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Is anyone here an institutional trader?

  • #741
  • Edited 8:16pm Jun 15, 2015 7:30pm | Edited 8:16pm
Quoting nubbins
Yea, to be honest, the reason why I ask seemingly trivial questions is because I feel like "the devil is in the details"; I strongly believe that one's "edge" has to be holistically internalized, as in you have to not only have the rules and strategy, but a deep understanding of the dynamics and details of the market, as well as the philosophy to one's own trading (sorry to sound like such a theory-crafting nub, but this is what my personal beliefs are when it comes to trading).
Don't waste too much time crafting theories. You still have trading to do.

Quoting nubbins
Having said that, I have yet to fully go through the whole thread, so I suppose I should have done that first before asking that question. At least now I have a clearer picture of how a typical Sales and Trading division works, but I just think that the trade by phone system seems to be a bit outdated unless: 1) you can work out a strategic and profitable trade with a client-partner with whom you have an established relationship (if these things still happen post-LIBOR, FX and whatever scandals that have happened up to this point),
This point is beyond your control. We accept that fact, and so should you. Don't worry your head about it.

Quoting nubbins
2) there are still that many clients out there that are just that ignorant and outdated (who are most likely ripped off by their own LPs),
Some (or rather, MOST) people are just BORN to be Customers. That's just too bad. We accept that fact, and so should you. Don't worry your head about it.

Quoting nubbins
3) fail-safe against the "fat-finger" problem.
There is no automatic fail-safe. For lack of a better one, we think the ever-present threat of automatic job dismissal is enough of a fail-safe. We have (virtually) no defense against fat-fingers; we accept that and so should you. Again, don't worry your head about it.


Quoting nubbins
Anyway, it is clear to me now that in the spot FX market, no one Tier-1 LP works their trading in a vacuum (albeit with fragmented information pertaining to market direction, given other MM/LP competitors in the same market), be it in their flow-trading operations or in their prop-trading one, and that they actually work in the same market and not on some dark pool (the reason why I differentiated flow-trading from, quote-unquote, "live trading" was because I thought it operated on a dark pool).
Read the thread. Or read a book like Liar's Poker. Institutional trading ops is not too complicated to understand. To me, anyway.


Quoting nubbins
I guess the questions I had can perhaps help those who want to get into institutionalized S&T regardless. That is not to say I am inclined to do so myself
If you're not already inclined, with respect I think you shouldn't ask. People who ARE really inclined would have researched their chosen future careers and have asked less convoluted questions than you. I have (caused to be) fired or driven out more than a handful "philosophical" junior traders from my prop desks in my day.


Quoting nubbins
and that there are superior advantages to trading for an institution,
If you had read the thread and internalized the information therein, you would realize that the perceived "advantages" are over-rated.


Quoting nubbins
but it wouldn't hurt for me to know those technical details if I ever do find myself in a networking situation where I am at least able to carry out a convo that is on the same wavelength with a institutionalized trader irl.
Quoting srmfx
{quote} nubbins, you are absolutely right that if you want to successful trader you must know how the big guys thin and act. From my experience I can tell you that they care only about the bonuses. For a lot of them this is the larger part of the income.
I doubt very much a retail trader can ever be on the same wavelength with a bank trader in a conversation. As srmfx points out, all bank traders (most of the young ones nowadays anyway) care about are their bonuses.

Quoting nubbins
Besides, I don't think you can never know too much.
Yes, you can (know too much). Too much is pointless time-wasting. Simple is best.

Quoting nubbins
Before I end this post, a question just occurred to me: can you explain the Black Swan event from a former institutional trader's POV?
Speaking only for myself, I don't dispute the textbook definition. I have nothing to add to it.

Quoting nubbins
Is it wrong for me to just assume that it is as simple as all Tier-1 LPs decided to widen the spread for "price-finding" reasons by over 2-4000 pips
Nobody (that I know) widens spreads to facilitate "price-finding" (I think you mean "price discovery"). They widen spreads to cover their asses during periods of relative uncertainty.

