How do I get a trading job?
Getting your first trading job requires a bit of work. It's a competitive business, after all, and offers the potential of making some of the best money in finance. The bigger trading firms - commodity firms, investment banks, and retail banks - will often interview at the top universities. If you've just completed a math or economics undergrad program or an MBA degree, your school is a wonderful resource for entry level spots. Make sure to take advantage of the recruiting days on campus.
The firms that come to these events interview for associate positions. These new hires will move about through different trading groups or desks, taking a variety of training classes along the way. These classes are rigorous and intended to eliminate the low hanging fruit. To be successful, it helps to have a stand out personality.
The smaller trading firms do advertise assistant trader positions. However, there are still many trading positions that will never be advertised. This is when it helps to know someone in the industry. Because it's common for people to move into trading from some other area, your connections at this step are important. How do you make these contacts if you've never worked in the industry? Think college internships, or use your school's alumni network if you've already graduated.
Finding alternative routes into a firm can also work. Take a look at the list of member firms on different exchanges and visit their Web sites or contact them directly. Remember, mutual fund firms also have trading desks. Look at jobs in the analyst department or at one of the many firms that support trading operations. There are companies that service and provide applications and clearing services to trading firms. And a huge number of people support trading operations in everything from network management to accounting. A position in a related department or organization can provide you with inside information on job openings at a trading operation.
What types of trading jobs are available?
Whatever firm you work for, new folks generally start out as assistant traders. At a small shop that may mean making coffee runs, building spreadsheets, and doing lots of research. If you want to start at a smaller firm, do your research before you apply. It helps to know exactly what they do and how you can help them. Look for what products they trade, what professional organizations they belong to, and where their management started before working there. Traders from larger institutions are the ones who've started many of today's smaller firms. The interview process is tough, which is how they winnow out applicants who can't deal with high amounts of stress.
At a big firm, you'll do more coffee runs, build more spreadsheets, and do a lot more research as you learn about the extensive and complicated nature of the business. But don't assume that you'll get lots of authority right away. They don't put new hires without a track record in charge of millions of dollars.
Generally, you're required to hit the ground running. Firms need to see how you react and deal in a risky and very error-intolerant environment. Most of the real experience comes when you begin trading. There are a variety of things to trade, including stocks, bonds, commodities, fixed income, or derivatives products. If you have considerable experience and an educational background in mathematical modeling and programming, then you can build and back test trading models.
What is a proprietary trading firm or prop shop?
Proprietary trading is trading with the firm's assets, as opposed to for customers. Most major firms and banks have proprietary trading groups. The difference between these and pure "prop shops" is that the latter do nothing but trade.
What's better to get - an MBA or a CFA?
The bigger firms are looking for the best and brightest from the pool of math and economics majors. It certainly helps to get your foot in the door by having the necessary educational background. The MBA is generally a good place to start. For traders, the MBA is becoming increasingly expected, especially for those looking to work at larger firms. However, a CFA (chartered financial analyst designation) is something a smaller number of traders do obtain, especially if they're working on the sales side or as analysts.
The non-profit CFA Institute, which awards the CFA, describes the designation as a "self-study graduate level program for investment professionals." There are three separate exams for the CFA, but there are also prerequisites to garnering the certification. Additional details on the CFA can be found at the association's website.
The big firms expect their new hires to have an MBA from a top-tier school. Many prospective candidates have already finished the degree before they get an official trading spot.
What kind of program should I do at school to get a trading job?
For those in an MBA program, it helps to focus your degree on finance or economics. Most MBA programs require some sort of concentration, and others offer the option of a dual concentration. Some dual concentration programs require the student to complete additional credit hours beyond the normal degree.
For those interested in an even higher-level degree, it doesn't hurt to go for the PhD in math. While a lot of work, there's lots of money to be made by those willing to take this path. Generally, quantitative trading jobs require someone with a Ph.d. (Quants are essentially high-frequency traders.)
But no matter the degree, nothing replaces the on-the-job experience, and doing your homework is the best thing you can do to land your desired position. There are traders who started out as analysts, and even traders who began their careers by learning the in's and out's of the business at a financial news service.