Forget working for a bank, should you just become a prop trader?
You know the meme: working as a trader in a bank these days is boring; you'll make no money, you'll be living on pot noodles, and - given the extreme competition for places - you probably won't get in anyway.
In the circumstances, why not simply trade your own money? If you're good, you can make a very decent living.
Prop traders in the UK have had their financial cause championed by the unlikely role models of Navinder Singh Sarao and Tom Hayes, one of whom is facing imprisonment and the other of whom has been imprisoned already. Singh Sarao allegedly made $900k in a single day and $40m over four years trading his own account. Tom Hayes, meanwhile, opened a trading account after leaving Citi and initially made £960k in profit on his £1m trading book. Impressive.
With numbers like that, it's unsurprising that trader-training courses are popular and multiplying. Amplify Trading says its course is twice over-subscribed. Futex (where Singh Sarao trained), told us it receives 1,000 applications for its graduate course and accepts 75 people a year in London.
The latest to wade into the space is ex-Goldman Sachs trader and hedge fund manager Lex Van Dam, who's opened a three month trading course in London starting December 2015 and costing £6k. "If you can actually get a trading job in an investment bank, it's not a bad way to start a career," says Van Dam. "But there aren't enough of those jobs to go around and there are a lot of talented people who are left on the shelf." Van Dam's course, which uses in-class simulators for training, is run in conjunction with proprietary trading house Met Traders, and Met Traders might offer the most talented trainees a job at the end of it.
Not everyone is certain about the proliferation of trading courses, however. "A lot of traders are getting into teaching other people because it's an easy way to make money," says one prop trader. "It's a lot easier than trading, there's no risk. It's a bit of a no-brainer really."
Tom Hayes' experience underscores the fact that trading your own money isn't a one-way route to riches. After making £960k to begin with, Hayes went on to lose hundreds of thousands and was eventually left with nothing at all - despite having years of experience as a trader in an investment bank. "Trading your own money can be stressful," says Tom Dante, a well known day trader who's very active on Twitter. "There aren't many jobs where you can work a 15 hour day and come away with a loss."
David Hesketh, the ex-Merrill Lynch structured products trader who now runs Trading Hub, a trading game and simulator, says prop traders sitting at home or outside big banks will always be at a disadvantage because they don't have the same access to information on trading flows and central banks' plans as traders in banks do: "It's possible to make money as a prop trader, but it's not without its risks." Hesketh suggests you're best off placing trades based on geopolitical information, like the situation in the Middle East, because here the situation is as opaque for banks as for anyone else.
Dante trades currencies. He started out as a journalist and slowly segued the day job into trading full time after spending some time at Futex. You probably need at least £10k to start, he tells us. And if you're good, you could make £2k a month on that, but you're not leaving yourself much margin if things going wrong.
"The problem is that once you lose money, you need to make it back again and to earn an income on top of that. "You're putting yourself under more pressure," says Dante. "The more money you have to begin with, the easier it will be to make a living."
Photo credit: slimmer_jimmer