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Is anyone here an institutional trader?

  • #1
  • First Post: Edited Jun 1, 2014 6:36am May 22, 2014 1:58pm | Edited Jun 1, 2014 6:36am
Is anyone on this forum an institutional trader? If so, what are the main differences between retail trading and institutional trading? Do you have certain tools or information that gives you the upper hand? If not, what is it that means that you guys always have the edge?

Also, would you recommend it as a career choice? I've loved learning to trade as a hobbyist, but I can't imagine choosing it as a career.

Thanks for any insight
  • #2
  • Edited 9:44pm May 22, 2014 7:44pm | Edited 9:44pm
Quoting Ponzi Jr
Is anyone on this forum an institutional trader?
Have been one for more than 15 years.

Quoting Ponzi Jr
If so, what are the main differences between retail trading and institutional trading?
One of the many differences: retail traders trade with their retail FX brokers; institutionals trade with each other either VIA their interdealer brokers or directly with each other. Also, institutionals don't trade penny ante amounts.

Quoting Ponzi Jr
Do you have certain tools or information that gives you the upper hand?
Some uppity rookie institutionals will puff up their jobs and say their Bloomberg terminals and Thomson Reuters Eikon accounts give them an edge. To weary long-time operators like me, these "tools" only give them a long-term crutch.

My final answer: Sometimes. But if your objective is only to trade spot FX, you don't need another crutch.

Quoting Ponzi Jr
If not, what is it that means that you guys always have the edge?
Not sure what you're asking. The only real edge I see is the market-makers' ability to make money from the bid/ask spread (which is not even real trading).

If you take away this ability, an institutional will only have better-than-even odds that he'll be able to survive trading blind as a retail trader if he can get rid of the bad habit of relying too much on the so-called institutional "advantages" i.e. the spread, the expensive Bloomberg terminals etc etc.

Quoting Ponzi Jr
Also, would you recommend it as a career choice?
No.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #3
  • May 22, 2014 8:28pm May 22, 2014 8:28pm
Quoting Ponzi
Also, would you recommend it as a career choice?
Quoting skenobi
No.


Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #4
  • May 22, 2014 9:20pm May 22, 2014 9:20pm
Quoting skenobi
{quote} No.
Why would you not recommend it as a career choice? I am 19 years old trying to become 1.
  • #5
  • May 22, 2014 9:30pm May 22, 2014 9:30pm
Quoting jibjib210
{quote} Why would you not recommend it as a career choice? I am 19 years old trying to become 1.
I can approach that question from a few different angles.

To save time, give me your own points why you want to become one, and I will shoot down each point one by one.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #6
  • May 23, 2014 2:46am May 23, 2014 2:46am
Quoting skenobi
But if your objective is only to trade spot FX, you don't need another crutch.
Could you elaborate on this a little. Ta
The road to pipland is arduous and fraught with challenge.
  • #7
  • May 23, 2014 6:31am May 23, 2014 6:31am
I was a market maker in Emerging Market NDF's for 12 years at a British Bank. I now trade my own incubator hedge fund. Retail trading is an extremely difficult endeavor or better put trading your own discretionary account is challenging.

Trading in at a bank you have access to real-time information, you see what flows look like, what the customers (corporations and Hedge funds) are looking to do. Trading your own account is almost like trading in a vacuum. As far as a career, Banks and/or institutions are not looking for prop traders. You have to bring other assets to the table. You need a advanced degree, you need to be able to manage a "book" which entails making prices for customers and then managing that risk in order to make your budget.

I can answer any more questions you may have in more detail if you would like.
  • #8
  • May 23, 2014 8:03am May 23, 2014 8:03am
Quoting JacobFordFX
I was a market maker in Emerging Market NDF's for 12 years at a British Bank. I now trade my own incubator hedge fund. Retail trading is an extremely difficult endeavor or better put trading your own discretionary account is challenging. Trading in at a bank you have access to real-time information, you see what flows look like, what the customers (corporations and Hedge funds) are looking to do. Trading your own account is almost like trading in a vacuum. As far as a career, Banks and/or institutions are not looking for prop traders. You have to...
My understanding of flows would suggest that it's not something you can drop in passing...other than that, good reply.
The road to pipland is arduous and fraught with challenge.
  • #9
  • May 23, 2014 8:34am May 23, 2014 8:34am
Quoting skenobi
{quote} I can approach that question from a few different angles. To save time, give me your own points why you want to become one, and I will shoot down each point one by one.
1. Making a lot of money. (Earning a lot of money as a trader for a hedge fund)
2. Becoming a millionaire. (i think an amount of 50 mill would do it for me personally)
3. Making a lot of money.
4. Living a financially free life.
5. Making a lot of money.
6. Not having to worry about money.
7. Making a lot of money.
8. Retiring young (and rich).
9. Making a lot of money.

