Question for the old timers & experienced

Discussion in 'Professional Trading' started by PhilC, Jun 1, 2006.

  1. PhilC


    I have a question. Frankly, I am in limbo with my career. First, I need more experience. I have worked in operations at a large IB (dead end). I have done Trade Support for a CTA, working with him (great experience, no opportunity for growth). I have worked on the dealing desk for a FCM that strictly deals in retail FX (Retail FX is a joke, 99% blew up their account within 3 months).

    I enjoy trading, researching the fundamentals, monitoring news, understanding technicals, etc. Right now, I have my own operation, which is sales oriented, i.e. cold calling, trading the accounts, generating commissions, etc. Although I am good at selling or offering advice, I despise it. Chasing prospects, convincing them to do something they may not want to do is a waste of time inside a life that is too short. I cannot do this for an extended period of time. It is pathetic since I run my own operation and encourage, teach and train others on what to do. Not interested in sales jobs.

    My cash flow is diminishing. My bankroll to trade is insufficient to maintain my current expenses (without abandoning any risk management).

    My educational background is par, nothing spectacular; Top 50 school from US News. My goal, as I am sure is the majority, is to make at a minimum of $20K per month with an opportunity for a seven-figure income. Now, the latter could happen 2 years from now, or 10 years from now, but I want that opportunity. I certainly do not mind sacrificing for several years or a decade to position myself for that opportunity down the road.

    The question I have is what direction shall I proceed to go in?

    1) Floor? First I need to start out as a clerk. At the minimum I would need to clerk for 1 year, and then I would a stake to trade or I could use my bankroll. I could lease a seat for $1K a month, but I have no idea how to trade on the floor. So, I have spoken to at least six traders who have their own business on the floor. EVERYONE says I would be wasting my time, “You are overqualified”, “You would be taking a massive pay cut”, etc. Initially I disregarded the guys who discouraged me because a good friend who trades electronically on the floor, told me to get down there in any way possible. But now, his tune is changing. And everyone is stroking me the same way.

    “It is going electronic, why waste 2-4 years of your life dicking around, learning a system that will not be here by the end of the decade?”

    2) Bank? In my late 20s; too old to start the “Associate” program; set aside that, my educational background is not strong enough. One of good friends works at Top 20 IB in the Credit Derivatives department. He is a TA or bitch boy for trade support. He has his MBA; loves mathematical theory. I was under the impression that he was on the fast track to trade. He pulls in $120K/yr. Two weekends ago, on the way back from the Preakness I found out he is dissatisfied with his current standing in the company. He has been there for 1-½ years. They just brought in a 25 yr. old (friend is 28) from a Top 3 IB to trade. This guy will make a minimum $300K and he is already down $5MM for the year. So my buddy is fucking pissed. Now he is telling me he wants to go to a mutual fund to trade fixed income. Or he will make a “lateral” move only to GS. From an analytical standpoint, he is probably the smartest individual I know. I purchased Tim Crack’s “Heard On the Street”. Just to test him, I threw out question after question. He nailed it every time.

    Here is the point. My buddy, who has been working in Credit Derivatives for four years now and who has an above par undergrad and grad school degree, is NOT on the fast track. BUT, who knows in 7-10 years he could be making $500K base w/ bonus. If I had to do it all over I would have pushed harder for what he has. Now, at my age, it is too late to go that route EVEN if I pressed my friends to get me in someone AND I got the opportunity. The back or middle office is available. And I would earn a good living ($60-80K), but how the fuck can I buy a Porsche on that salary J ?

    3) Independent? This more relates to this forum. Ideally, being the next Kovner or Tudor Jones would be perfect. That is more less the attitude I have now; working my brokerage business and at the same time building my account. BUT I am playing with peanuts, less than $100K. Plus I am self-taught. I have picked up a lot of shit in the last few years, but nothing where I can build a money management business. If was given $50MM I might be able to churn out a decent profit, but with significant draw downs. My strategy is vanilla, trend following. I need to learn from someone who is successful. I have even tracked two guys who were noted in “Market Wizards”, asking for an opportunity to work for them. No dice. They wished me luck, but were brief.

    Money management (CTA or Hedgie) is my medium to long-term goal, but I need to have more experience and knowledge. I need to learn from a real guy or from a recognized bank, fund, etc. This I know. At this point it would not be prudent to open up shop as a CTA. I am just not ready. I need more experience.

