Career Decision - Trading?
During my crazy trading stint, I was strongly considering a career change (this was before Google came along). I had interned at Microsoft the summer before as a software engineer and wasn’t 100% sure that it was the thing for me. Because I had been fairly successful in my short trading experience, I thought that it might be a potential option to explore. I did realize, however, that the sample size for my trading was so small that I could not base a long-term career off of my recent success.
So here were the trading options that I found interesting:
- Sales and trading - These guys work on the trading floor and make money off of the spread between bid and ask prices.
- Proprietary trading - According to this article, “Most prop traders that are members of, or work in, a ‘proprietary trading firm’ are asked to risk their own capital in front of the firm’s capital. They are not employees with a job on Wall Street!”
- Quantitative trading - These mathematically oriented traders model the markets in order to assist traders. They are often referred to as “quants.”
After much research into Sales and Trading, I found that it typically takes at least 2-3 years as a trading monkey until you get any responsibility. I found the book Liar’s Poker to be particularly entertaining and enlightening about institutional trading. If you’ve ever read Monkey Business, which is about the investment banking industry, Liar’s Poker is very similar in style. In addition, an S&T trader does not really deal with stocks in the same way that you or I do - they mainly are concerned with maximizing profit on the spread.
Proprietary trading seemed particularly enticing to me, primarily because of the freedom it offered (and is almost identical to my poker career). Proprietary trading firms essentially train you - usually at a fee - and give you the trading systems and strategies you need. You usually risk your own capital and give the firm a cut. The position offers great reward at great risk. Most, however, require you to trade within a certain sector or industry. I didn’t like the limitations and risks involved in proprietary trading.
Quantitative trading seemed to me like the most interesting of the three positions because of my technical background. I attended a quant talk at Berkeley and found that most quants are have doctorates (typically physics, math, and engineering), but that they are in such high demand now that many are hiring straight out of undergrad or masters. These guys are the brains behind the majority of institutional trading programs at hedge funds and major trading firms. I was so intrigued that I took an upper division math prerequisite - mathematical analysis (supposedly the toughest upper division math course in Berkeley) - for Berkeley’s Masters in Financial Engineering program. While I handled the course all right, I didn’t find myself passionate enough about the material to continue with the prerequisites.
Furthermore, it was about this time that Google came along and I got my product management internship offer from them. Also, some friends and I had decided to run with our idea and officially start a company. I decided to abandon the trading career idea and pursue entrepreneurship instead. It seemed to me like investing would always be more enjoyable for me as a hobby as opposed to a full time job.