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    (Original post by crazyb)
    Sure, if you could turn in substantial profits, it will be completely irrational to go and work for a financial institution. Just one catch - most traders lose money!
    I'm sorry what? Where the hell did you get this ridiculous "fact"?

    Banks are businesses at the end of the day. If a trader is consistently losing money over a period of a few years, he will lose his job. Simple as.
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    (Original post by Nimiza)
    I'm sorry what? Where the hell did you get this ridiculous "fact"?

    Banks are businesses at the end of the day. If a trader is consistently losing money over a period of a few years, he will lose his job. Simple as.
    I'll repeat what I said - most traders lose money. The number of traders in financial institutions are small in number compared to the large number of market participants with directional bias.

    Many traders in banks are simply market makers - clearly not traders as they take the spread in return for providing liquidity.

    Oh - many, many prop desks at banks/financial institutions lose money. There's quite a big survivor bias here. loss-making desks disappear quickly and quietly.

    So before you make such confrontational comments, I suggest you calm down and think a little.

    From your post, you clearly have no clue about trading
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    (Original post by crazyb)
    I'll repeat what I said - most traders lose money. The number of traders in financial institutions are small in number compared to the large number of market participants with directional bias.

    Many traders in banks are simply market makers - clearly not traders as they take the spread in return for providing liquidity.

    Oh - many, many prop desks at banks/financial institutions lose money. There's quite a big survivor bias here. loss-making desks disappear quickly and quietly.

    So before you make such confrontational comments, I suggest you calm down and think a little.

    From your post, you clearly have no clue about trading
    What do you actually do?
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    (Original post by BetterThanHeaven)
    What do you actually do?
    As I am stating some facts, it's not relevant what I do.

    But if you must know, one of the many things I do is trade - sometimes successfully, sometimes less so, but it still beats a day job - in terms of rewards and lifestyle. Been at it in one form or another for the best part of a decade and I've seen many traders blow up (institutional and private)
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    (Original post by crazyb)
    I'll repeat what I said - most traders lose money. The number of traders in financial institutions are small in number compared to the large number of market participants with directional bias.

    Many traders in banks are simply market makers - clearly not traders as they take the spread in return for providing liquidity.

    Oh - many, many prop desks at banks/financial institutions lose money. There's quite a big survivor bias here. loss-making desks disappear quickly and quietly.

    So before you make such confrontational comments, I suggest you calm down and think a little.

    From your post, you clearly have no clue about trading

    Are you trying to differentiate numbers of traders from volume traded?

    Because the expected rate of return on a market portfolio (or, for example, stocks picked at random from the FTSE100) is >1.

    You're either communicating your point very badly, or you're chatting ****.
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    (Original post by PorcineAviation)
    Are you trying to differentiate numbers of traders from volume traded?

    Because the expected rate of return on a market portfolio (or, for example, stocks picked at random from the FTSE100) is >1.

    You're either communicating your point very badly, or you're chatting ****.
    Friend,

    My patience is starting to wane. There was never any talk of 'volume traded', just the number of traders (absolute)

    If you want to be technical, historically, the e(r) on risky assets has been positive, but that's clearly not the case now. The rise of derivatives, globalisation of financial markets/risk, means risky assets no longer need attract positive returns.


    If you don't buy the above, consider that markets can stay irrational longer than traders can stay solvent.
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    (Original post by crazyb)
    Friend,

    My patience is starting to wane. There was never any talk of 'volume traded', just the number of traders (absolute)

    If you want to be technical, historically, the e(r) on risky assets has been positive, but that's clearly not the case now. The rise of derivatives, globalisation of financial markets/risk, means risky assets no longer need attract positive returns.


    If you don't buy the above, consider that markets can stay irrational longer than traders can stay solvent.

    Absolute numbers of traders is a meaningless statistic, given your definition seems broad enough to include amateur punters.

    Derivatives and globalisation make a positive return on risky assets more likely.

    Been reading 'When Genius Failed'? Doubt it was Keynes.
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    (Original post by PorcineAviation)
    Absolute numbers of traders is a meaningless statistic, given your definition seems broad enough to include amateur punters.

    Derivatives and globalisation make a positive return on risky assets more likely.

    Been reading 'When Genius Failed'? Doubt it was Keynes.
    You want to talk for the sake of it? Enjoy! I'm off to grab more sunshine!
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    So who makes more? Someone on FO in IBD or a trader?
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    (Original post by mcp2)
    So who makes more? Someone on FO in IBD or a trader?
    This is asked so frequently it is unreal.

    Average banker will make more than the average trader. The very top traders will make multiples of the very top banker.
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    How difficult is it to switch between the two?
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    (Original post by mcp2)
    How difficult is it to switch between the two?
    They're both very different. Probably slightly easier to switch from trading to IBD than vice-versa, but difficult.
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    (Original post by crazyb)
    I'll repeat what I said - most traders lose money. The number of traders in financial institutions are small in number compared to the large number of market participants with directional bias.

