by Brian DeChesare Comments (128)

Prop Trading 101: How You Break In, What You Do, and How Long It Takes to Make $10 Million and Retire to Your Own Private Beach in Thailand

Prop Trading 101: How You Break In, What You Do, and How Long It Takes to Make $10 Million and Retire to Your Own Private Beach in Thailand

During my final year of university when I was recruiting for finance jobs, I never put much thought into prop trading.

But then one day I saw an interview slot listing for a mysterious “proprietary trading firm” and immediately asked my trader friend across the hall whether I should apply.

“Dude,” he said, “You can make hella money if you do prop trading. People make millions of dollars right out of school. You should go interview with them – they love technical and engineering majors too!”

Lured by the dollar signs, I went through multiple rounds of interviews and ended up winning an offer at a well-known prop trading firm – but then turned it down to do investment banking instead.

Which may have been a huge mistake.

In this new interview with a prop trader, you’ll learn exactly why I might have blundered back then – as well as:

  • How to network and break into prop trading.
  • What to expect in interviews and how similar they are to S&T interviews at banks.
  • What you do as a prop trader, and what your average day is like.
  • How much money you’ll make, and whether or not there are any exit opportunities.

Let’s get started:

The Story So Far

Q: Let’s start with your story and how you broke into prop trading – how did it all begin?

A: I didn’t follow the typical finance “track” because I was an engineer in university, went through academic research, and then did a few corporate internships.

I didn’t feel like I would make much of a difference working at huge companies, so I got more interested in finance and started looking at firms that would hire students with technical backgrounds.

Since my school was close to Chicago and since the economy was much better back when I was recruiting, plenty of companies came to campus to recruit engineers for all types of positions.

I interviewed with 3 different prop trading firms on campus, and won an offer despite having less of a finance background than the other candidates and a lower GPA (around 3.0) – I convinced them that I wanted to work there more than anyone else, and in trading they sometimes value “hunger” over academic achievement.

Q: That makes sense since traders care a lot about your “appetite” for success.

But it couldn’t have been easy to work there if you didn’t have much of a finance background – how was it when you first started?

A: I actually struggled a lot at the start – it’s a brutal environment at many prop trading firms and your experience depends 100% on what the head trader in your group is like.

As a clerk (entry-level position at prop trading firms), you don’t know what you’re doing and you’re completing tasks such as reconciling trades – so you don’t exactly get much guidance or exposure right when you start out.

After a while, I started performing better and was promoted to a junior trader after 8 months there. That can be on the low side for promotion to “real trader” status, but it depends on the size of the firm and your performance.

Q: We’ll circle back to what you do on the job in a bit, but what happened after you were promoted to junior trader?

A: I spent about 18 months there working in Chicago, and then went to London to help restructure the trading group we had in place there.

Then, less than year into that, I left to go join a colleague who had left our firm to start his own group at a small firm back in Chicago.

We did well for a few years and hired a few people there, and then my colleague took off and I tried to start another group – which didn’t go too well due to the credit crisis affecting liquidity.

Long story short, I ended up back at my original firm, and have been expanding into another new market since then.

Q: So it sounds like you’ve bounced around quite a lot, though I’m noticing one common theme here: Chicago.

Are there not as many prop trading firms in New York and other places?

A: In the US, it’s definitely concentrated in Chicago. There are a few in New York, but it’s much more institutionalized there whereas Chicago is more about market-making.

Most of the big prop trading firms are based in Chicago and are still doing really well despite the crisis, recession, and everything else that has happened.

Breaking Into Prop Trading

Q: So it sounds like one of the keys to breaking in is being near Chicago so you can network effectively.

But besides location, what else can you do to get yourself noticed and land interviews with these firms? Many of them are small, extremely secretive, and don’t even do on-campus recruiting.

A: Networking is your only option – you need to speak with someone at the firm and have him pass along your resume. Get in contact with a trader there – whatever it takes – and pitch yourself to get on the firm’s radar.

Some of the bigger firms in Chicago actually do recruit on campuses, 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.

You run into more trouble with the really small firms – groups of 8 – 10 people that might specialize in something very specific such as Eurodollar options.

If they’re doing relatively well – making, say, $10 million+ per year, they have little incentive to recruit aggressively unless they’re looking to expand into a new area or unless they really need extra help.

Q: Right, but those are exactly the types of firms that many readers would target.

Those firms release almost no information publicly, so how can you even find traders there if you want to cold-call or cold-email them?

A: Your best bet is LinkedIn – even if the firm itself doesn’t have a website or lists no information publicly, people will still list the company they work at on their LinkedIn profiles. So you could go through and search for “prop trading” or “proprietary trading” and see what results turn up.

You could also go through exchange websites – they list the clearing members and you can track down people there who don’t even have an online presence.

And then you could get even more creative and search for something like “Trading LLC” on Google in a certain geography, find the full name, and use that to look for more information and look up people who work there on LinkedIn

Once you have the contacts, then it’s just a matter of following the usual advice here on cold calling and cold emailing. Just make sure you don’t cold call traders during market hours!

You could also use informational interviews, weekend trips, and so on if you can find alumni from your school who are in prop trading.

Q: And what should you expect in interviews? If you make the sales & trading vs investment banking comparison, are they more like trading interviews, where you have to pitch investment ideas, answer brain teaser questions, and so on?

A: Yes, the questions are similar to what you get in trading interviews.

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.

One really important point to make here is that getting these questions wrong is OK – they care more about your thinking process than your answer. The worst thing to do is to freak out and apologize every 2 seconds or to second-guess yourself constantly.

In the second round, you’ll still get brain teasers but they will also move into more behavioral questions: how do you cope with stressful situations? What would you do if Random Disaster X happened?

A lot of it is figuring out what your instincts are like and how well they get along with you. As a trader, you’re glued to all 8 of your monitors all day and you spend a lot of time hanging out with everyone else there.

So not fitting in is even worse than not fitting in investment banking because you don’t go to meetings or visit clients during the day.

The most important points in interviews are to come off as confident, but not cocky, and to meet the minimum bar in terms of math and problem-solving abilities.

Q: Earlier you mentioned that you “convinced them that you wanted to work there more than anyone else” and that played a big role in landing your offer at the firm – how exactly did you do that?

A: As I mentioned, my undergraduate GPA was only around 3.0 – on the low end of all the other candidates – so although I interviewed well, I was waitlisted because other candidates still had better academic backgrounds.

They promised to “let me know in 2 weeks,” but I wasn’t satisfied with that response so I typed out a passionate email to the Partner I interviewed with and said that I would work for free and would do anything possible to get in.

I even went as far as saying that I would clean the bathrooms and do menial tasks – I would have done literally anything to win an offer.

All the other applicants were much more reserved and didn’t try anything like this, so I came across as honest and hungry, and that pushed me over the edge into winning an offer.

With this type of strategy, the key is to prove that you’re genuine – you must show off a history of this kind of passion and demonstrate how you act this way in everything you do.

A Day in the Life of a Prop Trader

Q: That’s a great story, and it goes to show how effective it is to want the job more than anyone else.

In the beginning I didn’t bother to define “prop trading” because I assumed that everyone reading would be familiar with it, but let’s take a step back and do that – how would you describe it?

A: Sure. There are a couple different types of trading, but the basic categories are agency trading and proprietary (prop) trading. With agency trading, you execute orders for clients and take a commission on each trade. The challenge there is finding enough willing parties to properly buy and sell large blocks of securities.

