don't need all the overheads that come with an institution. All you need is an information network and time to think about what you are doing.
This is the very strange wonderland inhabited by long term full time profitable individual traders. There aren't many of course, but they are not fictional, and they are usually very interesting people. No press report on them, they don't appear on tv and few people bump into them in casual life. But they do exist.
Nothing sj says is untrue. But what the vast majority of institutional people don't understand (because they don't come into contact with it) is the opportunity set that exists at the small capital base level.
There are day traders who make a very good living, better than most analysts beavering away at funds today. And there are individual traders doing all kinds of bizarre things in the markets. Some of these people have accounts so gigantic that they might be classed as institutional, but the manner they operate in is still the same : one guy behind a desk, and that's it. Some buy foreign sovereign debt, some do risk arbitrage, some do quantitative work. When you only have one account to service, your own, you simply don't need all the overheads that come with an institution. All you need is an information network and time to think about what you are doing.
This is the very strange wonderland inhabited by long term full time profitable individual traders. There aren't many of course, but they are not fictional, and they are usually very interesting people. No press report on them, they don't appear on tv and few people bump into them in casual life. But they do exist.
This might be the case. But who are these, forgive me, mythical people? I ask this, because for all the years I've read ET on and off - at least since 2001 - there hasn't really been a single example. There are some magnificent frauds - I think one posted in this thread a few posts up - but not really one credible candidate. Surely, there are a few who are making a living - but from what has been said, not a great living by any stretch of imagination. My position in this thread that with the amount of hard work and sweat they put into it, they could have probably made far more money in another trade (no pun intended).
I don't mean to be confrontational, but will you tell us who these mythical successes are? And what are the opportunities, beyond a isolated and quick to disappear statistical anomalies, for a small guy in some of the worlds' most liquid and efficient markets.
I don't mean to be confrontational, but will you tell us who these mythical successes are? And what are the opportunities, beyond a isolated and quick to disappear statistical anomalies, for a small guy in some of the worlds' most liquid and efficient markets.