Help a beginner get into Trading!

[DavidCarpentier]

Hi,

I am a recent Engineering graduate who is trying to get into derivatives trading. I have a few questions that I am trying to get answers to:

Considering my circumstances (Engineering background, no previous Trading experience)

1. What is the best way to get into derivatives Trading (Trader Support ? or just apply for a trading role)

2. Do large investment banks look down on you if you have previous experience with smaller trading houses? (banks being less risk averse and all)

3. If you get fired from a trading role, is it easy to find new work?

4. What do recruiters look for when selecting candidates?? (Im asking this because i have been to a few interviews but no luck yet!)


Any feedback, tips or general pointers would be appreciated. Cheers.

Dave

 

[NotQuiteRandom]

Dave,

My 2c:

1) I would advise doing a masters in finance. If you have a degree in another quantitative subject it will not be too hard, you will learn a lot and boost your stock. Cass business school do some good programmes in Mathematical Trading and Finance, Investment Management, Quantitative Finance and a few others. Provided you have a 1st or a 2:1 from a decent uni and can stump up the course fee (it was 15k when I did it) I'm sure you will get in.

2) Large investment banks look down on everyone, I am sure they would not discriminate on the basis you suggest however.

3) I guess that depends on what you were fired for.

4) In my experience this depends on the job. The graduate programmes tend to be focussed more on your intellectual ability as they train you how they want you to become. Positions which do not have a long term training programme attached tend to be more experience based.

I have been through that which you are experiencing and found that a Masters was the best way in - I also found that working for large banks is not for everyone but it is a good place to spend a few years earning your colours.

Good luck.

NQR

 

[DavidCarpentier]

Hi NQR,

I do have a master but it is in Engineering. I dont know if that would help.

and what if a trader gets fired for underperforming ...say he was not making enough money from his trades...would it be easy to find another job afterwards?





On another note...what do most traders' day to day activities involve?

I know you may do valuations, but is the rest of it just click to buy and wait for the price to rise then click to sell?

When doing valuations do you follow strict formulae? How do valuations work?

(sorry im im being a bit thick! )

David

 

[NotQuiteRandom]

David,

You are not being thick. I am sure I would sound equally unsure of myself about subjects relating to engineering.

The term 'Trader' is a generic one which really encompasses many different activities and professions. Allow me to clarify a few jobs which people may do and call themselves a 'trader':

1) The most popular on this forum: a person who trades financial markets for their own account for private gain. This is not a job of employment but one of self employment.

2) A person who makes a market (google search "market maker" for details) in an exchange traded asset or derivative (future, option etc). These people are usually in the employment of a firm and using their capital as margin for market making. In essence, the job involves continuously quoting a 2 way price (bid and ask) on an asset. Market makers can be screen traders or 'in the pit' in some markets.

3) selling over the counter or other structured, often exotic, derivatives to clients for an investment bank. This is heavily model driven and a good route for an engineer. Only the major investment banks offer such opportunities and such positions are well remunerated. These guys rarely, if ever, take any real risk, rather they 'build' risk profiles for their clients and earn a spread.

4) A trader for a hedge fund or prop book at an investment bank may take directional market positions in a similar way to the person listed in 1) above. These traders use either their client's or the banks funds to trade with. These jobs are hard to come by and require other professional experience and/or extensive training.

5) A person who writes trading algorithms which automate the trading process by generating buy and sell signals as a function of market activity as determined by the analysis of those markets by the traders statistical analysis. This requires a real time data feed through an API and fast access to markets through a dealable API so that the computer can deal direct to the market upon generation of a signal. These jobs are usually with hedge funds... this is my background.

The activities of the trader are a function of which of the above (and these are by no means exclusive, there are other trading jobs and sometimes the lines blur) they do. My career to date has involved writing systems to capture statistical anomalies in asset and inter-asset prices. A market maker will be constantly adjusting the prices he offers people to buy and sell at as a function of what other market participants are doing. A structured products guy at an investment bank may be doing what I describe above or dealing with client relationships.

There are also exotic option market makers who sell bespoke option products and manage a large book of risk. This is probably the most interesting investment banking job in my opinion. Be prepared for some masters / PhD maths here though. Lots of fun stuff.

The world of trading is vast and varied, I am barely scraping the surface - anyone who offers you a simple definition of what a 'trader' is or does is doing so in ignorance.

If you want a career in finance your best bet is either to get on a graduate program at an investment bank or to go and do a masters in a financial subject... both are a great education.

Unlike the old days and contrary to the desired belief of every ill educated person who fancies himself as a trader there are far more successful people in this business who are financially educated than who 'are just good'. Especially in investment banks / hedge funds.

If any of these terms require a definition, see google.

Hope this helps.

Good luck.

NQR

 

[DavidCarpentier]

Thanks! Thats really helpful.

 

[vergis92]

Hi NQR,

I do have a master but it is in Engineering. I dont know if that would help.

and what if a trader gets fired for underperforming ...say he was not making enough money from his trades...would it be easy to find another job afterwards?





On another note...what do most traders' day to day activities involve?

I know you may do valuations, but is the rest of it just click to buy and wait for the price to rise then click to sell?

When doing valuations do you follow strict formulae? How do valuations work?

(sorry im im being a bit thick! )

David

The price at which a stock trades on any given day is how much someone
is willing to pay for it to purchase it, not its value.
stocks can be excessively over intrisic value and still go up and vice versa
so depending on the length of the investment they investors do technical
or fundamental analysis,

stock valuation methods are for long term strategies

 

[hasse]

Engineer!

Hello,

**If you know nothing or very little of trading why do you want to become a trader?

It doesn't take much to find out what a trader does during the course of a day, go to JP Morgans website and then to careers and you'll come across an option to watch a short film about one of their traders at work. It's not bad. You could also try other IB's websites and look through their 'employee profile' section, this should do the trick.

You do not need a finance/business/economics BSc/MSc to be a trader. Engineering is a highly respected degree and is the basis of the school of management science.



STH.

 

[bvpraveen]

If you want a career in finance your best bet is either to get on a graduate program at an investment bank or to go and do a masters in a financial subject... both are a great education.

NQR

Hi,

Thanks for your great explanation.

Meanwhile can you please tell more details about 'graduate program at an investment bank'. What we will be learning through that program? Does it deal with trading or managing the same in some banks, institutions, etc.

Thanks,
Praveen.