What's the difference between trader and portfolio manager?

It depends. Some funds have a very tight stop (e.g. Bluecrest has a 4% stop), some would force you to reduce risk but not pull the money out. The general thought is that any draw-down larger then 10% is "catastrophic" and the trader is done and out, but it all depends on your contract, your relationship with the partners, the total amount of capital etc.

 

I really enjoyed my time at CRT and it was a heartbreaker when they sold out to Nations Bank. I probably would have stayed them forever (well at least until the floor died) if they didn’t go the big bank route.

This is only my opinion but I view them as one of the best examples of being so successful that you miss a fundamental change. I kind of view them as Microsoft if Microsoft missed the shift to the mouse and Windows and instead just stayed too long with DOS as the flagship product.

CRT’s problem was they were making so much money on the Merc/Board/Liffe etc floors that they slipped off the leading edge and first stumbled getting access to the OTC interbank market and then stumbled again in the shift to electronic trading.

If the Chicago options market making firms (CRT, O’Conner, Tradelink, Hull Trading etc) would have foreseen the demise of the pits and stayed on the leading edge and taken their expertise, risk management etc to the electronic trading of cash equity/derivative/debt etc then there never would have been a window of opportunity for market making high frequency firms like Renaissance, Shaw or like that Serbian guy mentioned earlier on this thread.

Well what is done is done but I can’t help wishing they hadn’t been doing so well on the floor and instead of stumbling caught the big wave to beach.

Joe Richie & most of the original crew were great to work for; a little weird for a heathen infidel physics guy like me to when it came to their devout religious belief but still great guys.

As an aside the Richie brothers grew up in Afghanistan where their parents were missionaries. I think after they sold out they continued to be pretty active in both direct political activism and charity work in that part of the world.

All the best,

Warmest Regards, Smoker

 

Smoker,

I'm trying to get into institutionalized trading and the knowledge you displayed in this post leads me to believe you will give me an honest answer.

I am curious if I am going to right route and if there is anything I could be doing to improve my chances of getting into the industry.

My quick background is that I've always traded very very small amounts on my own and enjoyed the aspects of it. Unfortunately, I went to a non target school and got a degree in Communications (I know this sucks... please don't remind me, lol).

I knew this wasn't the route I wanted to go. So, I've gone ahead and signed up for the CFA. I'm still having a lot of trouble getting the chance to be a back office monkey (Sling coffee, mow lawns, file papers) and getting my foot in the door for any type of finance job. Which I'll need to get not only for my CFA but for my dreams and desires.

My job dream is to be a PM in about 10-15 years. I would like to start as a trader, go analyst, then PM. However, I'll take any route that is available and I'll do what is necessary to get it.

Am I going in the right direction and what could I be doing to improve my chances?

Thank you for taking the time to read this.

-Quix

 

Hi quix034,

An honest answer is easy to give; it is the correct answer to fulfill your ambition that is the problem.

That said what you have no hope of getting is an easy answer!

The good news is if you really are that diamond in the rough, the undiscovered Michael Jordon playing pick up ball in the park ready to be spotted by a scout and start in the NBA the next day if you have an account open and are trading like a god then it is impossible in the world of modern finance not to be discovered by the asset allocators.

I referred to this process in a couple previous posts on this thread.

The bad news is that it is highly probable that you (including moi & the rest of the guys on this board) are not an undiscovered Albert Einstein of trading.

I don’t need to remind you since you already know the answer.

The bad news is the CFA is useless for trading and about as exciting as reading the phone book backwards.

The good news is there is nothing difficult or intellectually challenging in the CFA. It is just volume and memory work without an ounce of creativity. A German Sheppard with a good memory could pass the CFA.

That said I have a CFA, CAIA (Chartered Alternative Investment Analyst) & FRM (Financial Risk Manager from GARP) but no MBA. I do have a degree in Physics. If you understand Physics you can do anything. Physics is the only real science, everything else is just stamp collecting.

Anyway back to finance; the only reason I have these designations is I did them with my trainees when I first came out to the sandbox. My trainees were doing the CFA and getting a CFA was very important to their careers so when I was helping them study etc it was just natural to also write the exams with them so that is what I did and knocked it off.

If you have the time, resources & the mentality to do it one ticket is to now go do your MBA at a school which is on the radar of the US financial industry. If you are going to study finance I suggest the big time school MBA over studying for the incredibly boring CFA for achieving your goals.

However the best academic route to go is to go back to school and do math and heavy duty programming. In every class keep thinking how to apply whatever they are teaching to trading. Do every single homework assignment; ask every question etc with a focus on application to trading.

This route makes you useful to a guy running a hedge fund and then you can get hired and the rest will fall into place. This is the exact way and reasons that I hired my Serbian programmer. He started out as a code monkey and now is directly and successfully running serious wedge and in the last five years has turned himself into a multi millionaire.

The single best hire of my career.

A lot of people say this but very few are actually willing to do what is necessary to get it.

Most want a quick fix where they start in the mail room tomorrow at XYZ hedge fund and start immediately brain sucking every proprietary edge by osmosis and then presto turn into a market wizard and score a billion dollar allocation yada yada yada!

