Necessary skills for a derivatives trader

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What kind of skills does one need to be a successful derivatives trader ? I am about to graduate with a MSc in Finance and I am seriously considering junior trader positions. However, it appears that most of them require programming skills and preferably quantitative background. Do you think that one can still become a good trader without programming skills and MSc in Quant. Finance ? Is it a common practice to hire graduates with less quantitative education ?
 
It is certainly possible but I think you’ll have two things going against you at the moment:
1. There are some very very qualified people out there, possible also with relevant experience who will also be going for these positions, who may have been made redundant etc from their last role, so your competition is much stiffer than it used to be.
2. In my experience, junior trader jobs are hard to get, made harder by the fact everyone I know who got one, got it because they had contacts and knew someone who put them up for it. I’m only speaking from my own personal experience here, but I genuinely believe its quite a ‘club’, so if you know someone, talk to them and ask them to help!
Best of luck to you, I wouldn’t think it’ll be easy, but with enough determination and patience, you’ll definately find something.
 
Well, you need a sweet bike. And you need to be really good at picking up chicks. And you have to be pretty the only guy who has a moustache
 
I have a few picking models that seem to work…but now on the serious side:
Is trading a dead end job ? What could possible do after several years of trading ? I was thinking of something close to portfolio management but still…trading seems to me too specialized for an employer to really want to hire you in other roles…say M&A. I’m asking because several trading houses are recruiting and I decided to take the plunge…in this kind of market any finance-related job is worth celebrating.
 
2x2equals4 Wrote:
——————————————————-
> I have a few picking models that seem to
> work…but now on the serious side:
>
> Is trading a dead end job ? What could possible do
> after several years of trading ? I was thinking of
> something close to portfolio management but
> still…trading seems to me too specialized for an
> employer to really want to hire you in other
> roles…say M&A.
I agree with that statement. You get typecast as a trader. Anyone who succeeds in trading would not want to do anything else. If you are looking for something else it will be assumed that you did not succeed in trading.
 
as i use to work at a discount brokerage…about 95% of ppl i knew wanted to be a trader.
to me, trading is sorta like sophisticated speculation (perhaps i’m seriously wrong here). but the question that i never got answered was how ppl become a trader as those kind of skills are not easily identifiable amongst ppl. the books i read said you can be a trader after an MBA but that’s as far as i know.
 
numchuck skills, bow hunting skills, computer hacking skills…besides, girls only want boyfriends who have great skills
 
trading flow is not sophisticated speculation, sure there is plenty of risk involved but its definitely not speculation. how you hedge your positions & have the trading book positioned has some amount of speculation involved otherwise you wouldnt have a position. there are many paths to be a trader, some people get right in after undergrad as an analyst, some after mba as an associate, others become a trading assistant do a good job and when an opportunity opens get promoted to jr trader.
 
You want to be a trader but don’t want to close the door on M&A?!? I do think you need a very impressive quantitative background to be a (prop) trader at any serious shop in this day and age. That being said you sound non-commital to me, like you don’t know what your really getting in to. To even have a shot, you’d need the fire that says trading is in your blood, those type of people aren’t looking to keep the door open on M&A, which requires the opposing personality.
 
You sound like you knew what you wanted to work the day you were born. And like an ex-trader.
Excuse me but don’t tell me that every single trader dreamt to become one without ever considering any other function.
I want to do trading (not only trading but I am considering it a possible career path) but I do NOT want to be a trader after my 30s. What’s wrong with that ?
Quantitative background is not such a big problem. No programming skills necessary at all and it’s not like I do not know what math is. I think the traders’ skills are highly overrated. And let’s not forget that many people have succeeded in trading without ANY finance education.
Are you suggesting that half of the people hired should fail ? How could you possibly determine “who has it in his blood” ? M&A was given as an example. The main question was what other roles are similar to trading so that you could more easily transfer your skills.
 
I know a lot of ex traders who go out to do a lot of intersting things. I know one that started a record label, open that opened a clothing store, bars/hotels, etc etc
I dont know many people that go through college wanting to be a trader because they know what traders do but more so they know what they can make. Key word is “can”… its a tough gig but if your in school cast your net wide and look into all careers. I was at a MBA event and two ex traders were on the panel talking with us…. both are working for McKinsey and Bain so it is possible to change careers after 5-7 years.
 
2x2 people have exceeded in all realms of finance without a proper finance background. so that is a moot point, I know plenty of bankers that were history/liberal arts and other majors. the banks hire people who are bright and train them with what they need to know to do the job. there are plenty of things you can do after a trading career but most people who are successful that ive been around want to trade. they dont come in thinking about what they can do after trading…
imo as someone who worked as a banker and than moved to a trading desk, the trading side of the business is much more quantitatively demanding and has a much higher level of stress than anything I dealt with on the banking side. each area requires a completely different skill set and attracts different personalities. the skill set is far from overrated.
 