    4) Hedge fund? Similar situation as it would be with the bank, with less bureaucratic nonsense. Recently, I interviewed with a guy who was looking for a “Junior Trader”. They have $250MM under management. Within 15 minutes the interviewer told me that this position would be more clerical. He had worked with Schoenfeld (Prop shop). Now he is partly responsible for $250MM. They focus on Emerging Markets. This is my only Hedge Fund experience (at least on the buy side). If I were offered a job with SAC, Renaissance, Marathon, etc, I would take it, albeit the mailroom. I have yet to submit my resume (unsolicited) because I do not believe they would hire me. Outside of the latter interview with the $250MM Hedgie, DE Shaw emailed me asking me to submit a 3 page essay discussing whatever, I do not even remember. Still in my mailbox, but have not acted upon it.

    Hedge fund could be the best move. I live in NYC. After writing all this shit out, I am starting to think I should track down every fund who has $100MM in the New York area. Maybe this is the move. Honestly, I really wanted the floor job, even if I had to sacrifice, but every person I spoke with suggested I look elsewhere.

    5) Prop shop? Possibly a good experience, but the real money is having your own shop. Similar to what I am doing now. Retail. Don Bright is making 8 figures a year, according to Trader Monthly. Considering everything is going electronic I mauled the idea of an “arcade”. However, I really do not have enough knowledge to put something like that together.

    I am at the end, with my six pack that is. Looking for any insight from guys who have the experience. What direction would you go in? I am entrepreneurial; would like to use my brain as opposed to my mouth to make money; truly passionate about the markets, need more experience before I start up as a CTA (trade commodities/FX). But again, I need more experience before the latter. Getting up there in age. I need to make a move sooner than later. From the recommendations given to me, the floor is a no go. Thanks for wasting your time reading my queries. Any insight would be appreciated.
  2. If you left NYC and moved to a low cost-of-living, zero income tax state (New Hampshire, Nevada, Texas, Florida), you could focus on trading your personal account upwards AND start building a track record. When you've grown your account to $500K you can open a CTA and trade just your own money, plus any customer money that happens to come your way. Futures plus FX ought to have the possibility of dialing up the risk to get +80% returns per year with 30-40% drawdowns. If you can handle that (and if it won't poison the track record you hope to present to clients, some day), you'll get there pretty soon.

    Take a look at the CTA's on www dot iasg dot com ... Lots and LOTS of them have < $1M under management ... perhaps doing exactly the procedure outlined here.

    This is not a suggestion or a recommendation. More like a wacky idea from left field. It may get your brain rotating in a different spin.
  3. PhilC


    Thank you for the reply. Ultimately, I would like to set up a money management operation (CTA/Hedgie). However, I still need more experience. I will begin to send out my resume to the hedgies, starting wth SAC, Tudor, etc. Hopefully, I can find a good fit.
  4. Cheese


    You're at a dead end, pal.
    End of the line.
    Your current ride is over.
    You have to get off .. and do something else.
  5. PhilC



    Thanks for the reply; really poignant and insightful. After sifting through some of your responses or postings, it is sounds as if you have some regrets. Are you bitter? Keep your chin up.
  6. Phil,

    Let me preface my advice by saying that I hope you've gotten off the TA wagon that you were likely on when working for a retail FX FCM. That's the first step to profitability - realizing that TA is BS and that the curve-fitting analysis of those bucket shops is designed to mislead. Ok, on to my advice.

    You are in NYC.

    Get a job at a bank as a temp. You can demand more money working as a "consultant" (read: Temp). You are young, so health insurance can take a back seat for a bit. Save money.

    Read The Logical Trader by Marc Fisher.

    Take the money you save (start with 5 or 10k) and put it up at a prop shop that is ok with you trading remotely and not doing a ton of volume to begin with.

    If you execute the strategies outlined by Fisher (mind you, no overnights, of course), you'll be on your way. Keep adding to your account.

    Live like a peasent for a couple years and you'll chuckle in restrospect at the angst trying to get started trading caused you.

    Best of luck!

