Signalcalc
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I guess the answer may be no. If you have worked as a market maker now retail trader then didn't you learn a thing or two about your customers, the ones that presumably supplied you with a living?
Best Thread ASK ME ANYTHING: Hoping to Help!
I guess the answer may be no. If you have worked as a market maker now retail trader then didn't you learn a thing or two about your customers, the ones that presumably supplied you with a living?
Do i know the type of trader I target?
We dont target individual traders. We target clients: CBs, HFs, AMs, LDI, Banks, HNW individuals, FOs.
Do I know the personality of my clients? I met most of them and some I have an understanding of their trading.
Have I answered the question? Still not 100% clear on it!
Signalcalc
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You have to bear in mind as a beginner I don't know what half those abbreviations stand for [emoji38]
I think my question has been answered in so far as I now understand that you work for clients money. And I think my questions are just to help my understanding of the mindset and approach of a professional trader.
Maybe that is also a reason why you've started this thread: to provide yourself with an understanding of some kind?
How many layers of governance are between you and your clients? At what level in the hierarchy do you work at, are you a decision maker of some kind?
Mr. Charts
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"CBs, HFs, AMs, LDI, Banks, HNW individuals, FOs. "
Cross Borders
Hedge Funds
Don't know what that means
Liability Driven Investments
Banks !
High Net Worth Individuals
Follow ons
No doubt the OP will correct me if I'm wrong and explain what AMs are
Cross Borders
Hedge Funds
Don't know what that means
Liability Driven Investments
Banks !
High Net Worth Individuals
Follow ons
No doubt the OP will correct me if I'm wrong and explain what AMs are
Sorry, i was replying on my phone earlier. Let me type out properly:
Central Banks
Hedge Funds
Asset Managers aka Real money
Liability driven investors
High net worth individuals
Family Offices
If you need further clarity, google has plenty of info or feel free to ask specifics here and I'll answer.
To clarify; A market maker (in OTC (over the counter) markets at least) trades on principal for their employer not for their clients. They are professional traders. They are decision makers. All there is between a market maker and his clients is a salesperson (if anything). A market maker will trade with anyone that wants to trade (assuming docs are in place etc.) but the vast majority will come within the categories of client I have listed above. He is taking the other side of their trade. He is at risk.
I think you may be thinking of a broker. A broker trades with the same clients as listed above but does not take risk/trade as principal for their firm. They execute trades with market makers on behalf of their clients.
When you look at a 'market' what you are really looking at is a collection of prices from various market makers. Nowadays most of the prices are managed by computers to at least some extent. The traders that build and manage those systems are still market makers/traders.
Market making is very different to retail trading but is extremely interesting and is well worth googling for a while/ following up with me on here as a large proportion of trading jobs available these days are market making jobs in tech firms.
A lot of the top hedge funds these days make the bulk of their money making markets, not taking directional bets on things. It's a huge field.
I have worked as a market maker for the vast majority of my career.
dont understand this im afraid?
D
Dowser
I would be interested too, thanks
thanks for the interest. I think it's definitely a topic worthy of some further detail.
A professional is someone that gets paid to do something.
A professional trader is paid to trade markets.
That payment can be purely salary (rare), salary and bonus (almost all reputable, legit firms), or 100% bonus/pnl split (the majority of bucket shops/less reputable firms).
I want to focus on reputable firms where traders make a salary. These traders typically earn the vast majority of their income as bonus/pnl split but they do earn some sort of salary (not just expenses). If you want to trade for a living, this is where you should be aiming for unless you have access to a big pool of capital that you can trade for yourself. Even then, you’d be better off risking someone else’s capital for a while…
I know that deep down everyone knows this already but just to reiterate: If any company or individual wants any form of payment from you before they will give you a ‘job’ whether salaried or not. Proceed with extreme caution. That’s not how employment works.