I think you get the idea
Thanks !
"Always be yourself " Batman
  • #10
  • May 23, 2014 8:50am May 23, 2014 8:50am
True, flows are only good if the institution that you work for lets you "capitalize" on that order flow. But since 2008 the public scrutiny of banks has made that kind of trading taboo and proprietary trading has become a dirty word. Banks now just want to quote their customers and cover the risk. It's not the way it use to be, not as much fun as it use to be.
  • #11
  • May 23, 2014 9:18am May 23, 2014 9:18am
In your opinion, how much FX volume is in the form of swaps & other derivatives is generated by funds simply currency hedging? I suspect the volumes are huge based on how active the funds market is and how many dollar denominated funds are buying non dollar instruments.

Quoting skenobi
{quote} Have been one for more than 15 years. {quote} One of the many differences: retail traders trade with their retail FX brokers; institutionals trade with each other either VIA their interdealer brokers or directly with each other. Also, institutionals don't trade penny ante amounts. {quote} Some uppity rookie institutionals will puff up their jobs and say their Bloomberg terminals and Thomson Reuters Eikon accounts give them an edge. To weary long-time operators like me, these "tools" only give them a long-term crutch. My final answer: Sometimes....
  • #12
  • May 23, 2014 12:09pm May 23, 2014 12:09pm
Quoting JacobFordFX
Retail trading is an extremely difficult endeavor or better put trading your own discretionary account is challenging.
i.e. Real by-the-seat-of-your-pants trading.

Quoting JacobFordFX
Trading in at a bank you have access to real-time information, you see what flows look like, what the customers (corporations and Hedge funds) are looking to do.
... and believe it or not, I know some smarty-pants MBAs who can't make money even WITH all this presumably advantageous information. (Btw, flow information is over-rated. With enough practice, you can predict flow with a reasonable degree of success just by looking at S/R lines on a plain bar chart. )

Quoting JacobFordFX
As far as a career, Banks and/or institutions are not looking for prop traders. You have to bring other assets to the table. You need a advanced degree, you need to be able to manage a "book" which entails making prices for customers and then managing that risk in order to make your budget.
You could be right. Another way of putting it is that some Banks may still be looking for prop traders but just enough to maintain their industry persona as right proper risk-takers.. and even that attitude is fading away.

Quoting JacobFordFX
True, flows are only good if the institution that you work for lets you "capitalize" on that order flow. But since 2008 the public scrutiny of banks has made that kind of trading taboo and proprietary trading has become a dirty word. Banks now just want to quote their customers and cover the risk. It's not the way it use to be, not as much fun as it use to be.
Understandable sentiment. But I think FX flows will continue to be "capitalized" (i.e. front-running) for as long as it's not a crime in the statute books. If am not wrong, no institutional has ever been prosecuted for front-running FX flows for his employer Bank.

In the case of that stupid NAB Aussie trader who got nabbed recently for using leaked information to front-run his own private retail trades, that's insider trading and is clearly illegal. Institutional traders are generally prohibited from trading private accounts especially whilst on the employer's premises.

Quoting TranceTrader
In your opinion, how much FX volume is in the form of swaps & other derivatives is generated by funds simply currency hedging? I suspect the volumes are huge based on how active the funds market is and how many dollar denominated funds are buying non dollar instruments.
By swaps, I'm assuming you meant "FX swaps". FX swaps are generally cheap ways to borrow and lend but in the guise of simultaneous buy/sell or sell/buy transactions between a near date to a some future date. Due to the simultaneous nature of FX swaps, generally they don't move the spot market (this explanation is too simplistic but should serve for now. Just Google everything.)

The only markets that do move due to FX swaps are the short-term money market rates. Sometimes the rates affect the FX swaps markets, sometimes vice versa. Yes the volumes are huge. FX swaps are also trade-able (i.e. not just for managing cash flow mismatches) and the face amounts on FX swaps are always much larger than the standard amounts on FX spot trades.

Quoting rdsl
{quote} 1. Making a lot of money. (Earning a lot of money as a trader for a hedge fund) 2. Becoming a millionaire. (i think an amount of 50 mill would do it for me personally) 3. Making a lot of money. 4. Living a financially free life. 5. Making a lot of money. 6. Not having to worry about money. 7. Making a lot of money. 8. Retiring young (and rich). 9. Making a lot of money. I think you get the idea Thanks !
So you want to be an institutional trader because you want to make a lot of money. Money from what? From trading? From management fees?

The Banks won't give you that expensive office chair, a phone bank, some squawk boxes and a Bloomberg terminal and pay you big money bonuses for nothing. You have to PERFORM, and if you don't perform, you get fired.

The only way to make money from trading FX for an employer Bank is from the bonuses. You earn the big money bonuses by making sure you exceed your annual profit-taking targets. These targets increase every year and if you don't meet them, either you don't get the big money bonuses and you leave on your own, or they just fire you and find someone cheaper. And once you get fired, the chances of getting hired elsewhere in a similar capacity get less and less because of poor track records.

The Banks are only interested in what you can do for them, not the other way around.

The majority of institutional prop traders I know (and there are very few) who are still around after 10, 20, or even 30 years are those who can easily give up all those things I call "crutches" (e.g. flow information, expensive data terminals etc) and just trade blind like most retail traders.

