Friday, January 14, 2011

How to Become A Proprietary Trader - V

The Career Path
Let's make one thing clear upfront: the hiring process for traders is highly competitive.

The conventional way of becoming a trader is to become an assistant trader to begin with. In reality, there is no such job as assistant trader. This is really more of a catch-all job title meant to attract interns. The assistant trader is generally responsible for verifying deals and working out problems with the back-office when he has a doubt. He also estimates the P&L (profit & loss statement) and verifies its main items, updates the prices in the morning, answers the phone, updates the spread sheets for pricing and the calculation of present or historic risk, monitors risks and positions, acts as liaison with research and helps provide quotes on big trading days.

In principle, the assistant trader should go on to become a trader, and eventually a proprietary trader, though there is no guarantee. He is unable to get hired into the position straight off. However interns are allowed a measure of freedom including contact and job rotations with traders from other desks.

Another way to become a trader is via the middle and back offices or risk management where the diploma requirements are more easily met. Above all, this path involves accepting a job and making a commitment to work there, typically for a minimum of 3-5 years. That is why age is so important. The younger you enter the field of trading, the better. A new trader must possess a dynamic personality, entrepreneurial spirit, intelligence, ambition and discipline to succeed in the field. In fact, the new graduates and assistant traders have priority over the front- and back-office staff in the scramble for front office positions.

You can take the direct approach and submit your application via the career opportunities page of corporate web sites where you may also find expensively developed training programs for young graduates to become traders, sales people, structuring people and analysts - in short, the firm's future managers.

In any case, landing an internship at the age of 22 is the key to the future, even though the hardest part is yet to come.

Can I be a prop trader if my qualifications are less competitive?
Yes. Provided you are dedicated, chances are there.

Many modestly-sized investment banks and stock brokers, whose profits do not mount into the hundreds of millions of dollars per trader, but offer people with less brilliant diplomas plenty of opportunities. As such, if someone performs well, even in a small company, he has every chance of being recognised and eventually handling more substantial sums, catch the eyes of headhunters and move on to work for bulge brackets. Therefore if you are taking the non-diploma path to success, the earlier you begin to make money, the better your chances for dealing with large funds and being hired by large banks as a prop trader.

What is Required?
Regardless of the path taken, the trader must be able to deal with technical and financial issues. Apart from the university math credentials, the job candidate must also have completed a solid year or two of graduate level finance or at least show a good understanding of economics and finance, a thorough understanding of financial issues, understanding of the main derivatives and the principles for pricing them, an understanding of the fundamental issues in finance and of the operations of the monetary system and the main players in the capitalist system. 

What is the Future?
When the time comes to make a change, a trader will find it hard to make the transition to a new career outside the trading room, given the job's degree of specialisation. Traders after 10 or 20 years of service may choose to retire early. Highly-driven individuals who have made a name for themselves may launch their own investment funds.

Action now
Browse the JP Morgan Intern Opportunities 2011 and go through the resume and cover letter tools in this blog and start your intern role searching. Also visit the career sites in this blog for more intern opportunities.

Download FREE eBook: "The Complete Guide To Day Trading"
If you are serious in a trader's role, better learn something about day trading now. Markus Heitkoetter, a professional day trading coach is offering his ebook for free and he promises to help you to become the trader you want to be.

Investment Banking Career