Professional traders working in IB's make salaries somewhere between $100k-$140k depending on their seniority. Any trader (or the desk collectively) has an "annual budget" to meet (the budget here refers to the amount of profit they're expected to generate). The bonus is normally negotiated but varies between 8%-12% of trader's profit. Prop traders in IB's can curve out up to 15%. IMO, the "value" of a trader working in an IB is about 20% of what he brings to the table.
So, if I were to make an average $.05 profit/share, and trade an average of a million shares/day, and there's 252 trading days/year, and I got 10% of that profit as a bonus, I could make >$1.26 million/year? Cool! Would I be considered a "low producer"? How many shares do traders usually trade per day? How many contracts do the options traders usually trade per day?
To the OP, when I said I recommend the IB's for their training programs and as a good place to start out if you can, I should have included top prop houses in that catagory too. As far as I know Wolverine is a good firm and has a solid development program. KrispKreme50 - I think the difference in the training programs at the IBs/Top Teir Prop shops from others is that they make a real commitment to trader development - formal development plans, mentorship, specific expecations and a real salary.
Thank you Nebulous, I've always wondered how investment bank traders are any different from an individual trader. Would you happen to know what strategies investment bank traders use (scalping, etc...) to trade?
Well, for one thing they execute customer orders, and make a profit by buying from the market at one price, and selling to the customer for a higher price. Or buying from the customer at one price, and selling to the market at a higher price. So, yeah, they almost exclusively scalp. And they trade WAY higher volumes, at least 20,000 share blocks. Isn't this one of the reasons i-bank trading is so hard, b/c you have to figure out how to buy/sell 20K shares w/o screwing up the market? This leads to an interesting conflict b/w the salespeople and the traders; salespeople want the largest orders (and will therefore quote semi-realistic prices to customers, which the trader will then have to make good on) traders want the most profitable. If the trader is trading for the bank itself, they use any strategy they want. Likely proprietary arbitrage algorithms.
How many shares/bonds/contracts do I-bank equities/bond/derivatives traders trade per transaction, on average?
Can you give me a list of Top Tier Prop Shops that do have these training programs? Also has anybody heard anything about Dimension Trading? Thank you
Transmarket Group: http://www.transmarketgroup.com/ Chicago Trading Company: http://www.chicagotrading.com/ Optiver: http://www.optiver.com.au/home/ Dimension trading is more of a retail firm. Do you mean Group or Partners?
Uhm, if you had ever had to deal with an i-bank in regards of getting orders filled, you would know that they never give you a decent price at their expense. Investment Bank prop traders operate on a different level. They don't follow the market, they try to influence & manipulate it. That includes trading based on insider information, trading off order flow that goes through their firm, spooking the market, working off their own analyst calls, etc. I know that in school it is taught that these Wall Street firms are some kind of noble entities that employs super geniuses, but the reality is that they are just a bunch of parasites & crooks, at least on the top level. Their most profitable trading operations as of late were the mortgage desks. Which, at the end of it all, was just a bunch of bullshit & fraud. Think about that. The algos are used primarily for market making, not proprietary trading strategies. There are some strategies here & there that they may run, but in reality, anyone high up on Wall Street knows that real money is in sure things based on exclusive edges & connections, not trading systems.