    Oh and PS - Stop fantasizing about getting picked up by a hedge fund. Zero chance of that happening. Those jobs are taken (it doesn't take a ton of people to trade a fund) and are normally obtained via connections which, since you are posting here, I presume you don't have. You're going to have to buy your way in.
  7. BudFoxx


    what do you mean by TA? technical analysis?
  8. PhilC


    I appreciate your candor. Yes, I am in NYC. I have already read the Logical Trader. In fact, one of my floor connections trades unleaded gas for MBF. He recommends that I pursue other avenues than Fishers program and/or clerking for a designated period, then getting “staked” or putting up my own capital. Initially, my goal was to get on the floor, learn the system, network and go that route. But as I said in my first thread, EVERYONE who I speak with is telling me that floor is on its way to extinction. On Thursday, which prompted me to Elitetrader for advice, thoughts, etc., I spoke to a guy who has been trading options on the NYBOT for 15 years. In a nutshell he basically said, “Why do you want to this now?” He seems concerned about his own situation. Another friend who trades Crude uses Fishers methodology. Its funny you mentioned this because I asked him on Friday if he is still experimenting with the ACD system. His response was “it works, however, you typically need to allow floating loss of up to $2500 per lot in the opening session”. Since the ICE contracts were introduced a few months ago everything has (along with others, from what he said), been tightening. Basically he said locals are on their way out. The cost of leasing a seat out weighs the potential since the increased competition from the CME. Locals are fading. Processing order flow will wane inside the next few years. Why would anyone pay a few dollars per lot to a “$2 broker” when they can submit the same order at 1/5 the cost electronically? The same argument came from many the guys who I have spoke to about this. Right now, there is still opportunity to make a good living. The guys who I am speaking to have clerked or have earned their stripes after being down there for 3-5 years—now their fruits of labor is paying off. But for someone new, starting this process today, and sacrificing for future, is a questionable reposition. So that is the advice I have been given.

    A few years after graduating college I worked for Deutche Bank. It was a great experience, but was a dead end if I wanted to get myself on the trading desk. I do have several contacts at hedge funds. It is very hard finding an idyllic position starting out. I reached out to several guys on Friday. Hopefully, an interview will materialize.

    To reiterate, my biggest challenge is to find a position where I can learn from someone who really understands how the system works, who and what are truly moving the markets. I just do not feel a prop shop can offer that. But I do not know. I am ignorant on what a prop shop can provide. But I have to believe, an outfit like SAC, Tudor Investments, Renaissance, Marathon, Moore, DE Shaw, Appaloosa, Fortress, Citadel, etc., have access to so much information and are true participants that can move the markets with their “fast money”. I know it would be very difficult to obtain a position at one of latter Top Tier funds. However, many guys who have worked at these funds start their owns shops. The latter is where I feel I could position myself for the future.

    Trading $5-10K or 10 times that is working, but how far can I go with that? I just feel I am limited due to the access of information. What I did learn with Forex is that retail “traders” have one arm behind their back. They do not have access to the necessary information, as do the funds or banks. Understanding the mechanics of these markets is what I seek. If you can find an institution that holds “The Dynamics of the World Cocoa Market” by Helmut Weymar, I suggest reviewing the text. This book really explains what affects the supply/demand balances from both commercial, hedging and speculators viewpoint. I am having a difficult time finding other books that really address a particular commodity/market, as does Helmut Weymar’s text. I feel funds who have a significant vested interest in one market or another extensively investigates or researches the fundamentals and supply demand relationship. I read an interesting article about how Julian Robertson (Tiger Management) sent one of his guys to Siberia and South Africa to check on the supply for palladium. This example to me is microcosm on the extremes to what a good money manager will do in order to correctly analyze a given market. The same can be said with a private equity firm or activist shareholder who will research the depths of a company before making an investment with that company.

    Believe me, I understand it is very ambitious for me to think I could acquire a position at one of these institutions, but I think obtaining an entry level position at a second tier fund would be possible given my previous experience.

    We shall see. Thanks again for your suggestions.
  9. Cheese


    What would I have to regret, asshole? Independent trading is only an option for players who operate as big winners.
    So you need to break out of your fantasy, pal.
  10. PhilC


    What fantasy? I already make a decent living, have, at least what you would think, a nice bank roll. Maybe you need to adjust your attitude. It evident that you have failed. Please, save your adages for Ma and Pa. Your miserable, right? Not happy whatsoever. But hey it seems you get some satisfaction on trying to bring down others or as what I have read in your other posts, humiliate them. If it makes you feel good "Wise man" then go for it. Because it seems you need a lift. Make yourself feel better. Good luck Independent!!
    #10     Jun 3, 2006