Quoting nubbins
(or a more likely scenario would've probably been one LP decided to take the first step to list such a ridiculously marked-up price and then had a transaction on it...)?
By this, you mean the opening session gaps, right? "Ridiculous" is a matter of opinion. If trades were dealt at those levels, opinions don't matter.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #742
  • Jun 27, 2015 11:40pm Jun 27, 2015 11:40pm
After reading through the entire thread, I want to give a special thanks to Skenobi, JacobFordFX, and other current and former institutional traders for chiming in and offering their candid experiences and answering questions in a straightforward manner. The thread has remained on topic If only there were more people like you here 10 years ago.....but it is here now and that is what counts the most.

To you this may seem trivial, but this thread goes a long way to help dispel a lot of myths of what actually happens at the institutional level. You could have easily used your position to rip people off by either contributing to the misinformation of how derivatives trading works in the real world, sell courses with misinformation or tactics you don't use yourself, etc. But you didn't, and both myself and MaAT thank you for that. And the video from Anton Krell on retail vs professional trading and institutional trading was a nice compliment to the thread as well.as well. The book we have been recommending to people for an overview into derivatives trading on all levels is Trading and Exchanges: Market Microstructure for practitioners, Larry Harris (also a free 'draft' version available). The most interesting chapter in Harris' book was chapter 8, Why People Trade. an important excerpt we think relates here:
"You must understand why people trade in order to use markets effectively. Markets provide many valuable opportunities. To take advantage of them, you must first recognize them.

By considering why people trade, you will better understand why you trade and whether [or not] you should trade. Many traders do not fully recognize the reasons why they trade. Consequently, they pursue inappropriate trading strategies or they trade when trading is counterproductive to their true interests. The optimal trading strategy for a given trading problem depends on the problem. You cannot trade well if you do not know why you want to trade.

Knowing why people trade may also help you determine whether other traders understand why they are trading. This skill is very important because you can usually distinguish good money managers from poor ones by whether they understand well why they trade. It is also important because traders who do not fully understand why they trade often trade foolishly. If you can identify such traders, you may be able to profit from their foolishness...(p.176, emphasis added)"

Most [retail] speculators did not know why they traded or assumed that everyone is a profit-motivated trader. But there are people who come to the market to hedge risk. Btw, did banks profile their customers who traded with them? Or did they Market Make to anyone with the money to trade?

One thing that struck me as odd is that you have not tried, mentioned, or advocated automating part or all of one's trading strategy. Seeing as institutions have already done so for the majority of their MM operations and what remains of their prop trading accounts (with some human oversight to monitor the algos), it would make sense that you and other now retail traders would attempt to automate some or all of your trading strategies (assuming you had a competent programmer to work with). Even a low frequency strategy could benefit from higher level of objectivity in the trading decision, which would come from recording the rules/conditions to open/close trades in a more accountable format (algo).

Did the Bloomberg/Reuters terminals have programming language ability? Or API connection in which you had to use a 3rd party/proprietary trading platform with algo capability If you did use 3rd party software, which one(s) did you use? Did other traders in the office attempt to use automated strategies in those days?

Also, can you go into more detail about dark pools? How do institutional traders work with them and why would they prefer using a dark pool to source liquidity a direct currency swap with another bank or insitution, ECN, or exchange traded product? Did you ever provide liquidity to a dark pool arrangement? How does one get access to a dark pool of fx liquidity?

Thanks for your input.

and I'll remember next time to use the 'print thread' link if I want to view an entire thread as one page. That would have been helpful way back at the first page.
Measure trends automatically with zero lag
  • #743
  • Jun 28, 2015 5:31am Jun 28, 2015 5:31am
Thank you skenobi for providing so much insight into the business and definitely very helpful for the youth to think through before joining it as a career just because it was glamorous and earning big money.
Life is a game. Money is how we keep scores.
  • #744
  • Edited 10:12am Jun 28, 2015 9:50am | Edited 10:12am
My two cents. YMMV.

Quoting ybfjax
Btw, did banks profile their customers who traded with them?
Yes.

Quoting ybfjax
Or did they Market Make to anyone with the money to trade?
Yes.