    Many traders in banks are simply market makers - clearly not traders as they take the spread in return for providing liquidity.

    Oh - many, many prop desks at banks/financial institutions lose money. There's quite a big survivor bias here. loss-making desks disappear quickly and quietly.

    So before you make such confrontational comments, I suggest you calm down and think a little.

    From your post, you clearly have no clue about trading
    This is an astoundingly flippant comment. There is a disparity in definitions, and yours are unspecific and ignorant to the massive variety of actors in the market.

    You seem to be defining an average joe who puts money on stocks in his spare time with his savings as a trader. He is not a trader, he is a retail punter.

    You seem to be defining asset managers and hedge fund managers as traders. Again, this is simply unclear and resultingly is never used.

    You seem to be saying market markers at banks are not traders. Believe it or not, a market maker who is also a dealer, i.e. not only provides liquidity but takes on risk, is a trader. You could qualify this as a flow trader if you wanted, but a trader nevertheless.

    Using these definitions, even if you account for loss making prop traders at banks, most traders make money since there are a lot more flow traders (by my and the industry definition) than prop traders.

    I know plenty about trading, but you clearly don't know your definitions and are lumping anyone who puts money on the stock market as a trader. This is far too vague and demonstrates your lack of knowledge of the industry.
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    "I know plenty about trading"

    "most traders make money"

    Yawn........Yawn............

    Great - you've managed to give me a rather long-winded overview of different market participants. The fact that you need to write all this on TSR shows you have nothing better, or more constructive to write.

    In simplicity there is beauty - something you've not been able to master and I therefore suggest you give such lectures to academics rather than pragmatists.

    Once you have come to your senses young man, feel free to PM me and we can discuss further.



    (Original post by Nimiza)
    This is an astoundingly flippant comment. There is a disparity in definitions, and yours are unspecific and ignorant to the massive variety of actors in the market.

    You seem to be defining an average joe who puts money on stocks in his spare time with his savings as a trader. He is not a trader, he is a retail punter.

    You seem to be defining asset managers and hedge fund managers as traders. Again, this is simply unclear and resultingly is never used.

    You seem to be saying market markers at banks are not traders. Believe it or not, a market maker who is also a dealer, i.e. not only provides liquidity but takes on risk, is a trader. You could qualify this as a flow trader if you wanted, but a trader nevertheless.

    Using these definitions, even if you account for loss making prop traders at banks, most traders make money since there are a lot more flow traders (by my and the industry definition) than prop traders.

    I know plenty about trading, but you clearly don't know your definitions and are lumping anyone who puts money on the stock market as a trader. This is far too vague and demonstrates your lack of knowledge of the industry.
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    33 replies and no one's really answered the OPs question in a simple, clear, and succint manner. Is it that difficult to explain what a trader/market maker does in language a 10 year old would understand?
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    (Original post by Prince of Zamunda)
    33 replies and no one's really answered the OPs question in a simple, clear, and succint manner. Is it that difficult to explain what a trader/market maker does in language a 10 year old would understand?
    ??
    Traders are there to manage risk.

    While generating profit is the end-goal, it is a consequence of risk management in the first place. When a bank takes the other-side of a deal or trade for a client, there is risk to manage. That might be the other-side of a simple GBP/USD transaction, or something like a snowball - rarely will a bank let that position just sit there.

    It comes back to why banks exist in the first place. Beyond the simplistic ideal of matching those who have too much capital with those who don't have enough - banks are essentially one-stop shops for all financing needs for corporations or other institutions.

    A lot of the time they will be there to hedge risk, but sometimes entities might want exposure to FX rates, interest-rate fluctuations, or junk-rated residential mortgages - banks can cater to that - and eventually, the risk needs to be managed.
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    (Original post by crazyb)
    "I know plenty about trading"

    "most traders make money"

    Yawn........Yawn............

    Great - you've managed to give me a rather long-winded overview of different market participants. The fact that you need to write all this on TSR shows you have nothing better, or more constructive to write.

    In simplicity there is beauty - something you've not been able to master and I therefore suggest you give such lectures to academics rather than pragmatists.

    Once you have come to your senses young man, feel free to PM me and we can discuss further.
    In your "simplicity" there is inaccuracy and generalisation. A simple example of this is what happened earlier: you claimed most traders lost money, I claimed they didn't, you claimed I was wrong. In fact, thanks to your lack of accuracy in definition, we were talking about different things. This is not beauty.

    I by no means over-complicated the matter: I simply correctly defined and identified it.

    Whilst you ponder that, consider losing your condescending and arrogant attitude. It's extremely misplaced. Pragmatism is not the same as ignorance.
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    What traders do is for a major part firm, desk, and role dependent.

    Firm: You have a whole ecosystem of financial firms participating in the markets.

