Starting a graduate career in Trading....Help please!

[Airthrey Capital]

The term "buy" side comes from buyers of research (i.e fund mangers)

The term "sell" side comes from sellers of research (i.e brokers)

 

[binsley]

sell-side analyst is a research analyst who submits recommendations to fund managers/buy-side who 'unofficially' purchase that information (soft dollar commissions) through acting on the recommendations and executing through brokers of the sell-side analyst .

 

[binsley]

Ok, so this is my first post...hopefully in the right section!

I have previously graduted from King's College London in Biomedical Sciences , and have just passed my MSc in Management (as i didnt like my first degree).

I have always been told i have a business sense of mind etc etc which is why i done this MSc. Now i have been told by many friends etc that trading is a good (but hard) field to get into as a graduate. I must admit, i dont have very high UCAS points but they are not poor either (19 points). I only got a 2.2 in my first degree but have done really well in my MSc.

So now there a million sites on trading etc and i just found this forum. I want to know the very basics of what goes on etc etc (at a novice level) so that i can grasp some understanding of what goes on in the trading world. I know there are various devisions on trading but just wanted any advice on preferred sub sectors of trading.

Having only a basic financial background, it is proving to be hard to get any responses from any cover letters i have wrote etc, so just wanted sadvice on any suggestions. I know i could prove myself etc but i need to get some doors open in the first place......

Kindest regards, look foward to your comments

bet he's glad he came here!!

 

[wisestguy]

GJ ,

Very sorry , I do apologise . I made the classic mistake of not looking at the poster before replying , so I thought you were AM and made those comments as such . What a plonker I am.

you are absolutely right re : measuring bank and IB PT's returns ,since technically their risk capital would be the bank's paid up capital . That being the case the return to risk ratios would be appaling , and that's probably why they were not up to the mark for the MW series.

This was graphically shown up in the Baring's case , since in the worst case scenario , the bank's entire capital will really be at stake !

BTW , I would be interested if you could remind us what Lipshultz said on this .

Yes I mean by real traders - hedge funds , CTAs , successful individuals.


best regards.

 

[mauzj]

Hey guys,

Could I ask a slightly off topic question?

What would be the chance of a moderately successful graduate trader at a small prop firm getting into a big bank? From what I've read the two worlds seem totally different. As a small prop trader it's possible to make a few grand a day arbing a few lots here and there, but I'm not sure how such strategies would be viewed from a large bank's point of view.

Thanks,

Mauzj.

 

[binsley]

don't agree GJ on your point about arbing.
its well possible to do 'genuine' arbs at prop firms. why not? as long as you have a competitive price structure then there's no reason why you can't compete whether its dual listing pure arb, index arb, stat arb ...whatever. possibly risk arb might be a bit tricky or setting up a PT desk on your owns ambitious (!!) but the simple stuff is possible. How profitable it is is another question!! the expressions something like 'flogging a dead horse' i think!!
and Mauzj if you're making a few grand a day 'consistently' with what sounds like very small capital then most people interested in profit will be interested in you!! 500k a year translated to the big swinging size you'd be doing at an ib is very attractive.
whatever your take on hedge fund/ib/prop/living room decisions - as a new trader my advice would be to exposure yourself to as much talent as you can. For me that means a big hedge fund or an ib. when you've learnt from the best .. then trade from your armchair!!

just my opinion...

 

[binsley]

My mistake Binsley - I was tired and had my FX blinkers on ;-) Forgot this was a discussion in a general forum. I stick to my guns about pure FX arb being impossible outside a bank but am happy to bow to the greater knowledge of others re. other products (e.g. equities).

Apologies for the confusion

GJ ;-)

FX arb? i think you're right about that one - big swingers party only!! must be great to throw the size around those boys are used to?

 

[wisestguy]

>>I still feel there are some good traders working at the banks - people who could translate that ability to >>the CTA / hedge fund side of things with no trouble at all. I believe this because I know a few of them >>and have respect for the way they approach their trading.