So looking at types of reputable firms that you could work as a trader you have the options of:
- Banks
o Prop trading
o Market making
o Treasury management
- Hedge Funds
o Execution trader
o Portfolio manager
o Systematic trading
o High frequency trading/market making
- Asset managers/Pension funds/Liability driven Investment firms
o Execution trader
o Portfolio manager
- Family offices
o Execution trader
o Portfolio manager
- Central Banks
o Execution trader
o Portfolio manager
- Proprietary trading firms
o High frequency trading/market making
o Systematic/algorithmic trading
o Portfolio manager
o Execution trader
- Wealth management/Financial advisory?
I’ll post more details on these roles asap.
A professional is someone that gets paid to do something.
A professional trader is paid to trade markets.
That payment can be purely salary (rare), salary and bonus (almost all reputable, legit firms), or 100% bonus/pnl split (the majority of bucket shops/less reputable firms).
I want to focus on reputable firms where traders make a salary. These traders typically earn the vast majority of their income as bonus/pnl split but they do earn some sort of salary (not just expenses). If you want to trade for a living, this is where you should be aiming for unless you have access to a big pool of capital that you can trade for yourself. Even then, you’d be better off risking someone else’s capital for a while…
I know that deep down everyone knows this already but just to reiterate: If any company or individual wants any form of payment from you before they will give you a ‘job’ whether salaried or not. Proceed with extreme caution. That’s not how employment works.
So looking at types of reputable firms that you could work as a trader you have the options of:
- Banks
o Prop trading
o Market making
o Treasury management
- Hedge Funds
o Execution trader
o Portfolio manager
o Systematic trading
o High frequency trading/market making
- Asset managers/Pension funds/Liability driven Investment firms
o Execution trader
o Portfolio manager
- Family offices
o Execution trader
o Portfolio manager
- Central Banks
o Execution trader
o Portfolio manager
- Proprietary trading firms
o High frequency trading/market making
o Systematic/algorithmic trading
o Portfolio manager
o Execution trader
- Wealth management/Financial advisory?
I’ll post more details on these roles asap.
alphazetatrader
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Hello would you be open to being a mentor for a person? I am a teenager looking to seriously get into stock trading and/or forex. I realise they are completely different things but I have a knowledge in both and in finance in general. I have a basic knowledge of stock trading and for forex as well. I would like a MENTOR to guide and teach me how to trade effectively because currently, I feel like I am a headless chicken running around the virtual stock exchange.
Unfortunately, I am not able to pay since I have no money of my own but for the philanthropists out there
. Seriously, I really need some help to help me realise my dream, whatever my mentor would want me to do (i.e. read, research, etc.) I'll be 110% willing to do it.
Unfortunately, I am not able to pay since I have no money of my own but for the philanthropists out there
. Seriously, I really need some help to help me realise my dream, whatever my mentor would want me to do (i.e. read, research, etc.) I'll be 110% willing to do it.sorry, was a pretty hectic week last week with the move in rates markets. Haven't had a chance to develop the prior post until now.
Let's start with banks. If you're a trader in a bank these days you're likely a market maker. There are a few prop desks within banks, particularly smaller regional banks, but the major US and European banks do not have specific prop trading desks as you would have seen prior to the crisis.
When you as a retail trader decide that you think EURUSD is going higher or that you'd like to sell your AAPL shares for a tidy profit you have a number of options open to you. You can go to your local foreign exchange bureau and exchange your US dollars for some Euros. You could go online and trade a derivative of the price like making a spread bet. You could also phone up your stock broker and ask them to sell your shares for you.
In each and every scenario you are given a price at which you can execute your trade. You are a price TAKER. You cannot trade with any of these people without them first giving you a price to trade on. You can leave an order but it's not until THEIR price reaches your order level that you can trade. They are price MAKERS.
That's fine if you are an average retail guy with a relatively small amount to transact in but if you are a hedge fund portfolio manager with $1bn under management and you decide you want to sell your AAPL holdings then you're going to need a different type of price maker and that's when you phone up your sales contact at an investment bank. Same goes for all other institutional money managers (see prior thread posts for a list of investment bank clients).
