Author Topic: So, you want to work as a trader?  (Read 737 times)

PipMeHappy

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So, you want to work as a trader?
« on: December 18, 2021, 10:06:07 PM »
Here is an advert for a job (Trader) for the
investment bank Citi, which came out today.

The screenshot gives you a small
summary of the vacancy requirements:
personally, as a retail trader, I know I
am looking at an alien language
and all my experience counts for nothing.

What these people's/the industry's
definition of 'trader' is,  and what an
independent retail trader might actually be,
can be very different things...

https://www.glassdoor.co.uk/job-listing/xva-trader-citi-JV_IC2671300_KO0,10_KE11,15.htm?jl=1007515587278&utm_source=jobalert&utm_medium=email&utm_content=ja-jobpos3-1007515587278&utm_campaign=jobAlertAlert&pos=103&ao=1136043&s=224&guid=0000017dcf7b3588b1b8bd4c4b213707&src=GD_JOB_AD&t=JA&vt=e&uido=0A2A5FC36EC2C86818D82CB9F6FDB549&cs=1_40a18143&cb=1639863498319&jobListingId=1007515587278&jrtk=3-0-1fn7nmde7u3jp801-1fn7nmdf33oft000-63d7b5c56a73f9db-&ja=157471909&ctt=1639864781274&srs=EMAIL_JOB_ALERT&gdir=1

Kaitsu

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Re: So, you want to work as a trader?
« Reply #1 on: December 19, 2021, 12:06:39 PM »
What these people's/the industry's
definition of 'trader' is,  and what an independent retail trader might actually be, can be very different things...

Yes, indeed! And it also depends on what type of institution one is referring to. E.g. Investment banks, commercial banks, pension funds, etc.

It is a long, long time since I was a trader in a commercial bank dealing room, but even then there were similar variations in job responsibilities. People often think that banks are just rows and rows of guys just sitting there trading speculatively all day and making big profits. Whilst this may be one element in a bank dealing room, it is not a major function at all. For example, I remember that we had four main functional desks in our dealing room: domestic currency customer desk, interbank/market-maker currency desk, foreign interest rate loans desk and derivatives desk.

Much of the daily work was pricing products for domestic customers (companies, etc), interbank loans/currency market-making activity, funding the bank's own needs, balancing the bank's interest rate and foreign currency risk exposure, and balancing the bank's overnight account balances. This was all just routine stuff.

Only then did we deal in the "icing on the cake" personal speculative trading activities within pre-set risk parameters. My own area in those days included interest rate derivative products, mainly futures and options on eurodollar deposits and US treasury notes/bonds. But the bulk of my daily work was pricing, monitoring and adjusting exposure. A lot of routine and not a lot of cowboy trading! :D
« Last Edit: December 19, 2021, 12:09:38 PM by Kaitsu »
Ships are safe in harbour - but that is not what ships are for....

Caesar

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Re: So, you want to work as a trader?
« Reply #2 on: December 21, 2021, 10:55:43 AM »
Nice posts @PipMeHappy  and @Kaitsu

I think this side of things must be talked about more.

People who go into the industry are trained to perform
certain roles very well, sometimes they are narrow roles,
sometimes broader.

@Kaitsu  it sounds like you had quite a broad experience
within the field, indeed people like you should be heard
a lot more than people the fake gurus. But an easy penny
is always more alluring than hard work, and the cycle
of dreaming up millions (and losing money) will continue
to perpetuate itself.

Reality checking is much needed in this area of life - finance -
and looking at how the industry hires new recruits is
an interesting contrast to all the fake ads for 'traders' with
bogus companies who are just setting up to lure members of
the public into losing money.

We also have a huge misrepresentation of what 'financial markets'
are, as Kaitsu said indirectly by talking about just how many types
of banking areas there are, let alone trading, risk managing, onboarding,
data analysis, etc. The list goes on, and a lot of these jobs in banks
have zero connection with trading properly called... Indeed, the days of
'pit trading' when college graduates were put into the floor with zero
training and just learnt on the job are so over: a huge shift has gone on
in the last fifty years, and new job applicants (in trading, for example)
are no longer just going in with a degree but have to have a big long list
of skills, like programming/coding, etc. It is ever more competitive and
the talent pool has probably shrunk (but there is no data behind this
assertion).

