Need Advice! Career Decision: FNYS or ETF MARKET-MAKING or DAY-TRADING?

Hello all,

I'm in need of some insightful career advice and this forum looks like the perfect place to get it. This might look a little long, but don’t let it deter you - it’s a quick read and I need some advice!!! My immediate future hangs in the balance!

First, my background. I graduated from a top school 3 years ago and am now completing the Investment Banking Analyst program at one of the top 5 banks. It’s been a long term goal of mine to become a prop trader and now is the right time to make the move. For reasons outside of my immediate control (timing, demand, etc) switching to a prop desk at my current bank isn’t immediately feasible and after much deliberation I’ve decided to focus on alternative routes. To be brief, I’ll just quickly summarize the opportunities:

1. First New York Securities – Assistant Trader. I’m sure many of you are well aware of this training program 18-24 months of a 55k salary + bonus with a prop seat if you complete the program. I’m aware of the demand for one of these seats and am currently navigating the interview process. What is the earning potential at this place based on product focus? What is the work environment like? If anyone has any insights as to their culture, compensation arrangements, avg length of tenure, strengths/weaknesses, etc, I would really appreciate it. RECENT info on these guys is really hard to dig up.

2. ETF Market-Making on the floor of the AMEX – These guys are ETF market-makers on the floor of the AMEX. They’re offering a 40k salary with minimal bonus for the first year, during which I will be hedging the books of two floor traders who make markets in certain ETF’s and also trade their own books for a P&L split. After a year (or so) of doing this and learning about ETF’s I will have the opportunity to be a market-maker on the floor and trade my own book for a P&L split. The comp looks like it has tremendous upside potential if things work out, but there are a lot of ifs. The biggest one namely the future of the AMEX. It’s been struggling with its options and equities businesses, but is at the forefront of ETF’s, which is what I’d be trading. Another question is the earning potential as spreads decrease for AMEX floor market makers. One strong plus is that I will gain some good skill sets here: Market-making experience, index-hedging execution, and familiarity with algorithmic trading models and systems. Plus, since the firm is so small, there’s A LOT of room to grow and lead new firm initiatives, i.e. actively managing ETF portfolio’s, or shaky ground to stand on given that the firm is an AMEX member – guess it depends on your perspective.

3. Daytrading at a reputable daytrading firm (Hold Bros, Schoenfeld, Prestige, etc) – We all know what this entails. Huge potential upside, but along with that is the 1 to 6 month learning curve before you can be consistently profitable (if you are still trading). During these 1 to 6 months you are making little to no money because of this learning curve. To top that all off, if I do this and it doesn’t workout, I’ve gone and squandered the leverage I currently have on my resume (top-tier banking program). Daytrading for 6 months and then trying to get an A-list gig making good money is a risky venture and would require masterful weaving and spinning of a story and some intense scheming on my part. Basically, I’m worried about it substantially reducing my resume leverage.

Those are the three opportunities. There are a few others out there, like energy trading at another large bank, etc, but these three are the ones I am focused on because of the lifestyle/upside combination. What do you think? Currently I am leaning towards the #2 opportunity (ETF market-making) mainly because of the valuable niche skill set. I would actually prefer FNYS, but my first interview was a pure pressure interview that was zero technical, all qualitative and pressure tactics, which I didn’t really catch onto until I was right in the thick of it trying to explain myself. Chalk it up to rusty interview skills and lack of prep time due to heavy workload. They were ambiguous about what they thought about me, so I am going to aggressively re-approach but honestly have no idea as to whether they liked me or though I was a moron. Again, zero technical content.

Any thoughts? Where else on the EliteTrader forums should I post this for a better response? I noticed all of the diff categories and am not familiar. Maybe I should post this somewhere else?

Any insightful feedback from current/former traders or those with relevant experience would be appreciated. Sorry for the novel!

AC

 

Congratulations on graduating from Rutgers and the Golden Sack job. Hold onto it for dear life. Option-2 should be relegated to the scrap heap because of technological advances in the near future. Options 1 & 3 should be considered if you're downsized out of GS, not while you're there. Consider developing a longer-term trading system with your own money and something that doesn't require too much attention nor data input. Your real long-term goal is to get rich QUICKLY. It probably won't happen.