With prop trading, by contrast, you’re the principal and you invest your own capital in whatever way you want, within the strategies you’ve chosen and your risk limits.

Small prop trading firms can’t compete with large banks when it comes to executing trade orders for clients because they don’t have the same resources and networks at their disposal – so they focus more on coming up with trading strategies and investing in areas where there’s less competition.

Many prop trading firms focus on market-making, which is a form of trading where the company acts as both the buyer and seller for a type of security and makes money on the bid-offer spread.

For example, if an institutional investor wants to sell 200,000 shares of a stock at $10.00 per share but can’t find anyone willing to buy that volume at that price, a market-maker might step forward and offer to buy the entire block at $10.00 per share – even if they don’t yet have a seller lined up.

Then, they would aim to sell it for more than $10.00 per share to another investor who’s looking to buy the same stock but can’t find it in the volume he’s looking for.

So that’s an example of what you might do at a prop trading firm, but the strategies used go way beyond that; the line between trading at hedge funds, trading at banks, and trading at small prop trading firms starts to blur past a certain point.

Also, note that most prop trading firms focus on fixed income and commodity derivatives rather than equities – and if they do something equities-related, it’s usually index derivatives.

Q: Thanks for that example. I do want to return to the hedge funds vs. banks vs. prop trading firms point in a bit, but for now let’s keep moving forward with what you do on the job.

What’s your average day like? Can you walk us through what happens from beginning to end, the hours worked, and so on?

A: It depends a lot on your position – clerk vs. junior trader vs. Partner – and also the firm type and geography.

I’ve worked at both the clerk and junior trader levels at both big and small firms, and in both Chicago and London, so I’ll try to go through all of those without making it too confusing.

As a clerk in Chicago, I would get in between 6:00 and 6:30 AM and would start off the day by reconciling trades from the overnight European shift. Then I’d start producing position reports for all the traders showing exactly where their money went the day before and where it is right now.

The trading day would start at around 7:20 AM for those in Fixed Income, and I would spend most of my days making sure that their positions were properly updated whenever they asked for more information or needed it to make another trade.

At the end of the day, I would spend time reconciling all the trades from that day and making sure that we were set for the next day of trading. I usually left the office around 6 or 7 PM as a clerk.

As a trader, I got in around 6:45 AM (sometimes a bit earlier), and the day would start with a morning meeting to go over overnight happenings.

After that, you might go down to the trading floor itself if you work there, or you might go to your desk and start monitoring the markets and news, and to begin making trades.

If you’re working on the floor, you’re busy making markets all day long (similar to the simplified example I described above), but you may also be talking to other traders on the floor or the rest of your team to get a pulse on the market and figure out who’s making different trades.

At the end of the day, everyone gets together to discuss the major trades that happened that day and who might have been behind them – at a large prop trading firm you have good market insight because you get exposed to everyone from major institutional investors to smaller firms and individual investors.

We might also talk about market-making overall, upcoming economic events and announcements, and so on.

If you’re senior – a Partner at a prop trading firm – you might leave at 3 or 4 PM in Chicago because the Fixed Income pits there close at 2 PM.

As a junior trader, you might be there until more like 6 – 7 PM because you have to do more work and analysis after the market closes.

Q: Awesome, thanks for that detailed description of both roles and the hours involved.

What about your experience at the firm’s group in London? Was it roughly the same hours and tasks there?

A: The hours were worse in London because we had to monitor both the European and American markets.

So as a trader, I got in at around 6 AM – and even earlier than that as a clerk – and I would trade straight through until 6 PM to catch both markets. I usually left around 7:30 PM, so I was at work anywhere from 12 – 14 hours per day, with most of my time spent glued to my screen.

Q: Sounds pretty brutal. I guess the message is, “Try to avoid trading multiple markets, if possible, or you may develop a monitor tan after enough exposure.”

What about your experience at the smaller prop trading group you started with your colleague?

A: Since it was a smaller environment, the hours were much more variable. I could put in as many hours as I wanted depending on what I wanted to get out of it and what my goals were.

When I first started, I woke up at 4:30 AM and got in by 5:00 AM every day to take advantage of a certain market we were getting into; I would go to sleep, wake up again to trade markets at night for a few hours, and then go to sleep again and wake up really early once again.

Small firms can sometimes be more flexible with your working arrangements, and I’ve seen traders win permission to trade from home, take more vacation days, and take time off when they want.

As long as you make a lot of money, they don’t care too much about strictly monitoring you.

At big firms, by contrast, many people only take 1 week of vacation time per year (outside of the major holidays), and your schedule is much more dependent on your seniority at the firm.

Q: Very interesting to note. I don’t think this “work from home” concept would ever fly at a bank or PE firm, but it’s great to take advantage of if you can get it.

How else is life different at a small prop trading firm vs. a large one?

A: It’s a much different environment in terms of personal risk.

At a bigger firm, even if things don’t go well in your group and your P&L doesn’t look great or you lose money, you still make at least base salary and you’ll get some form of bonus. And if liquidity dries up or the spreads get too tight, you can always move to another group at the firm.

So there’s less risk and more security for you.

You make much bigger trades as well, so the mentality is quite different – a single trade there might actually move the markets, and you can gain more insight into why the markets might be mis-priced because your counterparties are often large hedge funds.

Just as one example, when I worked at the large prop trading firm, I would know whenever Brevan Howard (a huge force in Fixed Income, options, and futures) was doing something. After a while, you start to recognize the size and style of trades a firm like that makes, which gives you more color on the market.

At a smaller firm, you don’t have that kind of insight so you must be more careful with the positions you take and the amount of leverage you’re using. If the spreads move way out of line, for example, and you don’t know why or you don’t have enough capital, you might need to close out your positions.

Prop Trading vs. Hedge Funds vs. Sales & Trading

Q: You just went over the differences between prop trading at small vs. large firms, but what about trading at prop trading firms vs. hedge funds vs. sales & trading at bulge bracket banks?

Obviously the amount of capital under management is a lot different, but what about the trading strategies themselves and the markets you trade in?

A: Besides the capital under management, the biggest difference externally is the return on capital.

At prop trading firms, you could easily get returns of over 100%, and it might be more like 200 – 300% depending on the firm.

But with a larger capital base it’s impossible to do that. If you had $20 billion under management, a 200% return would turn you into a $60 billion firm, and you couldn’t replicate the same strategies year after year.

You might see tens of millions or less invested in prop trading firms, and the much lower capital base explains why they can earn such high returns.

The markets they trade in are also much smaller – if a prop trading firm had $50 – $100 million invested in a specific product like natural gas options it might be the biggest market-maker (but not necessarily the biggest player) in the space.

Hedge funds, by contrast, tend to be much larger and focus more on directional trading (simply taking long or short positions and betting on the security’s future price) rather than market-making.

You could mirror some of the strategies a hedge fund uses at a prop trading firm, but generally the trading styles are quite different.

With sales & trading at banks, beyond the addition of agency trading, you’re once again managing much larger amounts of capital and you tend to be more conservative with strategies and risk management.

You invest in much bigger markets, so hypothetically you could keep growing and growing without needing to expand into different areas as a prop trading firm would.

At a prop trading firm, if you got a 200% return in one year and therefore tripled your capital, you would have to re-deploy it (whatever’s left after the traders have taken their cut) into different areas, push new products, and so on.

I’ve seen that happening more and more over the past 10 years – many firms that used to focus just on equity options or fixed income options have been diversifying and getting into other markets such as grains, energy, and so on.

