Being a former equity prop. trader with one of the top 3 IB... there are some minor differences in flavor but the general idea is the same...
Yeah, he's pretty spot on. I wonder how long are we going to wait before loonies show up to tell us that he's completely wrong.
Maybe a non generalized spectrum of what wall street traders are will come from this thread. The financial industry is apparently capital intensive and its operations relate to percentages related to that capital (sjfan). Making the capital productive has also been described (chelsea et al). Another piece seems to relate to fees for moving the capital around relative to both the seekers and the sources. Comparing wall street traders to retail traders probably has little overlap. someone mentioned the "hit or lift" aspect of trading in the financial industry by wall street or fund traders. How can that be considered as either trivial or important? I'm sure it is not trivial when 2/20 is on the table for an organization dealing with capital. The spectrum of retail traders is probably just as wide as is those traders who get paid salaries and bonuses as part of operating costs where scale and fixed costs are taken into consideration. As I look at it, it appears the two spectrums could be put parallel and how much they overlap could be considered. The one topic in this thread that most appealled to me was how the standard of performance of each has nothing to do with the other. Obviously, retail performance is determined by comparing to the market's offer and wall street trading is not determined in any way as relating to the market's offer. An example, is interesting. Take a time horizon of one day. Fit the market's offer of that day into the retail trader's context. Now do the same for the 2/20 number converted to just a day instead of an annualized characteristic. The retail trader uses capital to get his take home to pay for a tank of gas and to live his life style. So does the wall street trader. Give them equal incomes to make make an apple to apple comparison possible. Let that income be a multiple of the average medical doctor's income using 7,000 doctors to have a stat that is available to all from public records. Which person, the retail trader or the wall street trader, has to work more days or weeks a year to make 10 times the medical doctor's average income? I think this gets the thread to an apples to apples comparison for those who have that interest. Obviously, neither kind of trader wants to switch to the other's occupation. But it is possible to set forth how individual traders in each setting have to put forth to get what they get. It does appear that wall street traders are cogs in a process that involves a lot of other occupations to get an ooperating outfit. On the other hand retail traders just spend some time to rmap up to that level mentioned above. The ramping up usually depends on the capital traded and the performance relative to the market's offer. ET has been exhibiting income performance on most of the spectrum of retail and wall street traders.
No problem buddy, like I said I'd be happy to answer any questions. I didn't quite fully understand the role of sell-side traders until I experienced it.
Will try to keep this short. Willing to do the actual math from first hand experience if I am forced to. Every 'serious' 'big swinging dick' hedgefund, bulge bracket trader is thinking about one thing. The day that he can trade from home, the mountains, the beach, etc... I know this from first hand experience. Young people are best to get a job and learn a business on Wall St or at a fund and make a real living. Rather than start by living the dream, wait til you are set financially. Away from a top firms partner or Managing Director that has 100 people reporting to him/her or is a banker or other producer of some sort, these people don't make good traders, here is some of the math: A PM/trader with say $500mil AUM inside a fund is no chump. Very few reach this stature. Very few. SAC has $12bil under management, does lever somewhat, but has 8000 employees. This PM/trader in a good year where he remains hedged of course and has a viable strategy has a very good year and returns 12%. You cannot just be long the market. Most 2 and 20 hedgefunds give the PM just 13% payout and keep the other 7% and the 2% management fee to pay for running the overall fund. After cost of funds or interest for leverage minus rebate, lawyers fees, outside non-soft research and entitlements, and a bunch of other costs, PLUS paying your staff - this PM is lucky to walk away with about $3mil. Lucky. I can break down the math. A trader that puts $100k down at Assent, Hold, Bright or any one of dozens of others . . . And knows what he is doing can easily get 50 to 1 leverage with 100% payout. He can put down more, but let's just say he has $5mil of BP (buying power). I find its fairly reasonable to assume that one can generate about 25 basis points a day. If you are not after daytrading for some time, then it is not for you. That's about $1,250 for $500k or $12,500 for $5mil/ per day. That's $3mil a year. With no boss. With no employees. No commute. Flat most every night. No blowups in your stategy, converts, risk arb, quant, or sector like Biotech, coal, etc... that inevitably comes every 3rd year. 2 steps forward 1 back when you are 'forced' to be invested at all times. So when you say any real traders out there. Which one do you mean? The Goldman syndicate head who makes $5mil a year mostly in stock, will retire at 52 and spend the rest of his life spending it because he doesn't trade? Or the former PM who at age 42, trades from his deck in Nantucket during the summer, from his ski condo, and with friends at an office a few blocks from home?
I second that notion.... P.S. By the way, whats really most important to the original poster of this thread?.... the notoriety or status symbol of working for some Wall Street firm where office politics could set you back in the game and theres nothing you can do about it?...or working at a firm( no matter what town its in) that will offer you the attention and opportunity to prove yourself and actually get you prepared sooner to become independent so you can "steer your own ship" . Think about it.....
i would say that OP has very little experience in this field and hence the question. He still doesn't know what the right question to ask is, which is not "real Wall Street traders," but how many here are actually traders. I've met someone living in a very remote location, on a peculiar farm, that is a better trader then I've probably ever met. But not everyone likes independence, some people enjoy the office politics, and enjoy the ladder, the climbing, etc (i am still talking about ambitious, smart and motivated people). They get more validation from achieving ranks rather then $, which is no way bad or good - its just different. While all may dream of sitting on a beach and trading from there, those are not "real" dreams for some. Those are fantasies such as bowling with midgets, ... well bad example, but something people say they dream of but would never pull the trigger onbecause its not them. In either case, in any cache of information, like in any trading book, there will be 99% of useless and potentially dangerous misinformation, but 1% would be great and mind-opening. You just need to be wise to know that 1%. In the meantime - don't take anything on the board (or anywhere for that matter) too seriously, until you learn to spot what it is. I already gave you guys a head start, reread the post from Tide, thats something to learn from.