Quoting ybfjax
One thing that struck me as odd is that you have not tried, mentioned, or advocated automating part or all of one's trading strategy.
In the formative years of my career, I used Tradestation to automate my trading signals, but execution remained manual.

Quoting ybfjax
Seeing as institutions have already done so for the majority of their MM operations and what remains of their prop trading accounts (with some human oversight to monitor the algos), it would make sense that you and other now retail traders would attempt to automate some or all of your trading strategies (assuming you had a competent programmer to work with).
Sorry mate. I don't see how the last part of your sentence logically follows the earlier part, therefore I disagree that it "would make sense". If it's really true that Banks have automated the majority of their market making (I'm assuming that's what you meant by 'MM'), I don't see how it necessarily follows that we former and current institutionals would even want to automate any aspect of our personal trading. Some of us, perhaps. But not all of us.

Quoting ybfjax
Even a low frequency strategy could benefit from higher level of objectivity in the trading decision, which would come from recording the rules/conditions to open/close trades in a more accountable format (algo).
This is just my opinion and I don't really care if I'm wrong: Anytime a trader tries to introduce any level of objectivity in his trading decisions, he will usually come to grief against a subjective market that doesn't care about his rules or conditions.

Quoting ybfjax
Did the Bloomberg/Reuters terminals have programming language ability? Or API connection in which you had to use a 3rd party/proprietary trading platform with algo capability
I'm pretty sure the off-the-shelf treasury management systems we had would have the aforementioned capabilities. Even if Bloomberg or Reuters had them (and I'm not even sure if they do), I would not have bothered to seek it out.

Quoting ybfjax
If you did use 3rd party software, which one(s) did you use?
As mentioned before, I used Tradestation and I developed my coding abilities (such as it is) on TS's EasyLanguage.

Quoting ybfjax
Did other traders in the office attempt to use automated strategies in those days?
In those days, not many. I think automated signals never really picked up in usage as institutional traders (where I come from) pretty much chuckle over the notion that the Market gives a sh!t about an algo's rules/conditions. I stopped using TS about 4-5 years into my career when I became a full-on price action trader.

Quoting ybfjax
Also, can you go into more detail about dark pools? How do institutional traders work with them and why would they prefer using a dark pool to source liquidity a direct currency swap with another bank or insitution, ECN, or exchange traded product? Did you ever provide liquidity to a dark pool arrangement? How does one get access to a dark pool of fx liquidity?
For my part, I've never dealt with dark pools before. Others may have more useful input.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #745
  • Jun 28, 2015 12:31pm Jun 28, 2015 12:31pm
Quoting skenobi
{quote} This is just my opinion and I don't really care if I'm wrong: Anytime a trader tries to introduce any level of objectivity in his trading decisions, he will usually come to grief against a subjective market that doesn't care about his rules or conditions. {quote}
Interesting, are you saying you lean more towards discretionary trading, and don't rely completely on set in stone rules?
  • #746
  • Jun 28, 2015 2:04pm Jun 28, 2015 2:04pm
Quoting hieronymus
{quote} Interesting, are you saying you lean more towards discretionary trading
Yes. I believe I've said so enough times in this thread.


Quoting hieronymus
and don't rely completely on set in stone rules?
Nothing wrong with having "guidelines" but rules "set in stone" implies inflexibility. Inflexibility in an ever-evolving market?

'Nuff said.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #747
  • Jun 28, 2015 2:08pm Jun 28, 2015 2:08pm
Quoting skenobi
{quote} Yes. I believe I've said so enough times in this thread.
Ah, I haven't read enough of your posts to be acquainted with that, although I've been meaning to.

Quote
Nothing wrong with having "guidelines" but rules "set in stone" implies inflexibility. Inflexibility in an ever-evolving market? 'Nuff said.
I'm of the exact same thought, I just haven't seen many others say this and was making sure that's what you were stating. Thanks!
  • #748
  • Jun 28, 2015 2:41pm Jun 28, 2015 2:41pm
Quoting hieronymus
{quote} Ah, I haven't read enough of your posts to be acquainted with that, although I've been meaning to.
Sorry, mate. I didn't mean to be presumptuous to expect that you should've been acquainted with my "work"..

