Trading with a mathematical background

[gradaplicant]

In the last couple of weeks I have been reading a lot of threads (some by me) here about trading and how to pursue a career in trading while coming from a mathematical or financial engineering background.

The only answers I got were that mathematical background was not preferred for traders and in a lot of cases looked down on and as a downside to a prospective trader. At least it would in no way help you towards this career.

Last night I was browsing the internet, like many nights, and came across an interview with a prop trader which was not in perspective with the advice I had gotten from many members here. I thought that I would share it here, and perhaps get some input from the members here.

http://www.mergersandinquisitions.com/proprietary-trading-careers/

Proptrader (about interviews at prop trading companies): "Generally, they ask more math questions and brain teasers in the first round because they use them as a screen to see who can perform under pressure, think on their feet, and reason their way into solutions."

Proptrader (about what kind of people prop trading companies look for): "but they tend to focus on top engineering schools and good Tier 2 schools with solid technical programs because they want math/science/engineering people rather than the usual finance and accounting crowd."

How can this be? Is prop trading just different from trading at IB or HF? According to this I can't see how a technical background would do anything other than give you an advantage, and that a MFE degree would give you an even bigger advantage.

 

[tfors]

I am from a (humble) prop trading environment. I can imagine trading at IB is much more commercial than prop trading. Maybe math people are not considered commercial enough?

 

[Alexander Krosky]

Trading at a bank is very different from trading at a prop shop or hedge fund. Quant skills won't help you as much with trading in banks, which is flow trading. In flow trading you are just market making around customer order flow. In prop shops you are taking directional positions and some desks tend to have very little risk management. Quant skills can be very useful depending on the desk; it's really idiosyncratic. That being said, prop shops will take on anyone that they think will make them money. If you can prove your quant skills by developing good systematic trading strategies then that will entice them because they can expect that down the line you'll at least put out some systematic strategies.

It's difficult to break into prop trading with an MFE. They tend to take undergrads from the top ivy leagues. If they want quant skills they can usually get PhDs from top research programs. Getting a hedge fund trading gig is impossible with no prior trading experience. Usually hedge fund traders start off in banks or prop shops.

 

[Jayanthan]

Thank you. It is very informative. I am still wondering what exactly quants (MFE graduates) do in the industry?

 

[Andy Nguyen]

Have you seen our master reading list?
http://www.quantnet.com/forum/threa...uants-mfe-financial-engineering-students.535/

 

[Jayanthan]

Thank you Andy, I have seen that site. I've just finished reading "My Life as a Quant: Reflections on Physics and Finance". It is informative, but he spent 10 yrs of doing PHD and became quant. How is that possible to become a quant through 1 or 2 yrs of MFE program?

I watched the movie "The Bank". In that movie, mathematician predicted the market through sophisticated mathematical equation. I've read about Long-Term Capital Management as well. If I said that " quants are trying to do something similar to the movie "The Bank", or "LTCM", would I be right? or I am missing some points here?

 

[Alexander Krosky]

There has never been and will never be a single mathematical equation that can predict the market. Now an algorithm, that's a different story.

 

[Jayanthan]

There has never been and will never be a single mathematical equation that can predict the market. Now an algorithm, that's a different story.

opps. I meant an algorithm not a single equation!

 

[Li Cai]

opps. I meant an algorithm not a single equation!

Should read "The Complete Guide to Capital Markets for Quantitative Professionals"