So you're a trader in a bank and one of your sales team shouts over to you "i need a price in $25mm AAPL shares". Now it's all you. You have full discretion on that price. Using all the information you have available to you; the interbank market, level of stock indices, earnings, research, time of day, price action, twitter chat, and anything else you can dream up, you are obliged to make a price for that client. Something as liquid as AAPL stock means that the client has a very good idea of where the price should be but to make sure they are getting a fair price they may ask several banks at the same time. The best price will win the trade. If you are bullish AAPL stock then maybe you will try and bid higher than what you expect your competitors to bid. You have full control of that price and can make it as narrow or as wide as you want. Bear in mind that if you want them to come back and do business with you in the future and keep your sales off your back then you should keep those bid/offer spreads nice and tight...
So lets say you give the highest bid. The trade is done. Suddenly you're long $25mm AAPL shares. Now you have options. Many options. And this is why even though you're not on a proprietary trading desk, you're still a discretionary trader. Of course you can just immediately try and sell the shares to someone else in the interbank market directly. If you sell them for more than you paid you make a profit, if not you make a loss. Alternatively you could sell some Samsung shares as you think AAPL is cheap on a relative basis but you're more cautious on equities in general. You could buy some S&P puts so that if the markets go risk off your losses on your AAPL shares will (likely) be offset by gains in your puts. You can just hold on to the position and wait for prices to move higher. Maybe they do, maybe they don't. Maybe you stop out later in the day. Maybe your sales team finds a buyer of AAPL stock that you can sell to? So many options available.
Let's assume that all goes well and you still have a job the following day. You come in to work around 6am as usual and find that asian equity indices have been trading heavily in the red and there's some concern about global growth. You're a trader, a price maker. You're going to be expected to make prices to your clients all day. So in anticipation of expected selling flows, you decide to sell some shares, or S&P futures or FTSE100 calls. Much as a proprietary trader might. And as the day goes on you may or may not be asked to bid for client's shares and the market may or may not recover. The point is, you have taken a position based on the information available to you and you will make/lose money as a consequence.
This is how market making works across all asset classes whether it be equities, FX, commodities, or fixed income (bonds). At least it was. Nowadays more and more assets are moving towards automated market making. Banks themselves have trading algorithms that automatically price enquiries from their clients so now instead of the sales person coming for a price you might have them click electronically 'sell $25mm AAPL' and they will receive an automated bid that they can then trade on.
Those algorithms are built by quant teams and managed by e-traders. They still manage risk but a lot of the pricing is done for them. They are much less discretionary and tend to be more conservative in their hedging as a lot of the risk is also managed automatically.
More and more products are moving to this model and so manual traders are left with less liquid, more complex, or large outsized trades to manage. Maybe eventually even those will be lost to the machines.
I'll get to the next on the list ASAP. Hope that gives some insight, let me know if any questions.
Let's start with banks. If you're a trader in a bank these days you're likely a market maker. There are a few prop desks within banks, particularly smaller regional banks, but the major US and European banks do not have specific prop trading desks as you would have seen prior to the crisis.
When you as a retail trader decide that you think EURUSD is going higher or that you'd like to sell your AAPL shares for a tidy profit you have a number of options open to you. You can go to your local foreign exchange bureau and exchange your US dollars for some Euros. You could go online and trade a derivative of the price like making a spread bet. You could also phone up your stock broker and ask them to sell your shares for you.
In each and every scenario you are given a price at which you can execute your trade. You are a price TAKER. You cannot trade with any of these people without them first giving you a price to trade on. You can leave an order but it's not until THEIR price reaches your order level that you can trade. They are price MAKERS.
That's fine if you are an average retail guy with a relatively small amount to transact in but if you are a hedge fund portfolio manager with $1bn under management and you decide you want to sell your AAPL holdings then you're going to need a different type of price maker and that's when you phone up your sales contact at an investment bank. Same goes for all other institutional money managers (see prior thread posts for a list of investment bank clients).
