You say you you'd rather train a recent graduate than hire an "experienced trader without capital ". I am just curious, what background are you most interested in when training somebody out of college and in general what kind of education do your best traders have vs for ex. MM's at Morgan Stanley or Golman Sachs, Thanks for your time.
If you are a successful Market Maker at Goldman or Morgan Stanley, you are trading "order flow" from customers. It's a different type of trading when you trade upstairs with no order flow to trade against.Your order flow will determine your positions and your trading(most of the time). When you trade on a direct access platform upstairs, you have no order flow to trade against and you can't "look" at order flow to give you an idea of market direction. Direct access trading and Market Making are two different types of trading. I've done both and direct access trading with no order flow and limited capital is much harder to be successful at in my opinion. Many successful Market Makers , would be "lost" upstairs trading without order flow. If you are used to trading with big dollars behind you, you may not do as well when your own money is on the line and you are trading on a direct access platform. Our best traders come from a variety of educational backgrounds. All our successfull traders take trading seriously and have a game plan. None of our top traders "gamble" in the markets. You have to adjust your trading to market conditions and our top traders do that very well. Gene Weissman Lieber & Weissman Sec., L.L.C. gweissman@stocktrade.net
Good question...I will give you my read, and we'll see what Gene has to say (since this is his thread)....The training of MM's is geared toward making money for the Firm from order flow. There have been many articles in the WSJ and Barrons about the abuse of customers by MM's. Actual trading is a whole different thing...MM's can lean on orders, traders have to enter and exit with only the information available via tape reading and morket conditons. I like to see a person with an open mind, no pre-conceived ideas, and very little (if any)tendancies towards "over analysis." Learn how to come in cold, read the market, start the game. Anyway, I like to see dedication from a younger trader...and discipline, we can teach the rest.
I always felt the difference between a market maker trader and a prop. trader was this.... a market maker relies on who he knows(building relations with other firms trading desk , so his firm gets the call or order flow) while a prop. trader relies on what he knows. Basically a prop. trader uses his knowledge and experience to be successful and its just him against the market. I don't need to talk to or rely on anybody to make money from the market. But alot of market makers would be lost if their phone stopped ringing or they lost their big order flow clients. I much rather rely on my own ability than rely on others for my success.
from a large wholesaler, I agree that direct access trading is a lot more difficult. However, if an ex-market maker can put his ego aside, than I think that the experience of past employment can be of tremendous value.
cmz1, I would agree with you that your market maker experience is helpful and you may be good trader.In my experience, many who switch from market making to trading their own account do not make it. Firm Capital ,infrastructure and order flow to trade against are a big advantage for the market maker. When you trade upstairs on a direct access system, you have the same edge as any other upstairs trader(assuming you have the same ECN routes & a reliable order execution). It's hard to teach an old dog new tricks. The top traders in our firm learned direct access trading upstairs and had no market making experience. Gene Weissman Lieber & Weissman Sec., L.L.C. gweissman@stocktrade.net
I agree that many times traders are better off with no preconceptions when starting out. My feeling on why market makers have failed to be successful making the switch to direct access trading is due to a lack of passion for learning how to trade without a provided structure. However, it bothers me when I hear market makers are clueless, and they all have it so easy. My complaint is the misconception that order flow always yields great profits. I left market making because the order flow was kicking my butt. Selling 20k shares to a hedge fund at a price with no inventory. Selling multiple 1k share lots to every on-line broker on an automatic system. Having zero contol over positions became not worth it at all. Market Making on full commission teaches 3 invaluable lessons: 1)processing tons of information rapidly 2)trading multiple positions at once (ie P&L swings) 3)how the Nasdaq infrastructure works
cmz1, Well put. I was a market maker on the AMEX floor and what you say is true. Market Makers are far from "clueless" and many times we got picked off. I just think direct access trading is a different type of trading. Trading with your own "small" capital forces a trader to trade differently. Direct access trading and market making are two different types of trading. Many traders at our firm are former market makers(from exchange floors) and are doing ok. Gene Weissman Lieber & Weissman Sec., L.L.C. gweissman@stocktrade.net
There are NUMEROUS firms that will back traders: 1) Schoenfeld 2) Van Buren 3) WorldCo etc etc etc The MOST important thing is LOW trading costs. Don't sacrifice this for some other factor in selecting a firm. 20-60% of a loss still nets you $0.