In my defense, it would seem that Ramadan fasting has not been easy on my temperament this time around in my old age and has probably raised my snarkiness level a tad.

Apologies again.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #749
  • Jun 28, 2015 3:25pm Jun 28, 2015 3:25pm
Quoting skenobi
{quote} Sorry, mate. I didn't mean to be presumptuous to expect that you should've been acquainted with my "work"..
No worries : ) You're not that off base to presume that anyway, as you can see you're one of the three people on FF I subscribe to.
  • #750
  • Jun 28, 2015 3:56pm Jun 28, 2015 3:56pm
Quoting skenobi
{quote} Nothing wrong with having "guidelines" but rules "set in stone" implies inflexibility. Inflexibility in an ever-evolving market?
This, this, this! Rules written in stone is how we are conditioned, thanks to most forex material you get to read in your early days of retail trading.
The problem that then occurs eventually is that every time a trade fails it is because of a parameter not correctly adjusted to market circumstances.
We change settings, we "finetune" some further, we lose, we change settings... At this stage you are a dog following your own tail.
Instead of continiously changing parameters accept that the outcome of the next trade has randomness involved. Your focus will then be switched to correctly managing, instead of winning.
  • #751
  • Jun 29, 2015 1:20am Jun 29, 2015 1:20am
Quoting skenobi
{quote} Yes. I believe I've said so enough times in this thread. {quote} Nothing wrong with having "guidelines" but rules "set in stone" implies inflexibility. Inflexibility in an ever-evolving market? 'Nuff said.
The reason why I said automation made sense was primarily because of scalability. Whether you automate with computer instructions, hiring more staff, etc, you can only do so much yourself. You don't have unlimited time or focus. That doesn't mean the trading rules should be permanent or one size fits all market conditions. System framework or guidelines should be built from the start to be flexible enough to adapt or allow the user to make adaptations as market conditions change (human oversight). These adaptations could possibly be detected and adjusted automatically, but that's a separate argument there. The main point is that You would be limited in how many markets you could follow, trade, and/or manage simultaneously if too much of the entry/exit detection/decision was done manually by one person, especially intraday analysis. It would make sense for people who trade professionally to automate as much of these repetitive tasks as they reasonably could. They are not required to.

Appreciate the candid feedback either way. Enjoy the rest of your Ramadan, which goes until about 17 July this year. And if others can comment on dark pools, that is great.
Measure trends automatically with zero lag
  • #752
  • Jun 29, 2015 3:39am Jun 29, 2015 3:39am
Quoting ybfjax
{quote} The reason why I said automation made sense was primarily because of scalability. Whether you automate with computer instructions, hiring more staff, etc, you can only do so much yourself. You don't have unlimited time or focus.
For your guide, a senior enough institutional should be able to juggle at least 4 tasks (if not more) at the same time at any one time. If scalability ONLY involved position sizing and adjusting to unpredictable bullshit price spikes, you may be surprised what a junior trader can do with just a desktop calculator (or just his brains) and a 10-year-old Reuters Dealing keyboard (with coffee stains stiffing up the keys).

Quoting ybfjax
That doesn't mean the trading rules should be permanent or one size fits all market conditions. System framework or guidelines should be built from the start to be flexible enough to adapt or allow the user to make adaptations as market conditions change (human oversight). These adaptations could possibly be detected and adjusted automatically, but that's a separate argument there.
Understood. If split-second adjustments/adaptations are required, then sure: Computers 1, Humans 0.

Note however, that the number of market conditions are not finite i.e. computers can only compute so much and only based on what their human operators "adapt" for them. A computer or algo, for instance, could hardly react economically to how markets and prices react to bullshit surprises such as the recent SNB debacle.

Quoting ybfjax
The main point is that You would be limited in how many markets you could follow, trade, and/or manage simultaneously if too much of the entry/exit detection/decision was done manually by one person, especially intraday analysis.
I disagree that we are limited in the manner you describe. Individual traders in our prop crews manage dozens of continually running open trades. By "open trades", I mean currency pairs and not individual trades, since all trades in one particular pair are netted off as one position and not treated as individual trades like in MT4 (for example).