Q: So it sounds like they’re different because of the capital under management, the strategies used (directional trading vs. market making vs. agency trading), and the markets they trade in.

Would you recommend starting out in prop trading rather than at a bank or hedge fund? What are the trade-offs?

A: I’d say it depends on your risk tolerance and personality.

If you go the prop trading route straight out of school, your exit opportunities are extremely limited and you’re a bit screwed if you decide that it’s not for you.

So I wouldn’t recommend going into it unless you love trading, you dream of the markets, and you couldn’t see yourself doing anything else. You can make a ton of money, but it’s not for everyone and some people find they don’t like it.

It’s not even particularly easy to move from a prop trading firm to a hedge fund or bank because the styles of trading are so different. You would be overly specialized unless you happen to find a hedge fund that uses a very similar strategy.

So if you’re more uncertain of what you want to do, it’s better to start out at a large hedge fund, or even better yet, at a bank. Trading still gives you fewer exit opportunities at both of those as well, but at least you’ll have a brand name on your resume and you can move around to other industries more easily if you haven’t worked there for too long.

Q: So I’m guessing it’s not too common to move from a bank or hedge fund to a prop trading firm, either?

A: Traditionally, no, because the styles of trading are so different.

But following the financial crisis and the increased regulation, more traders from banks have been coming over as banks have cut back on the prop trading business internally.

Most of the time, though, they’ve been more senior people with established track records as opposed to junior traders – they went to the top-tier Chicago-based prop trading firms because they were offered lots of capital and the freedom to do what they wanted there.

The most common path on the hedge fund side is to start your own fund or join another one at a much more senior level, so you rarely see people move over to the prop trading side.

Q: Beyond just the differences in trading strategies, do you think any of that has to do with the cultural differences at banks vs. hedge funds vs. prop trading firms?

A: That’s a good point, but I’m not sure you can draw any definitive conclusions there.

Just like trading in other areas, the culture at prop trading firms is male-dominated with lots of yelling and stress all day long. Sometimes that convinces people who would otherwise be good traders to decide against doing it.

You tend to see that type of culture at banks as well, though it varies by group, and it’s almost impossible to categorize the culture at hedge funds because each fund is different and it depends on the background of the people there and the strategies they use.

Pay, Exit Opportunities, and More

Q: Now let’s turn to the question that everyone’s really curious about: how much you get paid in prop trading.

I’ve heard all sorts of stories, from people receiving decent base salaries at larger firms with bonuses based on your P&L to people receiving no or very low base salaries with pay 100% dependent on performance.

What should you expect, and how does it change as you move up?

A: Unfortunately, there’s no quick and easy answer to this one. Here’s what I can tell you about the pay at different levels:

At Chicago-based firms at the lower levels (clerks), the pay is very discretionary and you’ll likely earn a small salary in a tight range based on how good you are.

Ballpark, maybe around the same as the base salary that an investment banking analyst or sales & trading analyst at a bank would earn; somewhere in the $60-75K USD range.

As a “junior trader,” it’s still discretionary and you don’t get to negotiate a percentage of your P&L most of the time, so it’s random and very dependent on the generosity of the Partner in your group.

At one of my firms, the Partner was notoriously bad with profit-sharing and always screwed over the junior people even if they made more than their fair share of money for him; but another group had a very generous Partner that paid everyone well, even at the junior levels.

I hesitate to give exact numbers for junior traders at prop trading firms because it’s so dependent on performance and your group, but here’s what you might expect with good performance:

  • Year 1: $75K
  • Year 2: $100K
  • Year 3: $200K (If you’re a producer, much less if you’re a body)
  • Year 4: $350-400K (if you’re a solid producer and your group does well, but highly variable)
  • Past Year 4: It becomes very dependent on group performance and what you’ve brought in personally.

And it might be lower or higher than these figures depending on all the other factors above – that’s a very wide range, but unfortunately compensation data is difficult to find for prop trading firms.

Despite rumors to the contrary, you’re not going to make $1 million+ as a junior trader unless you’re a star in a group that is outperforming.

Q: So how often does a group do “exceptionally well?” And what kind of numbers do you need for that to happen?

A: As a quick anecdote, I knew of a 1-person group (1 seasoned trader working with 1 clerk) that made $20 million one year. So in that case, the trader would have definitely pulled in a 7-figure payday.

If you were in a bigger group and that group made close to $100 million, let’s say $80 – $90 million, you might also earn that kind of money even if you were more junior.

I wouldn’t say this kind of performances happens “often” – it’s more common in bull markets and when liquidity is high. You don’t see it as much post-crisis, though some groups do perform that well every year.

Q: So you shouldn’t hold your breath waiting for 7-figure bonuses as a junior trader – what about when you become a Portfolio Manager or Partner?

How long does that take, and what type of pay can you expect?

A: At that level, your pay structure shifts and then you can negotiate a percentage of your P&L for your bonus.

The timeframe to make Partner varies a lot, but you can do it extremely quickly (a few years) if you have the right numbers and you make enough money. I’ve seen people do it with 3 years of experience – sometimes a trader will leave, or the firm is expanding into a new product, and if you’ve done well enough they might place you in that role.

Partners might receive 25% – 40% of their P&L for their bonuses. So if you’ve made $5 million at that level, you could easily get a $1 – $2 million bonus.

This compensation may also be tiered, especially at smaller firms – you might make a certain percentage on the first $500K or $1 million of profit, and then the percentage steps up in increments after that.

Since you’re trading much bigger positions at large prop trading firms, it’s easier to earn a high profit there – but you also have to split it among more people in your group, so you don’t necessarily make more as an individual.

Also at larger firms, the pay for everyone outside the portfolio manager / head trader is more discretionary and it’s up to the PM to award amounts based on personal performances – so you may not see the percentages quoted above.

Q: So what might you expect at a smaller prop trading firm? What are realistic numbers for a group that’s doing relatively well?

A: A smaller group or firm that’s doing well might have 10 traders total, with 6 guys on the floor and 4 on computers upstairs.

They might make $10 million in a given year trading something specific like Eurodollar options, and then split the P&L between everyone there – so the Partner(s) might earn million-dollar paydays, with the rest of the traders getting somewhere in the mid to high six-figures depending on their seniority and individual performances.

At smaller firms you can sometimes extract better terms for your bonus and negotiate your way into receiving a higher percentage of your P&L. If you have a proven track record and strategy, smaller prop trading firms may fight over you and some may offer you better percentages or more capital to entice you into joining them.

Q: Finally, I have to ask the elephant-in-the-room question here: we’ve been focusing on the “P” part of that P&L and assuming that you actually make money.

What happens if you lose money – does that just mean you get a $0 bonus? Do you get fired due to poor performance?

A: It depends a lot on the size of the firm, how long you’ve been there, and your performance in past years.

Generally you are safer at big prop trading firms if you have one bad year, especially if you have a solid track record from the previous years.

At really small firms, you might not be so lucky – unlike large banks where there’s a tolerance for losing money at first, in prop trading it’s 100% about your performance.

So the reality is that yes, if you lose money at a small prop trading firm, you have a high chance of being let go.

In terms of bonuses, you should expect no bonus if you’ve lost money, regardless of whether you’re at a big or small firm.

Q: So let’s continue playing devil’s advocate and say that things don’t work out for you in prop trading.

What happens next? You mentioned there aren’t good exit opportunities, but surely failed traders must go on to do something else, right?