So you're a trader in a bank and one of your sales team shouts over to you "i need a price in $25mm AAPL shares". Now it's all you. You have full discretion on that price. Using all the information you have available to you; the interbank market, level of stock indices, earnings, research, time of day, price action, twitter chat, and anything else you can dream up, you are obliged to make a price for that client. Something as liquid as AAPL stock means that the client has a very good idea of where the price should be but to make sure they are getting a fair price they may ask several banks at the same time. The best price will win the trade. If you are bullish AAPL stock then maybe you will try and bid higher than what you expect your competitors to bid. You have full control of that price and can make it as narrow or as wide as you want. Bear in mind that if you want them to come back and do business with you in the future and keep your sales off your back then you should keep those bid/offer spreads nice and tight...
So lets say you give the highest bid. The trade is done. Suddenly you're long $25mm AAPL shares. Now you have options. Many options. And this is why even though you're not on a proprietary trading desk, you're still a discretionary trader. Of course you can just immediately try and sell the shares to someone else in the interbank market directly. If you sell them for more than you paid you make a profit, if not you make a loss. Alternatively you could sell some Samsung shares as you think AAPL is cheap on a relative basis but you're more cautious on equities in general. You could buy some S&P puts so that if the markets go risk off your losses on your AAPL shares will (likely) be offset by gains in your puts. You can just hold on to the position and wait for prices to move higher. Maybe they do, maybe they don't. Maybe you stop out later in the day. Maybe your sales team finds a buyer of AAPL stock that you can sell to? So many options available.
Let's assume that all goes well and you still have a job the following day. You come in to work around 6am as usual and find that asian equity indices have been trading heavily in the red and there's some concern about global growth. You're a trader, a price maker. You're going to be expected to make prices to your clients all day. So in anticipation of expected selling flows, you decide to sell some shares, or S&P futures or FTSE100 calls. Much as a proprietary trader might. And as the day goes on you may or may not be asked to bid for client's shares and the market may or may not recover. The point is, you have taken a position based on the information available to you and you will make/lose money as a consequence.
This is how market making works across all asset classes whether it be equities, FX, commodities, or fixed income (bonds). At least it was. Nowadays more and more assets are moving towards automated market making. Banks themselves have trading algorithms that automatically price enquiries from their clients so now instead of the sales person coming for a price you might have them click electronically 'sell $25mm AAPL' and they will receive an automated bid that they can then trade on.
Those algorithms are built by quant teams and managed by e-traders. They still manage risk but a lot of the pricing is done for them. They are much less discretionary and tend to be more conservative in their hedging as a lot of the risk is also managed automatically.
More and more products are moving to this model and so manual traders are left with less liquid, more complex, or large outsized trades to manage. Maybe eventually even those will be lost to the machines.
I'll get to the next on the list ASAP. Hope that gives some insight, let me know if any questions.
Last edited:
Treasury Management
Bank (and some corporate) treasury departments also hire traders to manage the company's capital. The mandate here varies massively with the majority of corporates just hedging real FX risks for the core business and investing cash surplus in money market instruments such as US Treasury bills and Commercial Paper. Some however have a much broader and more discretionary mandate with a p&l attached to them. They can take views across markets, mainly macro markets such as FX and rates but also in equities and commodities to some extent.
Many have minimum holding periods for assets and cannot short certain products etc and ultimately their responsibility is to manage the capital for the company/bank and raise funds when necessary (issue CP, bonds, equity etc) and invest excess funds when necessary (buy CP, bonds, equities etc.) as well as hedging real business exposures.
eg a company that buys products from Europe (in EUR) and sells to US consumers (in USD) may wish to lock in today's FX rate to enable better forecasting for the year ahead.
The more discretionary treasury trading departments will trade more actively than the majority but will still tend to hold positions for months rather than days. Their position size can be enormous because of the size of the company/bank balance sheet that they are managing. If you're Apple with $100s billions then you have to buy a fair chunk to even move the dial! They are one of the container ships of the markets, trading big size and maneuvering slowly, trading on very long time frames. They are big picture macro investors trying to anticipate large trends and dislocations in markets.
Remember though, the majority have very limited trading manadtes and are mainly active in spot fx, fx forwards, and money market/front end of fixed income curves.