I think that would be the exception . I am suspicious whether their skills really are transferable to the hedge/CTA arena, since bank trading as we have agreed is so mixed in with agency work , and is thus not pure trading .

also to facilitate the above hybrid trading , the risk tolerence of banks is so much higher and thus unacceptable to hedges etc , so a trader going from bank to hedge would have to make wholesale changes to his methodology .

the resultant form will usually be so different from the trader's original model , that his returns will be greatly reduced. just have a look at the IASG list , and you can see what happens when banks try to trade hedge style - they fail miserably , only 1 made the top 50 ! awful .

I have some experience on the reverse of this as I went from very successfull private trader to a prop. man for an institution.


>>But I do kind of agree that sometimes it's possible to hide a lack of trading talent if you work >>somewhere that sees very good flow.


not only possible but pre meditated . hear it from the man himself Lipshultz.

MW2 pp55-58 :

JS : is their ( banks ) profitability due to the advantage of earning the bid/ask spread on customer transactions ( brokering IOW ) or due to successful directional trading ( outright trading ).

BL: I read a study on the operations of Citibank , which is the largest and probably the most profitable currency trading bank in the world. they usually make between $300 -$400 m a year in their trading operations.

-he goes on to say that Citi have a basic a oligopoly on the forex markets and make huge amounts on customers fees through what they charge on spreads. And that is some countries , they double up as a central bank since these places don't have one. you can just calculate from this how huge the earnings are from customer fees.

then he says :

the study concludes that if Citi bank traded only for the bid/ask spread they would have made $600 million a year .

- alarm bells should start ringing now . 600m on pure market making and then only 300/400m with outright trades included ? let's see 600 profit that reduces to 400 , where's the other 200 m ?

errrr , mmmm , we all know what that was don't we : PURE TRADING LOSSES ! plain and simple.

JS : that would imply that they made a couple of hundred million dollars of losses on directional trading.

BL: PERSONALLY THAT'S WHAT I BELIEVE . he continues and says that Citi would try to justify the losses by claiming that without all this prop activity in the market , their customers would not have the liquidity to offload / hedge .

JS: that sounds like rationalisation ( making excuses )

if it were not for the bid/offer spread , would the banks be making money on their trading operations ?

BL : PROBABLY NOT IN THE CONVENTIONAL POSITION TRADING YOU ARE THINKING OF .

-he explains how the banks may then FRONT RUN their big clients . So , if ICI comes in to unload 1B worth of euros , they know the market will go down , and they just sell xxxm
Euros of their own money to the market BEFORE they take the clients order .

there is a built in advantage as the big order will shove the market your way , when you are already short the market . SB firms do this as well.

Banks are good in market making not pure trading.

 

[binsley]

It can be fun - or at times it can be terrifying. I once hit the wrong side by accident in about 100 million eurusd (these things happen from time to time - got out without it costing me too much except a freshly soild pair of pants).

but watching the arbers go at it is something else. With the big Fisher Price style EBS keypad they literally bang away like they're doing the 100 metres on the old track and field arcade game.

sounds like a lot of fun!! - hows business these days?

wisestguy - understnd the sentiment but i think you may be generalising a bit. some prop stuff is completely removed from client trading now for example. alsoi happen to know a hell of a lot of mega talented traders working in ibs and believe - they are making lots of money. i'm not advocating banks by the way - i just don't hold to the view that there is necessarily that much difference these days - it really depends on individual desks and largely to the head of the desk and how these ops are run and the people involved. ie not as a result of whether it happens to be under the guise of a bank or a hedge fund or a standalone prop. it does however make a difference if you have plenty of capital backing you up. there is no substitute to the experience you gain when you're trading size imo (but again this can be anywhere not nec a bank)

bottom line for me comes down to finding the right operation that suits your trading style/ambitions/personality/politics/lifestyle etc
no definitive answer as to whats best in general for everyone

 

[wisestguy]

>>understnd the sentiment but i think you may be generalising a bit. some prop stuff is completely >>removed from client trading now for example.

I have worked on the trading desk at a bank , and these " entirely seperated " traders are few and far between. it's has no bearing on the lack of ability of bank traders . a lousy trader will be lousy no matter where he sits.