A: A few options I’ve seen people pursue:

  • Some people joined the finance departments of big companies.
  • A few went to the back office at large banks.
  • Some have applied to MBA programs to switch careers.
  • Some have become financial advisers or gone into something like private wealth management.

Note that not all of these former co-workers “failed” at trading – some of them just didn’t like the work itself, couldn’t fit in with the culture at the firm, or decided they wanted to do something else, and left voluntarily.

If you get fired, it’s really tough to get hired at another firm.

Most prop trading firms prefer to hire organically and recruit people right out of undergraduate with no work experience – they only “poach” traders from other firms when those traders have been extremely successful.

So that is a downside to prop trading, and one of the risks you need to consider.

Q: Right. But since you’ve done quite well over the past few years, you wouldn’t have to worry about any of that – I’m guessing you’re planning to stay in prop trading for the foreseeable future?

A: Actually, I’m also interested in switching careers at this stage.

Although I’ve done well in trading, I’ve also gotten more interested in investing in entire businesses and learning how companies work as opposed to just trading options or commodities. That happened partially as a result of investing my own money and becoming more curious about business in the process.

So right now, I’m applying to top MBA programs and I’m planning to use that to transition into more of a corporate finance role, whether in banking, PE, or something else closely related.

Q: Interesting. I guess that just goes to show you that even if you’ve done well and enjoyed a particular industry, you may still switch to something completely different these days.

Thanks again for taking the time out to chat, and good luck with those MBA applications!

A: No problem, it was my pleasure.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. I’m an engineer, and 40 years old, and want to switch to Hedge Fund/PE/trading with an EMBA from a top school. Is the switch possible at this point?

    1. It depends on how you use it. If you can get a pre-MBA internship, sure, it may help, but you’re going to have to answer a lot of tough questions about “Why did it take you almost a decade to switch careers?” and “Why not leverage your skills at a quant fund instead?” See:

      1. Thanks for you response. The program I am considering is the MBA for Executives, which is on weekends. Is working at a new fund with $10m as valuable as a pre-MBA internship or better?

        1. Working at a startup fund is better than no experience at all, but you would still be at a disadvantage vs. someone who worked at a larger or better-known fund. But if this is your career goal, sure, do it and complete the Executive MBA program.

  2. I am from Nigeria and currently running an online MFE (Financial Engineering) program in a U.S college.What are chances of getting hired outside Nigeria with a wonderful grade? Also do companies hire for online quants so one can work from anywhere just like studying online from anywhere at good standard??

    1. It is generally quite difficult to work in the U.S. unless you are a citizen or can easily get a work visa. If you can’t, your chances are not good, so you should consider other options (Europe, Asia, going back home and working remotely, etc.). Some firms may let you do quant work remotely, but probably not initially.

  3. Avatar
    Ashton Hellwig

    Is being a computer science student in undergraduate taking a business minor and some classes in quantitative math a good plan for getting into Prop trading Or algorithmic trading?

    1. Yes, but more so for algorithmic trading or quant funds… for prop trading it depends on the firm and your role there.

  4. hi Brian

    I have turned 5k into 28mil.

    can you help me of how to get in the big firms.

    thank you

    1. We do not have a list, unfortunately, but you can Google “prop trading firms [Location]” and find a lot like that…

    2. It’s going to be hard because you don’t speak English, but imo you should just keep doing what you’re doing, it’s clearly working. That is, of course, assuming you’re not lying.

  5. Hey guys,

    I’m a graduating senior with a gig at a solid NYC prop trading firm where I’ll be trading equities. I’m really interested in value investing and long term, my goal is to break into a value fund of some sort. I’m concerned though that I’ll be branded as a short term guy b/c of the prop trading job and it’ll be difficult to transition into more long term investment with this experience. Basically, I feel that the exit opps are terrible (and I’ve heard/read that as well). Is my worry correctly placed? Should I try to lateral into some other finance role like IB at a boutique or something that is more traditional for HF to recruit from (btw is it even possible to lateral to an IB analyst after a year or two of prop trading)? Also, if I choose to go the MBA route, will my experience in prop trading be a hindrance in my application because it’s not PE or IB or something more “prestigious”?

    1. Yes, it is generally hard to move out of prop trading into other fields. So if you want to move, do so sooner rather than later (i.e. within 1-2 years).

      You could try to move to a bank, but it might be easier to go for an execution trader role at a hedge fund or asset management firm and then move into an investment analyst role from there.

      You could probably get into IB out of an MBA program even if you stay in prop trading, but PE and buy-side roles would be much tougher.

  6. First off, I wouldn’t call these Chicago firms, “prop traders”… They are market makers… Prop traders are pure risk takers using their own judgement.

    1. OK, sure, but people do use the terms interchangeably (also, there are far more searches for “prop traders” than there are for “market makers”… you have to use the vocabulary of your audience).

  7. Avatar
    Kunwar Singh

    I am a graduate in Accounts & Finance and a newly qualified Chartered Accountant (CPA) living in India. I have an interest into Trading since my school days. After completing my education, now I want to work as a prop trader. I recently got an offer from Bank of America for IBD team for preparing financial models, pitchbook, covering industry drivers, etc. Pls suggest me whether I being a fresher should take this opportunity now or I should stick to want I aspire to be and look for some small prop trading firm. Thanks.

    Pls do tell share comparative career growth in both the above options.

    Further is it easy in prop trading to switch to market of other country , like if i start working in India as a prop trader, then can I later get a chance to work in US market as well? Thanks in advance !

    1. Avatar
      M&I - Nicole

      If you don’t have any other offer on hand, I may take the offer for now and see how that goes. You can always transition into another trading firm after time at BAML; this gives you credibility. If you want to work in the US, best to study in a target school in the States in a few years.

  8. Avatar

    Can I enter into top mba colleges as i am having two years experience in prop trading?

    1. Avatar
      M&I - Nicole

      Hard to say given the limited information you provide, but yes your experience can potentially help.

  9. This is a fantastic interview, but I’m still left with a few unanswered questions:
    I will be graduating from a non-target school this fall with a degree in Economics and a 3.4-3.5 GPA. I have been profitably trading equity options (non-directional) for over one year. I would say I’m not theoretically math inclined, but I’m well versed in statistics.

    1.) I still am unsure of which “trading path” would best fit me. Prop trading seems technologically focused and I have no experience in programming, which also seems to be a problem for BB banks too. How important is the degree (and logic/problem solving skills with it) and a proven track record compared to more advanced math/programming skills?
    2.) Would the “Econ/trading combo” be viable in searching for a sales trading job? Or are sales traders more reliant on “people skills?” I feel like sales traders are an often overlooked opportunity.

    1. Avatar
      M&I - Nicole

      1) I’d say a proven track record is most important
      2) Yes, this is useful though communication and sales skills are also very important for sales traders. You may also want to demonstrate your passion in the stock markets for such role

  10. Avatar
    Mr. Tony

    Does the age factor affect prop & hedge fund trading careers also? What if someone is in their mid-30s (but has legitimate and unique reasons for this “delay”) ?

    1. Avatar
      M&I - Nicole

      Yes it can. If you can demonstrate a track record then being in mid-30s shouldn’t be too big of a problem.

  11. Hi,
    I have always wondered, why do good traders look for exit opportunities to work elsewhere while they can just quit their jobs and just trade from their home?
    Since they have the experience on how to trade, can’t they just take their own money and trade for themselves from their home instead of working for someone?
    Because I have seen many people who don’t even have a degree or work experience, but all they have is just a small capital and trade their own money while sitting at home, and they are making a pretty decent living out of it!
    So by comparison to those professional traders in S&T or prop trading firms, I think those professional traders have a better chance doing that since they have the skills and experience, and yet I rarely see professional traders do that? Why?

