Agree with everything that you said except this one. We traders ARE a productive member of the society. Just because we trade that doesn't mean we are not contributing to society.
Five years and you will be making $371K, more than the take-home pay of a junior trader already, and after that, the sky is the limit!
I know from personal experience that with 30% a year you can get millions from private customers in a short time. If you have 10 million AUM you take 20% on 3 million profit, so 600K (so above +-6 million AUM you beat the 350K salary). I know investment clubs of wealthy people that can put that amount on the table without individual risking more than just a 1 month income. I have a friend that runs a fund for them with low risk and single digit profits. How many will ever get a junior trader job in these famous firms?
Lol CME overserver?! I like that! Should open a bar by the CME building and start really making money when the interview season starts back up!
@blueraincap Regarding being shut out of the industry—truthfully I don’t know if that’s true or not of the specific type of prop shops we’re discussing here (Chicago OMM), but in my experience this is not true of all of prop trading. Physical commodity trading for example will take someone from just about any background (not a bad background, just more diverse), stick them in a scheduling or logistical role, and of that class of 5 schedulers maybe 2 or 3 will be traders within the next half a decade. I’ll defer to @sle for experience entering in other ways besides campus and commod as I’m really not an industry vet by any stretch.
Generally people right out of school or shortly thereafter pursue these jobs because they’re motivated by the challenge, interested in the field, and want mentorship in and education in this space. Indeed people are extremely interested in these jobs, it’s not just on this forum. In my experience as a recent graduate from a competitive school a large percentage of the nerdy people went into this line of work. Prop trading also interests a lot of engineering types that fill quant and IT roles. The optionality of a strat or IT role right out of school may actually be higher when you account for tradings attrition rate. Some people just don’t become profitable, whereas an IT or strategist background remains transferable. It’s probably close to irrelevant because the trader who just washed out still has a 3.9 from an Ivy and a beautiful mind and they’re all still young. If you didn’t join for the reasons discussed above then you’re an experienced trader. Logically and as alluded to above, the firm would only hire an experienced if they expected them to be profitable. If you’re smart enough to have a profitable strategy you’re smart enough to evaluate the cost benefit of applying for a job. So what benefit would this confere to you as the experienced trader? 1. focus on trading, not: a) IT b) Position reconciliation c) running a business, catered breakfast, health insurance, etc. 2. learn something 3. social life 4. paycheck 5. a prop desk has an economy of scale relative to the individual trader.
As a PM/prop trader, you get risk limits set by the management (capital, VaR, drawdown, sometimes things like delta/gamma etc). How you follow them is your own business. As a junior trader your PM will usually get you to use his preferred way of managing risk. First of all, I rather clearly said "income", dude, not "assets". So the question is a number of years to start taking home per year as much as a DRW monkey his first year. In a world of perfect strategies and simple compounding, it would take about 10 years to start earning 350k (assuming full reinvestment of profits): 100 * (1 + 30%) ^ N = 350 / 0.3 and solve for N However, if you are living in a semi-real world where you Sharpe is not infinite (yet you still spend nothing otherwise), you have a strong path dependency and suddenly it will take you longer depending on the number of down years. Look, we all know that you are a master of your intraday strategy, you have infinite capacity with a Sharpe of 6 and you know hordes of billionaires. Most people, however, would not be able to raise a penny without a long track record (let's say 5 years). I also doubt anyone would give multiple millions to manage before the trader himself has at least a million of his own money under management.