Friday, August 29, 2014

Landing a Job at a Trading Firm

I've been part of the hiring process for many of the trading firms where I've worked.  Perhaps that is why I receive a fair amount of mail from people seeking trading jobs and careers.  Most of those job inquiries are particularly ineffective.  They do not contain the information that any quality trading firm would need to interest them in an application.

The sad truth is that there aren't many resources to help traders navigate the job hunt.  Of course, many traders prefer to remain independent.  That provides them with maximum control over their money management and the highest payout.  Still there are advantages to joining a trading firm, including access to superior technology for screening/researching ideas and executing trades; the social and learning benefits from working with talented peers; and, most important of all for some, access to significant trading capital.  

A while back I wrote about pitfalls one experiences in joining a proprietary trading firm.  There are also potential pitfalls associated with hedge funds and other money management firms, including instability of investor capital, risk management policies that may not fit your trading style, relatively low payout structures, and constraints upon the instruments and strategies traded.  

Regardless of the type of firm, the big question is:  do the resources gained from affiliation with a trading organization outweigh the costs?  If the affiliation brings you needed capital, access to markets, superior technology, and significant professional development among colleagues, it can be spectacularly successful.  If the affiliation takes more in overhead than it provides in tangible resources, it's not a worthwhile proposition.

So how does one navigate a job search with a trading firm?  Here is one key to-do and one key to-not-do:

1)  To Do - Build a trading track record.  It may not be with a large account at all, but show a strategy and show results.  Smart applicants assemble a "pitchbook", where they describe their background, summarize their strategy, illustrate sample trades, and provide detailed performance metrics.  A pitchbook with a resume and cover letter will get attention.  It is professional and displays what you know and what you do.

2)  To Not Do - Beg. Whine.  Tell people how very motivated you are.  Talk a lot about passion but say little about actual, concrete trading expertise or accomplishments.  Boast about your ideas and acumen, but have no track record to support your claims.  All the above comes across as less than professional and meets a rapid fate in the circular filing cabinet.

It's not uncommon that I'll hear from traders eager to find a firm that will give them a chance at success.  The stark reality is that trading firms don't give chances; you have to earn them.  You don't apply to the New York Yankees without a history of successful baseball play; you don't try out for a Broadway performance on the basis of a passionate interest in theater; and you don't apply to a professional trading firm without evidence that you can provide professional results.

And if you don't yet have training and trading results?  Then a sound strategy can be to learn specific trading-relevant skills that can make you valuable to a trading team as a junior member.  The team can provide you with training, mentorship, and experience and you can provide the team with needed support.  A young friend interested in managing money recently put himself through a rigorous CFA program, while holding a full time job *and* teaching himself programming and quantitative analysis.  Those skills and experiences will make him all the more valuable to teams managing long-short equity books and "macro" portfolios.  Starting as a junior analyst or assistant to a trader is a great way to get a foot in the door for eventual money management.

This is where the right educational programs can be useful.  The MBA in finance or the master's degree in financial engineering won't make you a trading whiz, but they will teach you skills, expose you to the broad industry, and provide you with a network of alums who can make all the difference in a job search.

One way or another, you need to acquire skills and experience to set yourself apart.  Make yourself a valuable resource, build and work a professional network, and opportunities are most likely to come to you.

Further Reading:  Steps Toward Joining a Prop Firm