    1. you just summed up my goal. develop skills in HS/UG, make it into a prop shop, get fired and then do it solo

  12. Hi, I am a junior at a non-target school majoring in finance and economics. I have two quick questions: 1). Do you think economics would be a desired degree since it involves a lot of in-depth reasoning and math skills? 2). Since I don’t go to a brandname school, is it likely that I’ll be considered a potential candidate by trading firms of any size?

  13. I’d like to read a book that covers the topics written here, especially in sales and trading.

    1. Avatar
      M&I - Nicole

      I’ve not read this book before but it maybe useful:

  14. Performances and specialization are key in Prop Trading Shops, especially on small ones. Many people do not realize that. Also, if you trade in a small prop shop, the whole company may depend one your and few other people results. The pressure can be high.
    Nice post and follow-up comments.
    Thanks for sharing your story.

  15. Hi

    I am an international graduate student at a non-target school. I want to take up prop trading as a career. Are there any residency requirements? Do prop trading firms sponsor H1B visas?


  16. I’m getting mixed answers. When a firm mentions “strong quantitative skills” exactly what do they mean?

    Does the math from prop trading and trading differ?

    1. Strong basic maths. More depending if the firm uses quant heavy strategies.

  17. Thanks again for great articles and replying to previous questions,finally i found a chicago based P.T firm which after a demo period , funded me with 150 k account and 60% of profits payout which i am trading remotely.if i continue consistency in profits in P.T account, can a u.s.a based company apply for a working visa for me as a prop trader?
    ( i have track record of personal account + ongooing track record of P.T with 150 k account )

    Best regards

  18. Thanks for the great article. After reading it, i looked up a bunch of prop trading firms to see if they recruited at my school for potential internships. However, i also noticed a lot of the lesser well known shops have “training programs” that charge excessive fee’s. Is there any legitimacy in these smaller firms? How would i distinguish legitimate firms from scam?

    1. Avatar
      M&I - Nicole

      You mean these smaller firms are charging you fees for training you? Most firms offer training to their candidates for free so I’m not quite sure if that’s legitimate.

  19. couldn’t help but comment,

    after trading prop successfully for over a decade (actually taking home high-six/low-seven after exp,cuts,comm ever year.. because that is what its all about.. not gross)

    success is dependent on one thing/problem given you are trading material.. a mix of, but not limited to: math, risk, endurance, stomach, insomniac (granted you dont have a night clerk yet) & constantly learning/improving from mistakes

    given you have the givens.. its not what company you work for, its not who the head trader is, or speed of the network, or margins/firepower of the firm etc.. etc..These are just stepping stones the majority of aspiring youths concern themselves w as obstacles (ie.. excuses).

    the problem is… go pick up a mirror. thats the problem. im being completely serious, how bad do you really want it??

    if) you can’t get into a top tier prop company as a trader. go clerk nights for them or a lessor
    if) you cant learn from a senior trader, go find another.
    if) you payout is too low, go find somewhere else that will pay you for the fair industry rates
    if) you cant make enough money in markets, go find another strategy than can (no matter what the cost: hours & hours of charting, excel, backtesting, etc. etc)

    senior trading (non-institutional/or partner money) is unlike almost ever corporate profession. you eat Exactly what you kill after expenses.. NO salaries, there never should be outside of clerking & support infrastructure. This is how the “really” big money is made.. this is how the sharks feed.

    if you cant …. go find a way you can… (this applies to whatever stage you are in you trading career)

    if 10+ mil & a thailand beach is what you seek than… just getting a job at a prop firm is meaningless by itself. extreme success in trading depends on the individual & nothing else, winners always find a way. how successful or worthless you are in the electronic futures dream machine is your own decision. period, paragraph, happily ever after.

    1. Avatar
      M&I - Nicole

      Awesome comment. Thanks for your insights!

    2. Helpful comment! Thank you.

  20. There is market-making in both S&T and prop trading firms so there are similarities between them. Volcker Rule banned prop trading inside banks but they have not banned market-making. The legislators are still debating over this issue though.

  21. Hi,

    Can you advise me on how to find out what firms offer a significant base salary? I think this would be quite important for my job search. Thank you so much for your website, it has been extremely useful!

    1. Avatar
      M&I - Nicole

      I am not 100% sure of the numbers, though you may want to refer to – not directly relevant but it may be useful

  22. i have a successful track record of turning my own trading account from 10k to 18k during 3 months with near 400 trades (and it is ongoing).i am a trend follower in cme futures in intraday and i have a rigid plan for my account .after being 3 years in loss now i can say i am a consistent in profits(2 months in paper trading and 3 months in live trading) .the reason is that i have clear exit plan and more important i have controlled my ego and trading psychology and have positive expectancy system with proper reward / risk ratio & proper money i have BS of software and programming skill in Java that i think it has nothing to do with trading.

    as i read at least 6 months of tack record is needed for prop trading,if i can continue it to another 3 months and then with a 6 month track record is there any chance to trade on a firm account as low as 100 k ? (p.s i live in iran )
    is there any global PPT that accepts remote taders or is there any PPT in near country like dubai ? any recommendation is appreciated.

    1. Potentially I think you could, yes, but it depends on the region you’re in… I’m not familiar with the environment in Iran. There are plenty of firms where you could probably trade remotely, but your best bet is to find places in a financial center like Dubai and network in-person there first.

  23. Thanks for the inspiring questions and answers above.

    I am a recent master graduate in Physics, targeting on hedge funds and prop shops in Hong Kong. Last year, I got the first round tel interview from Jane StXXXt. As you said, they asked me mostly maths and stats questions. I think I could marginally answer most questions, but I didn’t successfully proceed to the next round. Since you said “getting these questions wrong is OK – they care more about your thinking process than your answer”. What exactly is the thinking process most prop shops are looking for?

    Basically Physics, and many other, students receive little training on statistics and other topics, like brain teasers, which could be asked in the interviews. How the successful applicants prepare themselves for their applications and around how much time they have invested?

    Moreover, will it be very strange if I offer to work for free at the early stage of my application? What can I do if I failed at the first few rounds of the interviews?

    Thanks for your insightful ideas.

    1. Well, there’s a thin line between getting questions “wrong” and having the wrong thinking process. Basically they want to see that you can break down problems logically, ask questions when you don’t know the answer, and use your reasoning to ask them for hints… but it also depends on the specific questions.

      The best way to prepare yourself is to get a book on brainteasers and practice from there:

      Working for free can work, but I would only use that if you have no other good options.

  24. Hi!

    What are your thoughts on prop firms that require a risk deposit (guaranteed), an upfront fee for training and access to software, programs, etc and compensate on a profit-sharing base?

    Seems I can’t get a straight answer anywhere else since all think it’s a scam idea.

    Thanks in advance!

    1. Avatar
      M&I - Nicole

      I think readers may have better suggestions on this front.

    2. Hey Eric

      I just received an offer from a prop trading firm that requires a deposit too. Could you contact me and we can talk?

    3. Trading firms are using education as another source of revenue (hence you pay for trading). You can successfully trade with them if you do well. The deposit is kind of like them hedging themselves if the time they spent training you doesn’t give them a new trader on board.