Trading for Banks is hell on your personal life. In the larger financial centers, you'd have to start work the moment you wake up and only stop when you turn in at night... all in the interest of "enhancing shareholder value". Financial security and even job security is uncertain especially if you have the wrong mentor to guide you thru an environment that continually evolves into a different creature after every financial crises. When you're a retail trader, no one can fire you if you fvck up.

Some of you young "action junkies" might say, "oh, but the action IS the juice", but after 10 years or so, after wasting your bonuses on booze and whores, you will still wonder where all the money went and why you even bother waking up in the morning anymore. That's when Young Turks become Old Turkeys.

(Happily, the above was not my own experience . I left the industry after 16 years before I became too jaded. )

Hence my answer to the question whether I would recommend institutional trading as a career choice, which is "No."
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #13
  • May 23, 2014 1:26pm May 23, 2014 1:26pm
Skenobi make some very good points. You only get paid the big money when you exceed your annual budget, I know some dealers who got nothing when they made just their budget. Those budgets were in the area of 5 million USD. So unless you did better you had only your salary that year, which by most standards is still a very good living. It is very exciting at times but my days started at 5 am and ended around midnight, not all in the office mind you but you are constantly watching and maybe in contact with your colleagues in other time zones or you may be answer some a**hole salesperson inane queries at 2 in the morning or you may worry about losing your job because you only made 7 million USD when your budget was 10 million USD. I remember being tired most of the time and only relieved towards the end of the year when I made or exceeded my budget. Then the worry would start beginning 1 Jan when the new increased budget was given to me which was obviously outrageous, and the anticipation of getting screwed on my bonus. If I look at the money I made for my bank versus what I got paid salary + bonus was around 6%!! Not as great as you would have thought. BUT saying all that it was a great experience and I had a great time, made some great friends and made good money. I would absolutely have no regrets and would do it all over again.

So if you have a chance to be a salaried trader for an institution I would def jump at the opportunity BUT be warned its not all wine and roses you'll def have earn every penny you make. You could be Mother Theresa but if you can't make your budget your gone!
  • #14
  • May 23, 2014 2:57pm May 23, 2014 2:57pm
Thanks Skenobi & JacobFordFX , that's about (exactly) what I thought.
Have a great week end guys.

(Are you related to my good friend Obi Van Kenobi or something?)
"Always be yourself " Batman
  • #15
  • May 23, 2014 10:25pm May 23, 2014 10:25pm
Quoting JacobFordFX
BUT saying all that it was a great experience and I had a great time, made some great friends and made good money. I would absolutely have no regrets and would do it all over again. So if you have a chance to be a salaried trader for an institution I would def jump at the opportunity.
Refreshing to find a former institutional operator with your positive spirit. I guess I'm the glass-half-empty type of person... LOL

I made great friends, had great mentors, and saved some coin on the side as well. But if I could do over the 90's and knew stuff back then what I know now (i.e. how history would progress), I'd have learnt to code more and properly.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #16
  • May 23, 2014 10:31pm May 23, 2014 10:31pm
Quoting JacobFordFX
True, flows are only good if the institution that you work for lets you "capitalize" on that order flow. But since 2008 the public scrutiny of banks has made that kind of trading taboo and proprietary trading has become a dirty word. Banks now just want to quote their customers and cover the risk. It's not the way it use to be, not as much fun as it use to be.
So generally, has the exposure to flows as you experienced them whilst working, helped you in any way? I would have thought so if you are still at the coal face of service provider.
The road to pipland is arduous and fraught with challenge.
  • #17
  • May 23, 2014 11:48pm May 23, 2014 11:48pm
institutional trades do not all come the same. I am not one of them but worked with them.

Many are just for numbers and usually one star that is in the know, real connected, etc. Often the 'stars' are quite humble and approachable. that is the one you want to follow. Here and there you get galaxy size egos types. These are ones on the way out and should be ignored. ego more important than profit.
  • #18
  • May 24, 2014 12:47am May 24, 2014 12:47am
Quoting seaman2
institutional trades do not all come the same. I am not one of them but worked with them. Many are just for numbers and usually one star that is in the know, real connected, etc. Often the 'stars' are quite humble and approachable. that is the one you want to follow. Here and there you get galaxy size egos types. These are ones on the way out and should be ignored. ego more important than profit.
Numbers. Thats a cryptic one. What do you mean? Numbers as in productivity or something else.

Generally, flow knowledge is not something (I have found anyway. Others more better placed than me may disagree.) that can be summarised for easy transmission. It is highly discretionary from setup to setup. There is an underlying rationale, of course.
The road to pipland is arduous and fraught with challenge.
  • #19
  • May 24, 2014 3:10am May 24, 2014 3:10am
numbers so bank can say we have xx traders. Really only one is doing real job. Typically from very well connected family. Insider trading in a way.
  • #20
  • May 24, 2014 3:47am May 24, 2014 3:47am
Quoting seaman2
numbers so bank can say we have xx traders. Really only one is doing real job. Typically from very well connected family. Insider trading in a way.
Insider trading is an admission of failure. If you cannot detect the flows, it's a pretty precarious way to run a business as we have seen from recent turmoil.
The road to pipland is arduous and fraught with challenge.
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