Just honestly answer the question: Why should this guy running the hedge fund hire me over super programmer guy, super math/physics guy, Ivey league MBA super marketing guy, years of experience in the trenches guy, audited solid track record guy?

You have to turn yourself into one of those guys.

I can tell you how I did it but it isn’t easy.

First off I had a physics background and a great finance pedigree with CRT with both Merc floor and OTC market making experience and even starting that high on the ladder it wasn’t easy to make the jump to money management.

I am dam glad I don’t have to do this today but if I did I would try to go directly to the principle at an established hedge fund/CTA and pitch for an allocation. Go directly to the top dog and not the top traders etc at the firm. They are not interested in more competition and will just try to steal your stuff etc.

I was hired by the London hedge fund because I targeted my guy by finding out, like me, he was into scuba diving. I then arranged it such that I ended up on the same dive boat on a dive trip to see basking sharks off Cornwall. I got talking to him on the dive boat and after the dive trip managed to more or less get offered a shot after some pretty hardcore due diligence. This is the big leagues and no one ever hires you on spec because of puppy dog eyes and they can relate emotionally to your hopes and dreams.

BTW I did have to take an Auzzie girl that worked as a temp at his hedge fund out to Rules in Covent Garden for a couple expensive dinners and then continue to date her for several months afterward to initially get the details on his diving trip. Thank Allah she could shag like a kangaroo on acid.

I am not proud of it but a man as to do what a man has to do.

Anyway when I walked into the hedge fund/CTA for my first day the traders working on the desk were furious, felt threatened and threw duplicate hissy fits when they found out I had end ran the usual defenses by getting directly to the founder. I gutted them both within a year.

It wasn’t noble but it worked.

Well this is not the easy answer but it is the honest answer and it is what I personally believe is the correct answer.

Best of luck!

Warmest Regards, Smoker

 

Awesome.LOL.

 

Thank you smoker for your insight.

I'll definitely keep on the watch for a Aussie temp but I think they are hard to come by. However, as I'm working on becoming "one of those guys" I'll keep in mind what you said.

Now, I'm going to be unabashed and ask...

If you have anyone in Boston (in the industry) that needs their lawn mowed, car washed, driveway shoveled or anything like that... I'll do it just for the chance to pick their brain about this stuff.

I knew it wouldn't be easy but then again, the best things in life never are.

-Quix

 

Hi quix034,

Sorry I didn’t get back earlier but have been a little busy.

Finding that Auzzie temp is not as hard to come by as putting the effort in to become “one of those guys”. Without the effort of having a physics degree, seven years OTC market making and risk running a volatility book along with Merc floor experience the scuba diving trip would have just been an interesting conversation and would never have resulted in a job offer.

You’re above quote verses your following quote indicates that you don’t understand what I said in my above post.

You are supposed to be working on making yourself “one of those guys” and forget this stuff about making coffee, washing cars or mowing lawns.

You appear to believe that the fact you are willing to mow lawns, make coffee etc in return for a chance to learn and get experience trading that this “Voluntary Trade Off” somehow makes you more likely to get hired.

Thinking like that is wrong and it doesn’t make logical sense so lose it and go back to what I actually said:

The people that are running hedge funds/CTAs already have people doing those chores for them so they have no interest in wasting their time and effort hiring you to do the chores that you appear to expect will somehow after some undefined period of time result in their spontaneously deciding to train you up so you can take a shot at big time trading.

Thinking like that belongs in one of those 1930s movies where the established Broadway star sprains their ankle on opening night and the girl selling flowers in the theater reveals that she is really is Judy Garland and jumps in to save the show and subsequently becomes the toast of the town etc etc etc.

It wasn’t true in the 1930s musical and it is not true in today’s hedge fund/CTA industry.

The only people I have ever hear of going your route were the children of successful fund managers and both of them had quite a bit going for them are the start.

One guy was an associate university professor and an MD who took over his fathers CTA business when Daddy wanted to retire. Even with all that experience and success it wasn’t a successful undertaking and alternative arrangements had to be made.

The second one was a European CTA whose daughter started working at the firm during high school summers initially as a receptionist, gopher, code monkey, accounting clerk, execution trader etc etc etc.

She went on to graduate from one of the best universities in the world in one heck of a tough and useful major. Then to top it off she did her MBA in international business and finance at one of the top business schools in the world.

And for icing on the cake she speaks four or five languages and is totally smoking hot without being slutty about it (an unbeatable combination when it come to having bored old men listen to your allocation pitch).

You want to be treated like family for no other reason than you are willing to start off making coffee and copies but the simple reality is the only people that get treated as family are actually family.

You said this:

And I said this:

I still stand by what I said; a lot of people claim they are willing to do whatever is necessary to get it but most are still looking for a quick fix and easy answer.

Unless you are a member of the lucky sperm club and your father or beloved uncle is running a hedge fund that only options I see available to you achieving your dream are those I listed above.

Who knows; maybe I am wrong? But that is not the way the smart money bets.

Best of luck!

Warmest Regards, Smoker

 

Thanks for the clarification.