  25. I’m a 32 italian analyst, I’m graduate in economics and I’ve got a Master in Business Administration, I’m a Member IFTA (Technical Analysis) and of EFFAS (European Society of financial Analyst). In Italy there aren’t proprietary trading firm so since 2008 to today I’ve done a lot of technical and financial analysis for some financial firms to pile in savings to go to London to find job as a Trader (my passion) in a proprietary trading firm. Do you think that my resume can apply to become a trader? Please answer honestly, thank all very much for your reccomendetions :-)

    1. Avatar
      M&I - Nicole

      Very hard to say. It would help if you have had some sort of trading experience

  26. Hi,

    I am interested in finding out what kinds of training programs prop shops offer. Since they like to take kids straight out of college, they obviously have to teach them skills and give them time to master these skills. I have met successful prop traders but have never met anyone unsuccessful. I realize that the majority of traders lose money, and that it is something like 20% of all traders make 80% of the profits. What happens to the traders who lose money?

    My questions are, what training programs do prop shops give you? How long do they keep you to see if you become profitable? Do they continue to train you if they see that you are struggling, or do they immediately let you go?

    I am very interested in a career in prop trading, but I realize that the risk involved is huge. Similar risks are involved with IB because it seems that banks are continuing to lay off employees and the chance that anyone can be fired for poor performance is high. However, there are exit opportunities for bankers in many other fields, whereas trading does not offer that luxury.

    I appreciate your input. Thank you.

    1. The training programs at most places are minimal to non-existent: they explain things, you attempt to trade or support them, and if you’re good you stick around, otherwise you don’t.

      They might train you for 6 or so months initially to see if you “get it”… and if not, they let you go. Trading is riskier to get into for the reasons you mentioned – you have to really love the markets and trading itself to do it.

  27. Hi..!

    Quite astonished by the topic..!
    I would like to know your concerns on my case as well. I’m currently a graduate student, doing parallel studies in two Programs: MSc Applied Maths (NTUA) and BSc Econ – Fin (LSE). I have already built my own ATS in matlab && C++, and “rent” it in a bank’s Derivatives Desk for continuous signal generation (Where I did my Internship Program in Quant Stuff – Pricing – Hedging exotics etc). It has a Hit Ratio of 83%, and NO limitations in the trading frequency, i.e. it can be used for BOTH HFT and Lower freq portfolio management. I have already come in contact with some Prop Desks, in order to start trading from home as well, with a really nice offered leverage. I also have a nice PA (LIVE) track Record in Eq. Options Day trading, with Lightspeed LLC, as well as several trading “awards” in mock simulators (like investopedia etc – I know that LIVE trading matters more !!) …

    How could I “sell” this performance in “big Hedge FUnds and Prop Desks” for a job interview?? I really want to experience trading which IS my passion, in a firm, once, rather than continuing tradng just from home..!


    1. Dude, I love the kind of work you did with your own ATS. We can share ideas. Wud u mind sending ur email id to abhigup01 at gmail dot com.

    2. From what you said, I don’t think you need to do much “selling” because your experience already sounds impressive. The main thing is to focus on explaining how all of that translates over to the somewhat different strategies of larger places (talk about how the required skill set is the same, even if the specifics are different).

  28. For prop trading, do they only value math and engineering degrees, or would it be possible to break in with just a finance degree, as long as I could demonstrate good quantitative skills and an interest in financial markets? In addition, I’ll be coming from a non-target (USC) nowhere near Chicago. Is this too much of a long shot?

    My next question would be, how exactly can I demonstrate good quantitative skills? Unfortunately I won’t be able to take any more math classes beyond basic calculus due to time constraints in graduating. I have the drive and passion to learn more math on my own, but proving this to firms is a whole other issue.

    1. You can get in with other degrees, but more technical ones definitely help. USC would be tough because of the lack of prop shops there, so you would probably have to travel.

      Quantitative skills: do a self-study course, start trading on your own, read books, develop your own strategies based on stats / numbers.

  29. I am a computer programmer with a MS in computer science and Ph.D in Civil Engineering. Currently I am working for a bank doing IT work. I have a passion studying the trading strategy. I have spent more than fifteen years to develop an algorithm to trade equity. It has more than 20% annual compound return with less than 10% maximum draw down. I also trade this strategy with my own money. I am wondering If I have a chance to get into a prop trading firm? If so, do you think if it is possible to work from home since I do not live in Chicago nor in NY City.

    1. Avatar
      M&I - Nicole

      Not sure if prop trading is “doing well”/”allowed” these days

      You can trade on your own. Re working for firms at home, I think it depends on the firm and your arrangement with the firm – hard to say.

  30. Hello,

    I currently work in the back office for a large hedge fund administrator, I have experience with multiple top tier clients (GS, Brevan Howard, JPM). But, I have always been passionate about trading. Unfortunately, I graduated in 2008 at the height of the recession and any job was tough to come by. I graduae from a state school with a finance degree and a cumulative GPA of 3.68. Do you think the barrier to enter the prop trading field would be too difficult coming from a back office role?


    1. Avatar
      M&I - Nicole

      No, as long as you are really good at trading and can demonstrate your passion in the field. Do you trade any mock portfolios etc? Can you network with HF managers and ask one of them to mentor you? Perhaps you can even suggest them ideas? If you do the above I think you can get in. It will just be a matter of time.

  31. Hi,
    I have a question very specific to my personal situation. I’m a freshmen attending Hampshire College. (A pretty good college, but to be honest I messed up the first few years of high school so my cumulative GPA wasn’t great) Would you recommend going to an ivy league business school to get an MBA directly after graduating from Hampshire College if I want to become a prop trader, or do you think I’d be able to get a job as prop trader without a Top Tier university on my resume. Also note, on a $100,000 portfolio I started 4 months ago, I’ve profited 40% (portfolio is now worth 140,000). I’d really appreciate it if you could let me know if you thought an MBA from a top tier university would be beneficial before starting my job search, or if Hampshire College partnered with good networking skills and a history of making money in the stock market would be sufficient for my resume. Thanks!

    1. Avatar
      M&I - Nicole

      Yes an MBA from a target will help. In the meantime I suggest you to network intensively and gain IB experience

  32. Dear Sir
    I am Having 2 yrs of exp in trading in NYSE with prop firm but now every firm is asking for capital and i was trading with the firm without Capital , can you suggest me few names where capital is not required…

    1. Avatar
      M&I - Nicole

      I think readers can give you better insights

  33. Commodity trading firms have been in the news over the last couple months because of the massive profits they’ve been making lately. Names like Vitol, Glencore, Cargill. Could anyone point me to any links/info about what working at one of these firms is like?

    Basic info like day in the life of, different roles and functions, career paths, etc. would be great.

    I’m assuming the highest paid workers at these firms are traders, but is it more about trading derivatives (futures, forwards, etc.) or arranging physical delivery of commodities (import/export)?Maybe both?

    Also, any input on career switching into one of these firms? I’m currently an associate at a boutique investment bank doing M&A work. While the work I do is completely unrelated, at least I have some finance experience.

    1. Not sure of those offhand, but we hope to cover more about commodity trading firms in the future. I can’t reasonably answer your questions on the day in the life and pay right now.

      In terms of switching in, it’s all about showing you love the markets, trading, and especially following commodities… if you’ve done M&A you need to be able to answer why you went into that first rather than trading. And present lots of great ideas about how to trade commodities and ways to take advantage of trends in the markets.