 

Here is my advice. I'm listing it in descending order of what I would advise you to do.

1. If the market-making job is with SIG, take it.

2. If you are looking to get into energy trading, apply to MBF Clearing Corp.

3. Apply to Jane Street Capital in NYC.

4. Take the FNYS position.

Best of luck.

 

FNYS, hands down.

I agree that if the ETF market-making job is with SIG you should take it, but it obviously isn't since you said it's a small firm. Floor trading will not be around much longer and most places won't hire former floor traders because it is difficult to adapt to the screen. Also, as you mentioned, spreads are getting smaller. It's already very hard to make money market-making the more liquid ETFs. Finally, technology is getting better, and unless you can find a better way to program a black box, you're going to find it very difficult to make money as a market-maker.

Option 3 should be a last alternative in my opinion since you would be giving up a tremendous amount of job security. While I agree that you might lose some resume leverage, I don't think it would be as bad as you think. If you tell the interviewer that you are a risk-taker, it's always been a goal of yours to do that, and you took a chance, I think he'll understand.

 

I knew a market maker that decided to trade his own money at a prop firm. He lasted two months. I know guys that made millions in the 90s bull market and are now giving all their money back - one guy I know lost 100k in a week in May. Another 90s millionaire guy called it quits last week after a devasting month in May. Then there are consistant scalpers that make good money but can't seem to break out of that mold even though they want to.
You have much better options than the 3 under consideration right now. First, there is no guarantee of success at either of the firms your considering. Second, all three jobs seem like they offer 'niche' trading approaches so if the market or technology changes, you 'niche' can become extinct. Third, once you take up a 'niche' job you make yourself undesirable to other firms. Fourth, once you put yourself into a mold it is very difficult to breakout.
I'd say stay with IBanking for now. Get CMT certification, learn how to program strategies, learn how to backtest, learn as much as you can about trading...lots of funds are impressed by all this stuff even though you may secretly know that its all bs because markets are unpredictable but it doesn't matter because you don't need to predict to make money. Trade the longer timeframes as you work at your job. You don't need to be glued to the screen to make money. You don't need the pressure of trying to live off a 2-50k account. You don't need to make 100 trades to net one point, when you can net 2 points with one patiently executed trade. Great traders make the most by trading the least. Once you find a way of trading your comfortable with and can see yourself doing for 50 years, then I'd accept offers from IB trading divisions and hedge funds that trade that strategy - or go out on your own if your consistant and you make more from trading than from your job.

 

Wonderful advice if you are completely risk averse and interested in marking time by the water fountain with the rest of the losers.

My guess is that the originator of the thread wants to trade for a living - both for the money and for the action - hopefully more of the former. To advise him to stick it out doing something about which he's not passionate... well, it explains why the poll at the top of the board indicates the average loser here to be... old.

This is not to say that swing trading can't be profitable, but the above advice seems to bypass the entire idea of actually enjoying trading. Is trading often boring if executed profitably? Yes. But, IMHO, I'd rather be bored doing something about which I'm passionate than to have my schedule stacked up with inconsequential BS.

I also think that the originator of the thread needs to consider the fact that trading jobs are stupifyingly hard to come by. Most people go prop because they were unable to get a trading job. FNYS is a bit of a mixed bag. The reason it seems to be so selective is because they pay thier trainees. But, the bottom line is that you eat what you kill. If you can't make money there as a Prop Trader, you will get blown out... quickly. The safest play that still allows you to trade would be to take a position with a firm that doesn't require you to execute directional trades based on your own judgement in order to make a living. Do that for a few years and you'll have a much better shot should you decide to trade your own (or someone else's) money.

 

Nazzdack and Kensho, what are you guys talking about? I didn't graduate from Rutgers, I don't know what the Golden Sack is (Goldman???). I don't want to get rich quick, I want to learn how to trade on a consistently profitable basis in up, down, and sideways markets. Why would I stay in investment banking when it's obvious I'm trying to leave the business and learn to be a trader? All of the trading positions at hedge funds require previous trading experience, and all of the trading positions at Bulge brackets are sell-side. Bulge banks don't hire inexperienced traders to join their prop desks unless you're a superstar, and I am not an ibanking superstar. Might be a good idea to think about where someone is coming from when you give them advice. People with less experience will take your advice more seriously and with less skepticism.

