Who makes the best traders?

Discussion in 'Psychology' started by jasrlew, Jun 19, 2003.

  1. jasrlew


    This is started from a post I submitted in another forum.

    Who makes the best traders? It seems to get a REAL prop trading job, if you're not Ivy League then forget about it.

    It surprises me that so much emphasis is placed on where a potential trader went to school when applying for a REAL prop trading position. To paraphrase Liars Poker-If you all were not trading bonds, you'd be driving trucks. Don't get too intellectual about the market.

    I read a book about chefs and one chef said he'd take a worker with a third grade education over a grad from a prestigious academy anyday because the "less educated" would do what he asked day in and day out exactly as he asked him to do it. Whereas the academy grad would have the balls to make suggestions to the experienced teacher and change things for the sake of changing them to justify their education.

    What is it about Ivy Leagues grads that makes them good candidates for success in trading? Is it as simple as the name of the school?

    If there was a test for the potential of success in trading what would it be?
  2. I assume when you say "REAL prop trading job" you're referring to bulge bracket i-bank trading?

    Three words for you:

    Old Boy's Network

    Why hire anyone else when you know these people are going to be smart? It's kind of like trading...you put the odds in your favor. The odds of getting a total idiot are probably less (some would argue) when recruiting from top schools. After all, the schools have already applied a rigorous filter to screen their applicants. Of course, the system isn't perfect and occassionally you'll get a bad apple.

    Of course, for those of us without Ivy League degrees it just means we have to be more aggressive and creative with our approach. We either 1.) make it on our own, or 2.) exhaust our resources to find a way into one of these firms (if that's what you want). It's not fair, it's not perfect....but that's life.
  3. Hook up a heart monitor to an individual then place them on a rifle range face down in the dirt. Fire a Browning 50 caliber machine gun over their head for 6.5 hours while explosives are going off every 2-5 minutes. At the same time give the individual a elementary school math exam. If they can maintain a normal heart rate and get 100% on the exam they are fit to be a trader.

    However, the only real test is to have them actually trade.....

  4. jasrlew


    I think you nailed it.
  5. lol lol lol....and don't forget to kick them in the stomach!!!!!
  6. The Shockwave from the TNT will do the job of that nicely. Perhaps stirring up the stomach enough for a nice bout of diarrhea.
  7. I would argue that this only applies to discretionary traders. If it's a mechanical system I would put the candidate in a room with a handgun and four freshly painted walls. When the candidate hears a beep (maybe every 3 hours, maybe less) the candidate must immediately pull the trigger on the gun. It doesn't really matter where they fire the gun so long as they don't shoot themselves. If you can find an animal (monkey or otherwise) to do this, that is fine too. When the paint is dry, they can stop.
  8. trader99


    Well, it's very DIFFICULT to say who makes the "best" traders among a pool of candidates. I think the BEST CANDIDATES are those with the RIGHT EMOTIONAL MAKEUP. Education does very LITTLE to contribute to trading success.

    But it's the way it works. I-banks on the Street just hire Ivy League or top school candidates because that's the way they have been doing it. I know it doesn't make sense. But things aren't as simple as they look.

    The era of Liar's Pokers where the average bond trader is a Street Smart kid from Brooklyn is over. Even toward the end of the book, Michael Lewis noted that Louie Ranier who started the Mortgage bond biz was left out and confused as the quant Turks took over and started to slice and dice payments and cash flows into thousands of little pieces. Things have gotten extremely complicated. The minimum requirement in bonds are at least a master in finance, MBA, ms in engineering, and preferably a phd in a quantitative discipline. But that was in the 80s. Now, the stuff in Liar's Poker is consider PLAIN VANILLA stuff. Now, we got even MORE EXOTIC payoff structures with derivatives sitting on derivatives on top of derivatives. Some of these exotic fixed income derivatives are so complicated that the trading managers are NOT even sure how to price them so they hire a team of phd quants just to run simulation to make sure they understand what the hell they just got!

    So, in that case, yeah, the product complexity has gotten up exponentially. And you do need some solid academic grounding to even begin to price a quanto double barrier knock out asian burmeda like option embedded in a dual currency bonds priced against the logairthm of basket of 12 different currency peg to the a floating commodities price weight index! haha. Obviously, I was been FACETIOUS. But you get my point. haha.

    Now, even in simple equity market-making, a min. is an MBA or a smart undergraduate. Whether it's necessary to trade or not something else.

    Personally, I don't think SCHOOL matters. But it depends on the kinds of products you want to trade. The more exotic the product is the more likely education requirements get higher.

    Even one of the Market Wizards noted that back in the 70s, institutional Wall Street traders were UNDERPAID, have LITTLE responsibility(just taking orders), take NO POSITIONS, an unglamorous jobs. He bought 750K shares of Penn Central stock then flip it back for HALF A MILLION in 30 seconds and the guy didn't even know what happened. That environment is gone. Now you have a room full of bright people and computers and quants trying to arbitraging every little inefficiency.

    The world has changed...

    But to be a SPECULATOR, I think is the ULTIMATE PRIZE! That has NOTHING to do with schooling!
  9. the best traders are those who are around long enough to learn from their own experience. We are in the business of staying in business. I have been around many traders who didn't last because they tried to make a living before they learned how to not lose.
  10. An ex Marine who has been in combat;
    Has a decent background in math or science;
    Has a degree in psychology;
    Understands what games are the best to play in Vegas and why;
    and is lucky (the kind of person who makes their own luck.)

    Why: A Marine is disciplined;
    systems are usually based in math,
    markets are moved by people,
    and in a sense the market can become a game with the odds in your favor.
    Luck never hurts.

    #10     Jun 19, 2003