  34. Hey, I wanted to know what is the basic knowledge you need to become a Prop Trader, I mean I’m from India. I have done my graduation in Financial Markets(The Education system is pretty different here). I have been working for a broking firm since a year now. So I wanted to know if there are any specialised courses in Prop Trading? As in, what do the recruiters look for in an employee?
    Also, if you could tell me, what is the right age to get into Prop Trading, I mean what is prefered? Thanks.

    1. I would also like to add that I’m NOT trading right now, but I’m very much interested. I am a Certified Financial Planner and I was in the wealth management department. But now I have been shifted into Debt Dept. So I don’t have a knowledge of trading but I do know how to get the deals finalised, if that’s of any use here. Thanks.

      1. Avatar
        M&I - Nicole

        I don’t think such experience is strong enough but I may be wrong

        1. Would it be preferred if I did an MBA in Finance, or Masters in Finance, and then tried for Prop trading?

          1. Avatar
            M&I - Nicole

            If you get into a target school, it may help you. However, masters aren’t useful for prop trading roles…experience matters more

          2. Actually targets help, in London at least even prop firms expect candidates to come from a “top tier university” (read: targets). It is right there in their job descriptions.

        2. Well, I would need to start somewhere right, in order to work and to gain the experience? Should I start trading in small firms here?

          1. Avatar
            M&I - Nicole

            Interviewing with smaller firms could help

    2. Avatar
      M&I - Nicole

      There is no right age to break in and we don’t have courses in prop trading. You should have a strong passion for the markets and strong quantitative skills

  35. im a high school senior, i have been trading since i started high school. I am now looking for internships in either S&T or prop. now I completely understand S&T and have been on desks before but with prop in your article it sounds like these prop firms are flow trading instead of market making. or am i wrong to state this. how does a desk make its money more or less. is it from the bid ask spread or from taking a directional position by biding on assets and selling them at a latter date.

    1. No, most prop firms do market making. So they make money from the bid-ask spread, not from directional positions. See above…

      “The markets they trade in are also much smaller – if a prop trading firm had $50 – $100 million invested in a specific product like natural gas options it might be the biggest market-maker (but not necessarily the biggest player) in the space.

      Hedge funds, by contrast, tend to be much larger and focus more on directional trading (simply taking long or short positions and betting on the security’s future price) rather than market-making.”

  36. I am a sophomore from a target school with good GPA ect, and internship experience in Private Wealth Management. I am applying for a summer internship with a large prop trading firm that specializes in options trading and recruits on campus. I have been learning about, following and trading options on my own and genuinely love it. How can I convey that prop trading/options is truly my passion and that I REALLY want the internship without sounding over enthusiastic and ridiculous (The firm did say that competitive eager people have a distinct advantage)? Will it sound stupid if I write in a cover letter that I follow/trade options and read about options strategies regularly and that nothing interests me as much as prop trading/options? It may sound naive or corny but I really do love options/prop trading and can’t get enough of it.

    1. Avatar
      M&I - Nicole

      No, I don’t it will sound stupid. That is awesome – you should let your passion shine through

  37. Thanks Brian.
    I have another question here. I realized that most of the day trader/ prop trader they always have at least two monitors on their trading desk. I think one of the monitors showing the trading volume of the stocks or something… the numbers were moving so fast… Correct me if I’m wrong…
    And where can I get those (software) programs?

    1. Avatar
      M&I - Nicole

      Bloomberg is useful. You can contact their office in your location directly

  38. Do those small/big prop trading firms offer any internship?
    I have one summer left before I graduate. What type of internship should I looking for in order to higher my chances to work in a prop trading firm after I graduate?

    1. Sometimes, yes, but mostly the bigger and better-known ones. Get an internship doing trading of some kind, either at a bank, HF, or prop trading firm. Or even potentially something like PWM or PB where you’re advising clients and analyzing investments.

    2. Some have this “buy an internship” business going on, in London at least. Or a course you can attend which can follow a job trading.

  39. Avatar

    Just an off-topic question…would it help my prospects of landing a trading job at a bank (not in America) if I tell them that I started trading real money at age 12 and was quite successful at it?????…I know it sounds strange, but it is true…would the interviewers find me too ”nerdy” because of that????????

    1. Avatar
      M&I - Nicole

      Yes. No. If you really are passionate about trading it will show in your interviews and it is a big plus. Passion for the markets is crucial for success in trading

      1. Avatar

        Thanks for the advice, Nicole

  40. So,what quantitative skills are important for this positions?VBA for example?
    Also,i have heard that usually (at least in small firms) if you are not profitable for a couple of months you are fired,and generally many people get the axe…Is that the norm?

    1. Avatar
      M&I - Nicole

      VBA is good but that doesn’t really give you an edge over other applicants

      Yes, if you don’t produce they can let you go.

    2. VBA, Matlab, C++, SQL etc are a plus but you really must be very good/proficient enough.. But that must mostly applies to Algorithmic Traders, making high frequency trading models etc.

      But by quant skills I mean maths. Be able to calculate i.e. (random example) 0.1/0.05 “at a blink of an eye”.
      Plus knowing how to make bionomial trees, monte carlo simulations, filtered historical simulations (ok that’s too much maybe) etc This type of skills and knowledge is highly appreciated.

      1. First part applies to roles where you’d help with some IT prior to transitioning. In that sense it or valuable to have these skills. I’ve seen VBA come up the most, SQL is the next most common and the third I’d say is python. C languages and Matlab are really more for if you want to go down the tech or quant route.
        Though if the knowledge gives you an amazing strategy, I could see it working.

        The math skills you noted are more than you need. Unless your specific trading strategy revolves around them, I don’t see how they’d go beyond impressing people that you know math over you have the skills to trade.

  41. I was once invited in a first mathematical assessment centre at a top Prop Trading firm in Europe. The amount of questions you had to get correct regarding the very very tight time limit (80qs in 8mins, 50 at least must be correct) made it extremely difficult to get to the next stages. Plus if you answered incorrectly, there was negative grading.

    A guy I know also had once an interview with either a HF or Prop (don’t know really) and they asked him during the interview to measure Pi using Monte Carlo simulation, something like that.

    So, generally, beware that without strong quant skills you have little chances to break in (at least in Europe).

    1. “You have little chances to break in.” That was just 1 top firm. Is that representative of all prop firms in Europe?

      1. The only chance to break in without decent quant skills is if one of the interviewers digs you, sexually speaking haha :p joking..

        Of course my experience or the stories I’ve heard around are not a representative example. And indeed if you’re a “robot” without any critical reasoning capacity or soft skills in general, I don’t see how you could be successful in trading. But the impression I have is that the first filter prop firms use is quant skills. Of course I believe that’s not 100% correct but hey, it’s their decision/money/problem..

        1. Actually your quant skills truly matter if the firm itself relies on quant based strategies. Other firms let you trade how you want, providing that you’re profitable.

          1. Avatar
            M&I - Nicole

            Thanks for your input.

    2. Interesting to hear about, thanks for sharing that!

      1. Oh, and one last detail; the company stated explicitly that should you be unsuccessful in that test, you will never ever be considered in any future job applications to that company..
        For the record, the company is Optiver, it’s a dutch prop trading firm and started in 1987 if I recall correctly. They stated somewhere in their website that they have never had a single negative year in terms of profits so far.

        1. Personally, I think those people who pass these tests are generally weirdos with no soft skills. Yes, I’m generalizing and that’s because it’s the easiest way to make a conversation.