>>alsoi happen to know a hell of a lot of mega talented traders working in ibs and believe - they are >>making lots of money. i'm not advocating banks by the way -

yes lots of it from market making not trading, and I know lots who have lost loads of money . it's all hearsay and proves nothing as to the alleged abilities of bank traders.

when a hedge fund is successful , it is verifiable from real sources like ratings agencies . when a bank trader is allegedly successful , it is from hearsay .


>>i just don't hold to the view that there is necessarily that much difference these days - it really depends >>on individual desks and largely to the head of the desk and how these ops are run and the people >>involved.


Are you saying that we are to believe you over one of the greatest traders ever and over verified rating agencies ? www.iasg.com

I think not.

And these days , with the forex market so huge , there is even MORE agency work not less.

views are fine but they have to be backed up by something substantial otherwise they are just personal fantasies and biases.


>>ie not as a result of whether it happens to be under the guise of a bank or a hedge fund or a >>standalone prop.


Please, there are fundamental differences between the structures of a bank v a hedge fund v an individual . scroll to find out.

so it matters a great deal , for the reasons aforesaid under what " guise " the institution comes.


>>it does however make a difference if you have plenty of capital backing you up. there is no substitute to >>the experience you gain when you're trading size imo (but again this can be anywhere not nec a bank)


That depends what you are mean . some contracts cannot take huge sizes , so learning frm a smaller organisation is better .


>>bottom line for me comes down to finding the right operation that suits your trading
>>style/ambitions/personality/politics/lifestyle etc


Not if we are talking about pure trading . then you want to find the best to learn from , and you can only KNOW who are the best from verifiable , credible sources ( like BL and iasg ) not from the hearsay
of IB fans .

if you want other thngs like learning how to make markets then banks and even SB firms are for you , but not pure trading which is what the guy asked originally.


>>no definitive answer as to whats best in general for everyone


Very misleading , you might as well say no definitive answer to what is a good trading and what is not .

Very clearly , there IS a definite answer , good trading is trading with the highest returns first and foremost . Other factors notwithstanding.

what it is not is CitiBank that LOSES millions on direct. trades .

what it is not is 3 lousy banks in a list of * 100 * hedge funds.

so I'm sorry , real trading demands real proof that someone/organisation is good , not fan mail.

 

[binsley]

just out of interest what do you define as 'pure' trading - about which the guy originally asked?
i've had another look - i don't see any specifics.

what's so bad about market making? its really not that easy you know. theres an element to mkt making in what a lot of the guys on this site do. ie spread trading, scalping etc its all the same thing - reading the market, feeling the liquidity etc

but anyway since you've read mkt wizards and found a rating agency website i bow to your expertise in judging the realtive merits of the various institutions this humble industry is made up of. as for me i simply don't have the knowledge to make a generalisation. i can only go on my own experience - so yes hearsay if you like. by the way in this business personal experience and hearsay is sometimes all you've got! where you gonna get your facts about prop operations? where you gonna get your info. about individual bank desk returns?

no desire to get into a meaningless discussion along the lines of banks suck / hedge funds rule.
but good luck anyway

 

[wisestguy]

>>Now they're desperately slashing spreads in order to try and grab these pockets of market share (be it >>traditional real money, corporate, hedge fund or whatever) to try and bolster their prop desks' >>knowledge base.


we are talking in circles here GJ . where's the evidence ? why are they not on the iasg list ? is it yet another mythical great bank trader who seems to have no provable record.


>>but I still stand by what I said about individual bank traders

exceptions don't disprove the rule so what is the point of this .


>>Sure some of them have to double up as market makers, but they tend to use their trading ability to >>bolster their market making / book running (as opposed to the opposite - just using a gigantic order >>book to make yourself look like a great prop trader which is of course easier).


no , I'm sorry as BL says any amount of MM will boost your profits , and disguise it as general trading . you don't make a market for free . it's either 1 function or the other , you can't do bits of both and call yourself a pure trader . that's BS in my book and BL's comments would support this.

>>So we seem to be sort of agreeing ;-)

I am not trying to convince you or anyone . it's neither here or there what you or I believe , we can all have our little " glamour " fantasies but what BL says about bank traders and what the iasg list shows will still be the reality .

if bank traders want to be the best , they will have to show it in black and white like the wizards , like the hedges , like the CTAs , and even individuals .