FaderTrader, thanks for the advice. Are you suggesting that I shouldnt consider any market making firms other than SIG? What about Knight and Hull, etc? Havent really thought about MBF and JAne Street, was not really aware of them. What other firms should I look at in addition to those two? Their business is a small universe, I'm sure you have to know someone to get interviews at these firms. I'll definitely check them out.

DynamicReplic8r - good point on the risk-taking. That's actually a great spin for future interviewsthat I will hopefully never go through.

Overall I'm leaning more and more towards daytrading. I SHOULD be focused on FNYS, but I keep thinking about the fact that at FNYS or a similar shop, I'll be an assistant for at LEAST 18 months and won't be taking my own positions. As a daytrader, the learning curve will be 6 to 12 months and I am my own boss the ENTIRE time. Ultimately I want to be an entrepreneur who works for myself, that's my dream and daytrading allows me to do that. If my goal is learn to consistently profit in all market conditions then I feel that daytrading under an EXPERIENCED MENTOR who's focused on training and helping me to develop my own style is probably a better route to take than being an assistant trader for a few years at a prop shop b/c the learning curve is flatter due to not trading your own book...

Here's a question. If you KNEW with 100% certainty that someone IS GOING to be a successful trader within 1 year and go on to trade for 10 years total, Would you advise them to go prop, or daytrade? Suppose they're planning on trading for 10 years. I suppose this question is basically asking which has the most upside? I ask it because I have to assume I am going to be successful, otherwise I wouldn't be trying to do this at all. If I fail, then it's grad school or another job somewhere in finance - two options I do not want to think about, but am fortunate to have as my safety nets. I have no idea how the access to the large capital at a place like FNYS compares to the large amount of leverage available to an experienced daytrader with a fair amount of capital. Anyone have valuable thoughts on this?

Thanks for being so responsive guys.

FYI, I also plan on trading my own futures account on the side. Right now I'm thinking long OTM puts on the Nasdaq 100, long OTM puts on the Brazilian ETF (options on equity, not futures), and a long play on crude or the crack spread. Vol is returning to the market and levels may rally for a little while longer, but I'm betting on a major downward correction and/or bearish downtrend into and through 2007. That's my view until these global imbalances and geopolitical tensions ease, which I don't see happening before the tipping point in the equity markets. This might be better material for a different forum, just had to share.

 

Daytrading or prop? What's the difference. When I hear the term daytrader, I think of a SOES bandit playing with his/her own money. Of course, there are no more SOES bandits, so when you asked about daytrading, I assumed you meant at a prop shop.

If you know you're going to be successful, then you might as well go prop for a couple months, build up a couple million in equity, buy a seat at an exchange to get the local commissions/fees and trade on your own.

I'll go ahead and tell you though, that your biggest problem is going to be admitting that you're wrong. You sound like a pretty smart guy that is usually right.

But, the market doesn't make sense most of the time. e.g. a number comes out that should be bullish for stocks, stocks shoot up immediately, you buy as soon as you can, but a couple seconds later, they sell off hard. You keep saying to yourself, this doesn't make sense, stocks should be rallying on this, so you buy more, but stocks end the day at their lows and you go home dumbfounded. Theory and practice are no where close to each other. Until I figured out that the market makes no sense (when you're looking at a relatively short time frame), I had a hard time making money, but maybe that's just me.

As far as your long term predictions, I can be of no help. The longest I've held a position (other than in my P.A.) is a month. I try to be in and out of the market within a few minutes, so I can't tell you where I think crack will be trading tomorrow afternoon, much less next month.

 

I have to agree. There´s no way to predict anything in the market with a 100% prob... it just doesnt work that way.
If you want to be successfull... get your self a good risk management strategy { originalturtles.org } and excecute it with perfect discipline... that´s 70% of trading...

 

Read The Logical Trader by Marc Fisher... it might change your thinking if you focus solely on the A and C triggers and design a way to filter stocks that offer a high probability of success using this method (i.e., trading stocks that are not rangebound).