2x2equals4 Wrote:
——————————————————-
>
> Are you suggesting that half of the people hired
> should fail ?
I’m not suggesting they should fail, I’m saying they will fail.
I also think that most people who are saying, “I’ve heard of guys…” are experiencing a memory representative bias based upon their tendency to overweight unusual events.
 
2x2equals4 Wrote:
——————————————————-
> I think the
> traders’ skills are highly overrated.
>
Have you ever trade your own account? It’s all good and dandy when you read numerous trading books out there, but not so when there’s big money on the line. When you’re discretionary (ie - execute your plan manually) emotion will cloud your judgment. Even if you let the computer to follow the rules that you’ve set, it takes time, money, and a lot of effort to build a profitable system.
To say that trader’s skills are overrated is an understatement of the decade.
 
What about the army of quants, software developers and researchers in the trading house ? You are basically saying that traders do their job as well.
 
2x2 I think you are a bit confused as to the role of a trader at a big bank. so let me clarify some things for you from what i have seen at the places ive worked, this is from an interest rate derivative perspective. quants help develop and improve the pricing models, they take marching orders from what the desk wants to see in the model (curve construction issues, convexity adjustments to the swap curve, improvements in the pricing sheet, formatting to the way the desk head wants it etc). software developers work with the front office to improve & develop p&l/risk processes, they also work with middle office to improve controls in trade bookings, p&l breaks, etc. research writes their own strategy pieces, the desk reads them but certainly doesnt trade off of their recommendations. its just another point of view, as a matter of fact ive never seen a desk head read a research piece and say ‘hey lets do that trade’. it just doesnt happen that way.
your prior post implies that these groups do all the work and the traders just use what they are told by research, plug it into a magical pricing model developed by quants and boom profits spit out which is far from the case. the reality is the job takes a lot of skill and has tons of pressure (in and out of the office). black swan is correct in that 1/2 will wash out due to pressure, mistakes and the like. its real money you are talking about and if you mishedge you are toast. 1 basis point on 100mm 10 year swaps is 85k down the drain so what happens if someone puts through a billion dollar order and the market moves 5 bps before you blink an eye, which is happening almost every day in this market, you just lost over 4 million bucks before you could even call the brokers to try and get a hedge
 
Black Swan Wrote:
——————————————————-
> You want to be a trader but don’t want to close
> the door on M&A?!?
Merger Arb. is a perfect example of being a trader with an exit opp. into M&A (or vice versa even). There are a variety of other strategies that would lend themselves well to work in M&A afterwards as well. I don’t think that’s unreasonable at all.
 
jax26 Wrote:
——————————————————-
> 2x2 I think you are a bit confused as to the role
> of a trader at a big bank. so let me clarify some
> things for you from what i have seen at the places
> ive worked, this is from an interest rate
> derivative perspective. quants help develop and
> improve the pricing models, they take marching
> orders from what the desk wants to see in the
> model (curve construction issues, convexity
> adjustments to the swap curve, improvements in the
> pricing sheet, formatting to the way the desk head
> wants it etc). software developers work with the
> front office to improve & develop p&l/risk
> processes, they also work with middle office to
> improve controls in trade bookings, p&l breaks,
> etc. research writes their own strategy pieces,
> the desk reads them but certainly doesnt trade off
> of their recommendations. its just another point
> of view, as a matter of fact ive never seen a desk
> head read a research piece and say ‘hey lets do
> that trade’. it just doesnt happen that way.
>
> your prior post implies that these groups do all
> the work and the traders just use what they are
> told by research, plug it into a magical pricing
> model developed by quants and boom profits spit
> out which is far from the case. the reality is the
> job takes a lot of skill and has tons of pressure
> (in and out of the office). black swan is correct
> in that 1/2 will wash out due to pressure,
> mistakes and the like. its real money you are
> talking about and if you mishedge you are toast. 1
> basis point on 100mm 10 year swaps is 85k down the
> drain so what happens if someone puts through a
> billion dollar order and the market moves 5 bps
> before you blink an eye, which is happening almost
> every day in this market, you just lost over 4
> million bucks before you could even call the
> brokers to try and get a hedge
1) Way more than 50% end up failing. I would say it’s a lot closer to 95%.
2) there’s a reason some are analysts and others are traders. If all a trader had to do was follow what the analyst thought, the analyst would have become a trader a long time ago. Analysts are either often wrong or don’t have the right timing.
 
LPoulin133 Wrote:
——————————————————-
> Black Swan Wrote:
> ————————————————–
> —–
> > You want to be a trader but don’t want to close
> > the door on M&A?!?
>
> Merger Arb. is a perfect example of being a trader
> with an exit opp. into M&A (or vice versa even).
> There are a variety of other strategies that would
> lend themselves well to work in M&A afterwards as
> well. I don’t think that’s unreasonable at all.
The term merger arb is a misnomer, there is nothing arbitrage about it. It is either a) raw speculation or b)insider trading. Secondly, most merger arb shops are just specialized teams of legal teams consisting of jd/MBA’s.
 
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