Relying on myth and hearsay of their fans will only result in their lies being blown out in the open by pains in the neck like me .

--------------------------


>>just out of interest what do you define as 'pure' trading - about which the guy originally asked?
>>i've had another look - i don't see any specifics.

outright directional trading only .


>>what's so bad about market making? its really not that easy you know.

nothing wrong per se , but it stinks when a bank tries to pass it off as outright trading .


>>theres an element to mkt making in what a lot of the guys on this site do. ie spread trading, scalping etc >>its all the same thing - reading the market, feeling the liquidity etc

I don't know about that , but it's off topic.


>>but anyway since you've read mkt wizards and found a rating agency website i bow to your expertise in >>judging the realtive merits of the various institutions this humble industry is made up of.


nothing humble about it at all . that's why any exhorbitant claims as made by banks must be able to be verified empirically , otherwise they are nothing but hotair.

and you'd be well advised to read the MW's , rather than listen to some banktrader.


>>by the way in this business personal experience and hearsay is sometimes all you've got! where you >>gonna get your facts about prop operations? where you gonna get your info. about individual bank desk >>returns?


And that is the WHOLE point , if a bank choses not to publish its accounts , it then CANNOT go around saying that they are the best traders in the world.

it's like me saying the same thing , you would all rightly demand proof . the same applies to banks unless you volunteer to fawn at them .


>>no desire to get into a meaningless discussion along the lines of banks suck / hedge funds rule.
>>but good luck anyway


nothing meaningless or lucky or hearsay about what Lipshultz says and what iasg says , what you want to believe is up to you.

 

[mauzj]

Fascinating Stuff!

Hey GJ,

Thanks for answering my query. I found your response very interesting.

What do you mean by "jobber"? And would you be able to describe in more detail about what the arbers do when they "bang away"? I can't discuss what I do in anymore detail, and will therefore understand if you don't want to give anything away, but the strategies I use are semi-automated and I don't bash any keys whatsoever!

Regards,

Mauzj.

P.S. Someone here mentioned SB firms... Be warned against arbing them as they're highly dishonourable and start cancelling bets after a few months.

 

[wisestguy]

>>>... Be warned against arbing them as they're highly dishonourable and start cancelling bets after a few months.


I see you have been introduced to the wondeful world of SB firms .

 

[HCAS]

Did anyone see the 100 tik spike in the CAC 40 yesterday afternoon... must have been a bank trader and his fat finger...

 

[wisestguy]

Whilst we are still on this subject .

I would like to ask those that have worked in banks and IBs and think they are so wonderful .

How come you are not there anymore ?

 

[mauzj]

SB firms are the scum of the earth! While I've only done paltry amounts on the financials, I used to arb the sports on a daily basis (with a firm that does both sports and financials). It was all going fine, easy money, until they started pulling the odd bet and claiming palpable errors. How is a client supposed if the 1st goal minute should be 30-33 rather than 34-36? If we thought the price was fair we'd be stupid to bet!

I used to work for a bank but left as I was in IT where there was little opportunity for advancement and the political games didn't interest me. Trading for a small firm is much more enjoyable though I can't say what it would be like trading for a bank.

 

[wisestguy]

SB firms are the scum of the earth! While I've only done paltry amounts on the financials, I used to arb the sports on a daily basis (with a firm that does both sports and financials). It was all going fine, easy money, until they started pulling the odd bet and claiming palpable errors. How is a client supposed if the 1st goal minute should be 30-33 rather than 34-36? If we thought the price was fair we'd be stupid to bet!

I used to work for a bank but left as I was in IT where there was little opportunity for advancement and the political games didn't interest me. Trading for a small firm is much more enjoyable though I can't say what it would be like trading for a bank.

Of course , they are the SOTE , they are bookies ! and they pull prices on financials too.

Do you ever bet on goal handicaps not goal spreads ?


you are right about the politics at banks or should that be w##ks , tell me about it , the only way to advance is to grease up to the right people . On top of that they put immense pressure ( non market related of course ) on you .

the trading side is even worse , you are under pressure to make money and on top of that you have the pressure of the scumish political games you have to play.