If any of my traders couldn't manage his positions AND conduct on-the-spot analysis to make quick decisions, he might find my boot up his ass.

Quoting ybfjax
It would make sense for people who trade professionally to automate as much of these repetitive tasks as they reasonably could. They are not required to.
That's the point: they're not required to. Algos don't do what they do JUST to do what humans can do and faster. Algos do it to take advantage of minute arbitrage opportunities in large sizes. They don't make things better; and in times of crisis, they only make things worse.

Quoting ybfjax
Appreciate the candid feedback either way. Enjoy the rest of your Ramadan, which goes until about 17 July this year. And if others can comment on dark pools, that is great.
Cheers!
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #753
  • Jun 29, 2015 10:19am Jun 29, 2015 10:19am
I have a question for pros/ex-pros: Why is the weekend gap almost always filled in FX (in commodities for example it is not always the case)?
Is it the dealers working to retrace/get rid of their losing positions, or are there other mechanisms at play?
Cheers,
k
  • #754
  • Jun 29, 2015 7:05pm Jun 29, 2015 7:05pm
Quoting kprsa
I have a question for pros/ex-pros: Why is the weekend gap almost always filled in FX (in commodities for example it is not always the case)? Is it the dealers working to retrace/get rid of their losing positions,
Not the only consideration.

Quoting kprsa
or are there other mechanisms at play? Cheers, k
Corporate / international trade (i.e. import/export) requirements etc.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #755
  • Jun 30, 2015 1:20am Jun 30, 2015 1:20am
Quoting skenobi
{quote} Not the only consideration. {quote} Corporate / international trade (i.e. import/export) requirements etc.
Thanks!
k
  • #756
  • Jul 10, 2015 2:49am Jul 10, 2015 2:49am
If you want further insight of a former trader you can check out Northernstar's profile. Since long time no more activity but go through his posts. Very good.
I think skenobi will agree with what he writes.

Skenobi, can you tell me, are traders free to use charts or bars or line charts?

I work at a large Swiss bank and doing an internship, followed by studies in Banking & Finance.
Any general advice? The thing is that most application offrrs require at least a bachelor and about 5 years of experience.
I don't have this. Bachelor is to come, but experience I xan only get on the floor.
There is an offer of a small middle east bank that does not require the two above stated, so, what's your take? Grab the chance anyway?

Could you give your opinion on this:
Is it arealistic idea that you will learn to trade at a fx floor in a bank for some years (5-10) and then be able to make the transition to retail trading? (Not as a primary source of income, just for building equity, I got that so far). In short: Being good trader in a bank= profitable retail?

Thanks a lot.
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  • #757
  • Jul 10, 2015 5:10am Jul 10, 2015 5:10am
Quoting bg_sunny
are traders free to use charts or bars or line charts?
Did you really think they aren't "free to use"?

Quoting bg_sunny
I work at a large Swiss bank and doing an internship, followed by studies in Banking & Finance. Any general advice?
General advice: Read my posts in the first few pages of this thread.

Quoting bg_sunny
The thing is that most application offrrs require at least a bachelor and about 5 years of experience. I don't have this. Bachelor is to come, but experience I xan only get on the floor. There is an offer of a small middle east bank that does not require the two above stated, so, what's your take? Grab the chance anyway?
No.

Quoting bg_sunny
Could you give your opinion on this: Is it arealistic idea that you will learn to trade at a fx floor in a bank for some years (5-10)
A bank will not give you "some years" to learn how to trade. For sure, they MAY give you "a few months" to get your sh!t together during your employment probation period, but if you're not already making money for the bank by then, or worse, if they don't even LIKE you to keep you longer, I don't think they will hesitate to fire you or transfer you out.

Quoting bg_sunny
and then be able to make the transition to retail trading?
If you have the opportunity to be apprenticed to old-school senior traders, it may be possible to transition to retail. Nowadays, I'm not too sure if that opportunity exists anymore especially in the big name banking groups. I hope I'm wrong, tho. In the meantime, why not learn how to trade now instead of waiting to be trained in a bank?