Bank Prop Traders
Bank prop desks are pretty similar to hedge funds. They vary massively in their style and approach etc. A lot of ex bank prop traders are now at hedge funds. A bank prop desk is doing the same as a hedge fund but it's trying to make money for the bank (shareholders) rather than taking direct investment from external sources as a hedge fund would. Will explain more about what these traders do asap.
Bank (and some corporate) treasury departments also hire traders to manage the company's capital. The mandate here varies massively with the majority of corporates just hedging real FX risks for the core business and investing cash surplus in money market instruments such as US Treasury bills and Commercial Paper. Some however have a much broader and more discretionary mandate with a p&l attached to them. They can take views across markets, mainly macro markets such as FX and rates but also in equities and commodities to some extent.
Many have minimum holding periods for assets and cannot short certain products etc and ultimately their responsibility is to manage the capital for the company/bank and raise funds when necessary (issue CP, bonds, equity etc) and invest excess funds when necessary (buy CP, bonds, equities etc.) as well as hedging real business exposures.
eg a company that buys products from Europe (in EUR) and sells to US consumers (in USD) may wish to lock in today's FX rate to enable better forecasting for the year ahead.
The more discretionary treasury trading departments will trade more actively than the majority but will still tend to hold positions for months rather than days. Their position size can be enormous because of the size of the company/bank balance sheet that they are managing. If you're Apple with $100s billions then you have to buy a fair chunk to even move the dial! They are one of the container ships of the markets, trading big size and maneuvering slowly, trading on very long time frames. They are big picture macro investors trying to anticipate large trends and dislocations in markets.
Remember though, the majority have very limited trading manadtes and are mainly active in spot fx, fx forwards, and money market/front end of fixed income curves.
Bank Prop Traders
Bank prop desks are pretty similar to hedge funds. They vary massively in their style and approach etc. A lot of ex bank prop traders are now at hedge funds. A bank prop desk is doing the same as a hedge fund but it's trying to make money for the bank (shareholders) rather than taking direct investment from external sources as a hedge fund would. Will explain more about what these traders do asap.
Hi Swissy,
Sorry for the delay.
Without going in to full details, the core principles of my entry risk approach are:
- Defined risk at entry, I typically risk up to 1%, normally 0.5% of capital
- All trades have live stop order at time of entry
- Maximum 3 attempts (2% of capital) at any one trade
The rest is noise. I'm not very good at predicting which way a market is going to move. I am pretty good at making sure I don't lost my shirt when I'm wrong. People obsess about being right. I think it's better to focus on staying alive, the big winners will come and as long as you have enough chips to play with you'll catch them.
Throw enough **** at a wall and some of it will stick.
Sorry it's pretty bland but if you really think about it, staying in the game is all the matters. Don't risk much money. Conviction is a dangerous thing.
counter_violent
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Hi, sorry if this has been posted elsewhere but I am new to trading and have just started a demo account. I had shorted both the US30 and the SPX500 and everuthing was going well until the FBI cleared Clinton. My question from this experience is when do I start taking some off of my trades and how do I do this? And should I have a moving stop on my trades? For example when I first start the trade have a stop and then as the trade progresses change this top so I do not get too done in once there is a big change in price.
timsk
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Hi KingPush,
Welcome to T2W.
As a general rule of thumb, being short simultaneously on two highly correlated instruments like the Dow and SnP isn't a great idea as, in effect, they're basically the same trade so you've just doubled up your position. I suggest you choose one index or the other and just trade that one. By all means reference other indices to get a broader picture as to what is happening, but only trade one. Having said that, if you have a tried and tested strategy trading two indices in the same direction that gives you a positive expectancy then, to use the word of the moment, this trumps my comments above.
Regarding stops, this will depend on numerous factors; there's no universal stock answer that applies to everyone. I recommend you start a thread in the Trading Journals section and provide a little more detail about what you're doing - or hoping to do - and then members can tailor their replies accordingly.
Tim.
your trying to call the tops and bottoms which the best of traders might only occasionally get right.you have to find your own comfort levels,where you are prepared to take profit or loss,which comes with experience.this nobody can tell you.
