Does prop trading kill your banking career?

I am currently working in asset managment in a large IB. Am thinking about going into prop trading firm. I am willing to take the financial risk and have no food for 6 months. But when I was at the group interview, they said prop trading kills all hope for getting back in to banks.

Does it really do that much damage to your CV? Or is it only for getting into trading in IBs. Would my CV go straight to the bin if I try to get back into asset management?

Thanks,
Matt

I'm also wondering the same thing...any help?

If your going into prop trading already thinking about getting back into banking later I suggest you don't make the plunge in the first place. Having said that I can't think it would make any difference as long as you could explain a) why you left and b) why you failed in the prop trading firm and were trying to get back in to IBanking at interview. The second question is clearly the more difficult here....

The scalping you normally learn at prop houses isn't scalable, ie you can't trade that with larger amounts of money.

And as old horses have dificulties learning new tricks...

There you go.

Just don't declare it on your CV? I imagine you'll find out quick enough whether you're suited for prop trading and you can always be imaginative to give a reason for the 6 month gap in your CV if requiired.

My friend now works as a Securities Lending trader at HSBC and spent 1 year at an arcade prior to that. However, he did have a 1st class in Economics from a Redbrick and he went in as one of the rookies where his small amount of trading experience helped him. I do, however, think he is an exception.

If you want to go the prop route, find a longer-term intraday strategy rather than scalping and do that for a few years. Then take your track record to a hedgie where they are likely to give you a go if they think you are good enough.

Banks do have prop traders, but they have normally come through the usual route of sitting on a desk running clients orders through. Eventually, they have the responsibility of their own book and the bank will size them up according to their success. Therefore, if you are good enough trading prop, it may still be possible to get back into banking - keep your contacts is my advice there.

I have to admit, I asked this question before I fully understood the difference between prop trading and what the IBs do. Have to say though, now that I do know I can see the problems and pitfalls. Actually, my new conclusion based on my own interests is: if I get into a prop, why would I want to go to an IB?

Thanks for answers though. They've confirmed my suspicions.

Most of my friends of whom I did a graduate scheme in 2004 are now at IB, doing middle office credit swaps. The reason:
A) They spoofed their CV around to make the role appear as "risk management" as possible;
B) They mentioned products which are common in IB that they dealt with on a day-to-day basis whilst in the prop firm (this means doing research on the products); and
C) Have good university background and something to fall back on. IB do NOT hire non-university graduates for any meaningful role.

Therefore, it is very possible and doable but one needs to be creative about it.

but can anyone pls explain to me why IB actually dislike independent prop or market makers when they have their own prop traders too??

I would imagine the experience would b very related n unique, compare to say someone trying to get in from a middle office experience

NNIT said:

but can anyone pls explain to me why IB actually dislike independent prop or market makers when they have their own prop traders too??

I would imagine the experience would b very related n unique, compare to say someone trying to get in from a middle office experience

Click to expand...

A trader from a prop-shop would be better then from a middle office spot, but it's still not a perfect fit to IBs. Well..those IBs that are left anyway

Ok, shouldn't laugh, it's one less place for me to work in the future.

Anyway, Prop shops tend to be shorter term stuff. E.g. day trading. You start work, and you immediately start you prop-trading training and within a couple of months you're trading, whether it be market making or speculating.

IBs have two types of traders, 1) the messenger boys. They basically go on market and buy stuff at the instruction of their clients. Not really trading, basically go and fetch. If you do well at this, after a few you you become 2) a prop trader. At this point you do similar stuff to prop-shops, but you're put on a short leash for a while with a very limited bankroll, and given the current situation, probably given very low limits. Also, I hear quite a few banks are getting rid of their prop desks.

Anyway..in short their investment horizons and risk preferences are quite different. So I think it's a case of IBs wanting a different skill-set and risk profile to prop-trading firms.

Although..this is just what I've pieced together from these forums. I haven't actually spoken to any IB people regarding this.

yuapanda thx to share ur insights.

but how valuable do you guys think the experiences at a prop-house for a hedge fund career??

Not sure. I can't imagine it would be amazingly good since HFs go around making deals. Buying stock is only a part, and they buy for the purposes of making a deal, not for trading profits. At least, not that I've heard.

But then, with the current problems who knows in what form hedge funds will survive. Who knows, maybe one day Hedge funds will actually..you know...hedge against risk.

hedge funds are clearly incorrectly named-it's all about making $$$, not capital preservation.

as for prop shop to IB it tends to be more of a scalability and term thing. plus i think locals generally have the rep of ex-floor barrow boys. not that i am agreeing with this in any way.

you tend to find the top hedge fund honchos come from the big trading IB's like GS or CS.

It depends on the Hedge fund - somewhere like TCI is strongly long-term fundamentals driven and, therefore, forces or prevents mergers and aquisitions, shakes the board up and invests or shorts based on a companies strength or weakness etc. However, some hedge funds don't like overnight risk and are pure trading funds where they, essentially, trade like a prop firm.

The name 'Hedge Fund' probably isn't that appropriate for a lot of Hedge Funds these days, as one firm is as different as the next. Not all are market neutral.

NNIT said:

but can anyone pls explain to me why IB actually dislike independent prop or market makers when they have their own prop traders too??

Click to expand...

Because most of the prop trading taught at prop firms is not scalable, does not work with larger amounts of money.

If you trade for a hedge fund a style that has you shooting for 1 pip / trade just doesn't make sense as it won't work if they give you a hundred mill or whatever to trade.

Plus there are hedge funds out there that are purely fundamental-driven, so they have a buy and hold mentality instead of pure short term trading

If you make money at a prop firm you have no reason to go to work at a hedge fund..

If you can't make maoney prop then how much value does the experience add to your cv?