Quoting bg_sunny
In short: Being good trader in a bank= profitable retail?
Sure, why not? But only if your definition of "good bank trader" is someone who makes money by actually trading and not via insider shenanigans.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #758
  • Jul 10, 2015 6:13am Jul 10, 2015 6:13am
<p>[quote=skenobi;8374578]{quote} Did you really think they aren't &quot;free to use&quot;?

I rather meant that a trader can chose how to trade, with candles or bars or line or whatever he feels comfortable with.


{quote} A bank will not give you &quot;some years&quot; to learn how to trade. For sure, they MAY give you &quot;a few months&quot; to get your sh!t together during your employment probation period, but if you're not already making money for the bank by then, or worse, if they don't even LIKE you to keep you longer, I don't think they will hesitate to fire you or transfer you out. {quote}
Can I deduce from that that it is possible to get your "sh!t together" in a few months, i.e. be profitable (good mentoring assumed?)

If you have the opportunity to be apprenticed to old-school senior traders, it may be possible to transition to retail. Nowadays, I'm not too sure if that opportunity exists anymore especially in the big name banking groups. I hope I'm wrong, tho. In the meantime, why not learn how to trade now instead of waiting to be trained in a bank? {quote}
With all due respect, but how is this going to happen? It's not as if you could read a book...
You need a mentor. Nobody will teach you just like that, bexaus why should he/she? He can make money in the time while he teaches you. At least in a bank the institution itself should have an interest in you being profitable, correct?

Thank you again for your time.
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  • #759
  • Edited 1:03pm Jul 11, 2015 11:56am | Edited 1:03pm
Quoting bg_sunny
I rather meant that a trader can chose how to trade, with candles or bars or line or whatever he feels comfortable with.
A bank doesn't care HOW a trader trades as long as he brings in the money. The only limits are local laws (such as it is).

Quoting bg_sunny
Can I deduce from that that it is possible to get your "sh!t together" in a few months, i.e. be profitable (good mentoring assumed?)
Anything is possible. But mentoring of any kind is not assumed or expected in all cases. For traders unlucky enough to not have a jungle guide to take them under his wing, they'll just have to hope they have the innate talent to survive. The politics suck, but that's what separates the men from the boys. If a trader can't stand the politics, he'd better have enough talent to make a lot of money for the bank to compensate.


Quoting bg_sunny
With all due respect, but how is this going to happen? It's not as if you could read a book...
Yes, you could. Sometimes reading a book is all it takes. I know a couple of bank traders who started out reading and internalizing John Murphy's Intermarket Analysis book and went on to become some of the best structural long-term outlook traders I know who are still at it WITHOUT having had mentors.

I've even forwarded some silly material from my ebook collection to some sniveling juniors for them to have something they can wet their beaks with. Some will wash out because they were lazy; some others took what little pointers came their way, made the system their own, and made successes of themselves (as signified by their bonuses), WITHOUT having mentors.

Anything is possible. With or without mentors.

Quoting bg_sunny
You need a mentor.
Maybe some traders need mentors? Hopefully not you.

Quoting bg_sunny
Nobody will teach you just like that, bexaus why should he/she?
Exactly!

Quoting bg_sunny
He can make money in the time while he teaches you.
If he's any good, for sure!

Quoting bg_sunny
At least in a bank the institution itself should have an interest in you being profitable, correct?
The bank is only interested in what traders can do for the bank, not what the bank can do for traders.
I'm not trying to convince anyone. I'm not in the &quot;convincing&quot; business.
  • #760
  • Jul 11, 2015 12:50pm Jul 11, 2015 12:50pm
Quoting skenobi
{quote} A bank doesn't care HOW a trader trades as long as he brings in the money. The only limits are local laws (such as it is). {quote} Anything is possible. But mentoring of any kind is not assumed or expected in all cases. For traders unlucky enough to not have a jungle guide to take them under his wing, they'll just have to hope they have the innate talent to survive. The politics suck, but that's what separates the men from the boys. If a trader can't stand the politics, he'd better have enough talent to make a lot of money for the bank to...
Thanks for your honesty (and pragmatism). Much appreciated.
So it's everybody for himself. I'll make it.

Cheers and thank you again.
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