I hope others will join in the conversation.
Hail Caesar.
No, just a bit of rain

Kaitsu

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Re: So, you want to work as a trader?
« Reply #3 on: December 21, 2021, 05:33:47 PM »
Hi @Caesar

Yes, I think there are a lot of myths going round and round about the "institutions" in trading. There are many kinds of traders and dealers and they are not all just speculating with institutional money.

Commercial banks are driven a lot by their corporate customers' needs whether it be currency exchange from their international business or foreign currency loans or acquisitions, etc. 

An investment bank may be more driven by fees income from handling clients' mergers/acquisitions stock exchange listings and so on.

Hedge funds and pension funds may be more driven by the need to optimise returns on the funds invested in them and they are, in that sense, more speculative. However, these institutions are strongly bounded by their portfolio criteria which defines what kinds of instruments they may invest in and what percentage exposure is allowed in different risk categories.

One should also not forget that many large international companies deal in such large volumes that they have their own trading rooms and traders. But an individual trader's licence to speculate is probably very limited both in size and range of instruments. Afterall, currency trading is not their actual line of business. And this is one reason why currency dealing is not a zero sum game in the wider sense. For example, if a company buys a large USD position to finance a deal, it just means that the current exchange rate fits the terms of the overall deal, it is not a view on the future direction of the USD.

One frequently mentioned issue with institutions is "stop-hunting" to win off the "naive retail traders".  I believe this is a total myth. For one thing, no single institution is capable of moving the forex market except in an extremely thin market and with a super huge position. And therefore for institutions to go "stop hunting" they would need to coordinate their activities across a number of such institutions. This is extremely unlikely!

In addition, even the smallest routine interbank transaction is USD5mill and more often in the USD 10-50mill range. So for these institutions to actually move the entire market sufficiently to reach the retail stops they would be building up some very large exposures! And when they reached that level they would then have to both unload and reverse these positions in order to take advantage of the stops being hit. Now if we assume that the average retail trader's stop loss amount is probably somewhere between 10-500 dollars then these wouldn't even appear on the institutional radar! They would just be steamrollered over without even noticing them!

If we add to that the situation that many retail trader positions are counterpartied by the brokers themselves, then these positions are not even in the interbank market! So if the institutions go to all that trouble to run markets up and down to find the stops, it is the broker that gains and not the institutions. Hardly makes much sense to me...

Another feature of the interbank market is that the main participants are also the market-makers and constantly offer a moving bid-offer spread. Without that function there would not be any continual price flow across the entire market. So, again, I think these large entities have far more important (and lucrative) work to do than pushing the market to steal the average retail traders' 1-2% stoplosses.

So, as @PipMeHappy says, there is a big difference between an institutional trader's work and a retail trader sitting in their homes with a PC on the desk.

Ships are safe in harbour - but that is not what ships are for....

PipMeHappy

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Re: So, you want to work as a trader?
« Reply #4 on: January 19, 2022, 07:49:56 AM »
Hi @Caesar



One frequently mentioned issue with institutions is "stop-hunting" to win off the "naive retail traders".  I believe this is a total myth. For one thing, no single institution is capable of moving the forex market except in an extremely thin market and with a super huge position. And therefore for institutions to go "stop hunting" they would need to coordinate their activities across a number of such institutions. This is extremely unlikely!

In addition, even the smallest routine interbank transaction is USD5mill and more often in the USD 10-50mill range. So for these institutions to actually move the entire market sufficiently to reach the retail stops they would be building up some very large exposures! And when they reached that level they would then have to both unload and reverse these positions in order to take advantage of the stops being hit. Now if we assume that the average retail trader's stop loss amount is probably somewhere between 10-500 dollars then these wouldn't even appear on the institutional radar! They would just be steamrollered over without even noticing them!


Such true words!! Print and frame on the wall!!! :)