        2. Avatar
          M&I - Nicole

          Interesting, I’m not quite sure if this company sounds that good to work for given your first statement

          1. Yeah, I agree. One more thing (assumption) I would like to point out; is that either the environment in prop shops can be very positive or demoralizing if you’re not doing well. Middle ground must not be so common. What you must have in mind is that prop trading, in essence, is like someone who trades his own money in financial markets. He/She just has so much capital that he needs someone else to assist him/trade on his behalf and with his/her money.. I believe that this factor makes prop shops to have a much different work environment than being a trader at an IB or HF.

    3. Avatar

      Prop Trading at this day in age is definitely not institutionalized at all. Therefore you will find a wide variety of recruitment and interview tactics as well as a large range of business strategies. That plays to each persons advantage if they are dogmatic about finding the right opportunity but might not be fruitful for someone looking for a handout.

    4. I work for a prop firm in Sydney, and have heard about another prop firm here testing candidates by attaching heart rate monitors to candidates and asking them to perform mathematical calculations. 6 out of 15 applicants were eliminated on this test alone, the metric being able to answer questions quickly and accurately with a low hear rate. Now that’s a high pressure interview.

      1. Avatar
        M&I - Nicole

        Yes thanks for your input!

  42. This is a question for the prop trader:

    1) What is the average Leverage Ratio that are given to traders that work within the client-facing FX desks of the major BBB’s?

    2) I’m assuming this ratio will probably decline over the years due to Basel III compliance, do you know by roughly how much?

    1. Honestly I don’t know for sure there and the interviewee has been tied up so he won’t be around to answer for awhile, but if someone else knows feel free to answer. I think falling leverage has more to do with banks de-emphasizing prop trading rather than Basel III. But both may contribute.

      1. Dodd-Frank forces US Banks to quit pure proprietary trading, but leaves prop. trading related to client transactions ( or Market-making) untouched. There are also other massive reforms enacted by it…

        Even then, it has not spelled out explicitly: a) whether prop. trading conducted by US Banks will be banned within their US operations or overseas and b) 4 Asset classes are still exempted from being banned. (Long Story)

        Basel III levies on ALL Banks in the world: a) 6-10% Capital Ratios b) An agreed-upon Leverage Ratio c) Banks to disclose more information about the nature of their trading activities.

    2. Avatar

      I’m sorry Neal, unfortunately I don’t have BB experience so have no answer as to the leverage ratio of various desks. Based on what I have learned personally, if most of their transactions are OTC (over the counter), the amount of collateral they post with their counterparty is most probably defined by their ISDA agreement. In some cases it may be zero, and in others a large amount – depending on the counterparty. Thus if you had more information regarding their ISDA agreements with the majority of their volume counterparties you could get a better idea.

  43. Avatar
    Adam Lewis

    Very useful article on getting into prop trading and trading in general…


  44. hey brian, hell of a question here.
    I’ve got a close friend to whom was landed an ib internship at an elite boutique couple weeks ago, but he’s just received an opportunity to start a recruiting process to a top BB, IBD position as well. He’s from a target school, and he has great chances of getting this internship (he’s from another country, where internships comprises 2+ years period, doing it while having regular classes).
    If his medium term goals (2, 3 yrs) involve moving to an elite PE, should he quit from his current position, pissing off everyone in his current office or should he try the top firm spot?
    (is there any chances of taking the rest of this conversation not publicly, by email?)

    1. Avatar
      M&I - Nicole

      He should still interview and see if he lands the job. When he lands it, he can then figure out what to do. Ideally its best not to renege an offer but if he really clicks w the other team and they give him an offer, he should just be honest w the guys who gave him his first internship and renege the offer.

      1. If he’s already working on the other company, does that change anything?

        1. Avatar
          M&I - Nicole

          Same answer above

          1. Ok, he said tks

  45. If I’m a self made millionaire, from a second tier university or first tier public university that never worked for a boutique firm, or bulge bracket firm, is that going to hurt or help my prospects during an interview, vs. the fresh ivy league graduate that is not a millionaire? Would I be overqualified or disqualified due to not having the right pedigree?

    1. People will probably ask why the hell you’re going into finance if you are already worth that much. So you definitely don’t want to say that. Just say you’ve done well at [XX] but want to do finance because of [YY]. Not being from a top university and not having experience will make it very difficult to get in no matter how much money you have.

    2. Avatar

      If there is any truth to your claim, keep doing whatever you did to become a millionaire – without knowing you the probability that you make more millions in trading is low.

  46. “Also, note that most prop trading firms focus on fixed income and commodity derivatives rather than equities – and if they do something equities-related, it’s usually index derivatives.”

    Why? Is it because equity trading is now easily done by robots?

    1. Good question, not sure why exactly (anyone else feel free to contribute here). I think it’s just the tradition that Chicago focuses on FICC and NY and other areas are more into other products, but take that with a grain of salt because I really don’t know. Don’t think it’s completely about automation though.

    2. Avatar


      I’m not sure what the precise reason, but here are my thoughts:

      They historically been market makers – and making markets on large products (treasuries, short term interest rates, equity index derivs, commodities), specifically options on the future provided a large amount of liquidity and “edge.” In the past 10-20 years there hasn’t been significant edge making markets in single name equities for the non-bank, non-specialist firm. They did make markets in equity options, but going to pennies sent that to the computers. That being said, there are many prop trading firms out there that are purely directional equity or futures traders. I don’t have experience with them and they are a different animal, though what I do know is there are people that do very well there.

      In addition – leverage. You get much more leverage if you are a smaller prop firm by trading derivatives rather than cash equities. Want an outstanding 200-300% ROE? Good luck doing that with cash equities and surviving.

      Hope that helps.

    3. I personally don’t work at prop trading firms, so I can speculate only, but would say an important factor might be the liquidity. This really relates more to fixed income and FX, which really are way larger (both cash-wise, and derivatives-wise) than any other market in the world.

      As very rough numbers, FX around mid-2010 had a daily volume of 4 trillion USD [cash + derivatives]. The total global equity volumes (cash + derivatives) would be around 60 trillion *annually*, so let’s take any benefit of the doubt from me and say it’s 100 trillion. All these were pulled from my memory where they ended up from BIS, so I am very happy for anyone to correct the figures.

      Anyway, assuming the above, you can see that FX market trades in notional volume in 25 days what the equity markets globally trade in 1 year.

      It’s by no means as extreme for fixed income, but fixed income is still order or two in magnitude larger than equities.

      This is slightly reflected in futures — the most liquid contracts in the world are the eurodollar futures [on a short term USD interest rate called LIBOR]. In these futures, and in plenty of others, CME is the world leader.

      1. Thanks for adding that – makes a lot of sense!

  47. Hi,

    I have a question for both of you:

    1) Do you have any specific recommendations of Books I could find on that would have the brain teaser questions that will come up on a S&T Interview?

    2) I recently got in touch with a Goldman Sachs HR person who told me that I should apply for an Associate position within GS Securities despite the fact that I have no Banking experience. I told her that I have done the following:(which is true)

    -Completed a Designation in Derivatives
    -Completed 4 Designations in Public Speaking
    -1 year as a Research Associate at a Tier-1 Business School
    -2 years as a Treasurer at a Non-Profit.
    -Read all of the major finance newspapers and magazines since 2008.

    I assumed before that I would be natural for an Analyst, so should I take her advice?

    1. 1) I believe this one is well-regarded: (see related books as well)

      2) For banking they would probably still make you an analyst. On the trading side I am not as certain since a lot of it depends on your previous trading experience, personal portfolio, etc. – at GS I would still be surprised if they made you an associate because they are usually stricter about the hierarchy.

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