If you don’t have any relative experience and you have no connections to anyone in the industry, how can you set foot in your trading career?
So to get started, I firstly want to walk you through the different paths that you can take in your trading career. You have the hedge funds approach, the banks, and the proprietary trading firms.
What they do is that they take an investor’s money and trade that money to earn a positive return. So for hedge funds, they can pretty much do anything and everything. They can go short, trade stocks bonds futures FX, whatever. They can pretty much do all of this because it’s a very loosely regulated industry.
So for hedge funds, their strategies, their methods could be things like investing based on fundamental analysis, identifying value stocks or maybe even identifying growth stocks. They can trade or invest based on macroeconomics or identifying where the economy is heading. And then making speculative bets on the economic direction, or they can use a systems trading or a line trend following to base their own trading decisions.
You can see that hedge funds have a multitude of different trading strategies and usually different hedge funds would have different methods that they focus on. For example, CTS commodity trading advisors usually focus on systems like trend following.
Hedge funs like fundamentals, they usually focus more value investing or maybe growth investing than their hedge funds. They don’t just trade or invest based on macroeconomics.
Many different types of hedge funds with a different approach that they can use, and the duration of their trades or investments it can range from minutes to days to weeks to months even. So the spectrum is really broad. It really depends on their trading method.
For example, investing markets are using fundamentals you would need months or even years for your ideas to payout. It really depends on the frequency that the hedge funds are operating on.
Banks are quite interesting because 20 years ago, they could take speculative bets like hedge funds to profit from a market direction. But for some time now there is something called the vocal rule and it actually prevents Bank from taking huge speculative bets. Because If the banks were to take bets and they get it wrong, it would make the bank vulnerable and the Bank would collapse. Banks don’t want this vulnerability where a rogue trader goes wall and a bank loses everything. So this is what the vocal rule tries to prevent.
So, mainly these days, what banks do is they provide liquidity in the markets. They don’t take on speculative bets, bat rather they provide liquidity in the market.
So, what does it means to provide liquidity in the market? For example, a car company F which it’s based in the US wants to buy some tires from company T in India. But, in India the currencies are Rupee and in the US is USD. So, you need to go to a bank, intermediary to exchange USD for the Indian Rupee. And from there F can make a transaction with the tire company in India.
So, what a Bank does is that they are a liquidity provider in the markets. They help facilitate this currency transaction.
And the Bank earn from the spread difference between the bid and ask.
So, this is what we call a liquidity provider otherwise known as a market maker, they make the market.
Proprietary Trading Firms
So proprietary trading firm is a little bit different from hedge funds. They trade their own money, usually, they don’t take any investors money.
The money usually comes from the bosses of the firm. So, the boss of the firm is usually a trader himself and yes excess capital to no allocate, so he might allocate it to his traders to trade different strategies. So this way his own earnings it’s not just dependent on his own trading, it depends on the different traders he employed too.
So, props trading firm employs different strategies, like scalping, day trading, systems trading but generally they are more short-term oriented. They don’t hold positions for months or even years.
They are more on the shorter term frequency.
Why Is This Important?
I am sharing all of this with you because this is important when you want to get a career in trading. You have to know which is the right type of firm for you. Is it a hedge fund, is it a bank, or is it a prop firm?
Once you know which type of firm is relevant to you, the next step is to see if their strategies are similar to the way you trade.
Because, for example, if the prop trading firm is solely trading system trading and you’re a discretionary trader wanting to apply for a role down there. It doesn’t make sense.
You must ask yourself these questions:
What is the right firm that meets my needs and that I meet their needs? And where is the demand for my skill set?
How to Find a Trading Job?
So, how do you find a trading job? So firstly, the easiest way is to go to the jobs portal, which advertises job openings. Go there and look for the jobs meeting your needs. You might have to go there every day, refreshing the page, but don’t give up, be persistent.
Second is Google, I am sure that if you are into trading, you would have some idea of the firms that exist in your country, maybe some hedge funds appropriating firms, etc. Now, you will need to Google their physical address, and if their trading philosophy is similar to yours – go down there and just hand them your resume. Your resume should express the passion that you have for trading and information that the type of your trading approach is very similar to what they are doing.
So, you want to meet the demand of the marketplace, you don’t want to offer something that is irrelevant.
And third is that you can use LinkedIn, which is a Profesional platform, and also a social media. Once you know the name of someone in the firm, you can find them on LinkedIn probably, and then you can send them a cold outreach message.
Also, when you get a job interview, it is good to bring some kind of proof of passion(results, records, journal..etc)because it will make you stand out from the rest. So, prepare yourself and show them your passion. And don’t worry, you don’t have to be profitable.
And of course, you don’t have to be afraid of them stealing your strategy, because chances are really big that the strategy is probably used by someone else out there if it really works. Or, maybe it doesn’t work at all.
But at least show them that you are genuine and you are willing to give and that will put you in a different league compared to the other interview participants.