    -Proprietary (true prop) firms trade their own capital and many are market makers for various derivatives, ETFs, stocks (high-frequency) products. Ex: Optiver, Jane Street, Susquehanna, Tradeworx

    -Banks: this is likely what you are referring to. Has a global platform trading just about anything that can be traded. Has the most diversity in desk mandates (everything from support say on a prime brokerage desk to illiquid investment say for the firm's own accounts)

    -Independents/Arcades: Takes in traders who provide their own capital, firm provides infrastructure and charges fees, eat what you kill attitude. Can be shady.

    Desk: The major products all have their own cultures including hours, relevant skillset, duties etc.

    -Equities: Can range from stock trading to exchange traded derivatives to structured equity derivatives.
    -FI: typically broken down into rates (handles sovereign debt, inflation and derivatives), credit (handles corporate debt and derivatives including structured aka CDOs, traches etc), currencies, commodities.

    Role: This is a part where I'll go into a little more detail.

    -Typical bank desk: in a typical bank desk, your job is to provide markets for your clients. However, in addition to providing markets you are also typically taking on proprietary risk where you are positioning your book according to your view/strategy. So say you are on a credit desk trading, your clients may call you asking for the market for a particular bond/CDS. You will provide prices where you will sell or buy product from them. In addition, you may be cultivating a book position which expresses your view on a particular industry or name you are trading.

    -Proprietary desks: Completely pure proprietary trading desks are fairly uncommon but they do exists and some are very well reputed. Your job isn't to provide markets for your clients but to make money by speculating/investing/arbitraging (nowadays its all the same) in particular products. So say a macro prop desk will trade everything under the planet to make money off of top-down analysis. This is definitely harder to do because you aren't earning the bid-ask profits that your counterparts in other desks are earning. Other prop groups might be investing money directly into companies, debt issuances etc. This of these guys as essentially a HF/PE firm with its own AUM (its VAR limits) inside a bank.

    -Proprietary trading firms: Now proprietary (true prop) firms have a different mandate. They don't have clients and all their capital is in-house which is used to trade. Most of these firms make markets in exchanges and typically are in the business of providing liquidity. For example, you have firms like JSC/Susquehanna making markets in options exchanges, operating stat-arb opportunities, derivatives arb in ETFs etc. However, they can do whatever they want because its their money. So you have firms like First New York where they do directional trading of equities, FI, currencies etc. Anything that makes money. You also have firms like Tradeworx/Getco which do high frequency shares trading and are some of the primary liquidity providers in equity exchanges (that mini market crash in US was exacerbated because a number of HFTs stopped posting bid/asks due to huge vols).

    Entire posts can be devoted to each of those partitions in trading. Let me know if you guys have questions and I will try to answer them to best of my abilities (not very high ).
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    (Original post by crazyb)
    I'll repeat what I said - most traders lose money. The number of traders in financial institutions are small in number compared to the large number of market participants with directional bias.

    Many traders in banks are simply market makers - clearly not traders as they take the spread in return for providing liquidity.

    Oh - many, many prop desks at banks/financial institutions lose money. There's quite a big survivor bias here. loss-making desks disappear quickly and quietly.

    So before you make such confrontational comments, I suggest you calm down and think a little.

    From your post, you clearly have no clue about trading
    If you work for one of the top ten global Investment Banks, you are never just a market maker. You warehouse risk rather than merely hedge it, you take large proprietary positions despite the fact you are not a prop trader, you often make over half of your annual P&L from non sales-related trading. If you lose money then you won't last very long. If your total P&L is less than the P&L attributable to you from market making, you won't last very long. If you prove yourself unable to trade successfully on behalf of the bank, you won't last very long.

    Yes there are a handful of traders who blow up, often at more than one shop. And yes there are plenty who lose money. But the majority of traders currently working at tier1/tier2 IBs will make money consistently over a 12 month period.

    80% of spread betters lose money but they are such an inconsequential part of the maket that they're not really worth mentioning.
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    (Original post by roussell)
    If you work for one of the top ten global Investment Banks, you are never just a market maker. You warehouse risk rather than merely hedge it, you take large proprietary positions despite the fact you are not a prop trader, you often make over half of your annual P&L from non sales-related trading. If you lose money then you won't last very long. If your total P&L is less than the P&L attributable to you from market making, you won't last very long. If you prove yourself unable to trade successfully on behalf of the bank, you won't last very long.

    Yes there are a handful of traders who blow up, often at more than one shop. And yes there are plenty who lose money. But the majority of traders currently working at tier1/tier2 IBs will make money consistently over a 12 month period.

    80% of spread betters lose money but they are such an inconsequential part of the maket that they're not really worth mentioning.
    Sure, some traders in banks take a view and retail traders are relatively insignificant. That however does little to change the fact that the bulk of traders lose money. Perhaps we should be discussing the ambiguity associated with 'trader'.













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