However, I understand what you are saying in regards to my unabashed groveling. However, That was more of a plea for employment. I know it isn't the way I'm going to get to where I want to go. However, a start is better then nothing and I think that is something that most people overlook.

I'm not expecting anything to be handed to me smoker and I'm willing to do what is necessary and fight my way to the top of this. Hell, I've already started making huge changes to prepare for the fight that I'm going to have to do. Yet, in this market today, with my situation, I'll run errands while I work on the other things. Mainly to have a job near what I would like to be doing. So, my offer still stands and I understand what you mean by don't expect to be the flowergirl. I never did and I don't want to be that person. I'll pursue my education and fight my way into the ranks.

I would also like to say thank you very much for advice. It has been taken to heart and I'm thinking I'll turn it into on of those motivational posters to put on my wall. With that in mind, thank you smoker and if you are ever in Boston, hit me up for a free lunch.

 

Hi quix034,

Ok best of luck and don’t forget making it in trading means learning mathematics, programming etc over how to make a cup of quality coffee.

I have a nephew just entering university in Canada who is interested in this business and asked me what subjects he should take to set himself up for the best shot.

I told him take English because if you can write your ideas in a clear and concise manner regarding the themes in a novel you can easily knock off that business study on opportunities in the Far East or whatever.

Second take Statistics and master it; don’t just study it like you are looking for a pass. I can’t stress this enough. Statistics is the one subject that is valuable in all cases no matter what you do with your life. Statistics is directly applicable to every thing from time series analysis for trading to running a fruit stand or a plumbing business or anything.

Third take some logic (both mathematical and philosophy) which will tune you onto logical fallacies & tiger traps etc which will really help when it comes to evaluating your testing results to see what they actually are verses what you hope they will be.

Finally do hardcore programming and that means not scripting languages like you find in retail trading system back testing packages but the real deal like C+ etc.

If you can logically think in terms of algorithms when someone talks to you about a trading concept they have come up with it will give you a skill that makes you valuable to anyone running a hedge fund/CTA.

It is great to be the creative genius but not everyone gets that gene switched on and if you are not one of those people but you can express the trading ideas of the creative genius in an algorithm that you can code and test you will never be without work.

And that is Smoker’s guide to trading success in a nutshell!

Thanks for the lunch offer but since I have only one customer and they are floating on oil out here in the sandbox I am very thankful of the fact that I never need to go visit financial centers to pitch to the suits for cash.

These days unless there is great diving and some great size to put a spear into I generally avoid population centers.

Of course if you ever end up in the gulf on holiday feel free to PM me and I would be happy to meet up for a pint.

But make no mistake; there is no possible way you could turn such a visit into anything resembling a job offer etc. You would literally have to be one of those guys to even think of such an outcome.

If you need to pick brains and experience use this board rather than an airline ticket and save your cash to pay the tuition for a C plus programming course.

All the best in the future.

Cheers Smoker

 

I graduated from an Ivy-League School in 2004, Cum Laude, Played Varsity football for the school and received the award for highest GPA in the entire athletic department with a 3.72 in Economics.

I received mutiple job offers out of school and choose Goldman Sachs. I worked on the Distressed Debt Desk for a couple of years until a family emergency forced my resignation. I left NYC and moved to Dallas. Once my family emergency was stable, six months after the resignation, I took a job at smaller distressed sell-side shop to start earning a steady income for my mounting debt. I enjoyed several years of success but the job was never meant to be a permanent career move. I had earned a good amount of capital at this next job and decided to advance my education at an Elite trading institution, investing 50k of my own capital into courses and then started trading my own capital after a year of training.

I have enjoyed two years of +65% and +%35 gains trading energy and precious metal futures as well as equity options. I have a solid track record and proprietary trading methodology but I am now trying to expand my experience to a larger capital base. I am not trying to raise money to start my own fund but I am looking to go back to a large fund as a trader or PM. I have hired a professional resume service, am working with several buy-side MD level mentors but have managed little success in obtaining job interviews.

I am not sure if its my location, Dallas, so folks outside of the immediate area do not take me seriously, if its the stigma attached to trading your own capital base, or something else entirely but I am frustrated.

If i had known that trading your own capital base with proven solid success would not matter I probably would not have made the move. I do not regret my decision overall however, as I have an MBA in trading and Asset Mgmt and I have proven investment and trading success. I would like to translate this experience into something more at this point.

If someone had told me that I could not garner any attention with an Ivy-League degree with top marks, Goldman Sachs experience, and advanced trading education a few years ago, i would have said they were crazy. However, that is where I am at right now.

I am willing to listen to any and all advice on measures to take to illustrate my continued passion for the markets as a trader. I realize my best bet is the buy-side, as sell-side trading has been greatly impacted by the Volcker rule. I really want to become a trader at a hedge-fund and I am willing to relocate anywhere in the world at this point, and accept lower titled positions, possibly even an entry level trading opportunity at the right fund(I was a senior VP when I left my last employer). I am just not sure how to show employers my flexibility and proven professional experience.

Thank you kindly in advance for anyone who offers advice on my situation.