In this article we will look at how you can get a job inside a professional trading firm.
This guidance is specifically for people that have no current industry experience. You might also have no relevant academic qualifications.
This is also for those that are not ready to launch their own money management business.
We will be looking at the following points:
- How prop firms operate
- Joining a prop firm
- Secret shortcuts
There is normally a standard hiring process for most city-based trading firms. This involves attending career fairs are universities each year.
The goal of investment banks and hedge funds is to attract the best and brightest talent.
This makes it incredibly difficult to get a trading position outside of that standard process. The chances are very slim if you’re not a graduate or if you don’t have relevant experience.
According to business insider, only six percent of those that apply to become traders go on to make it.
It’s important to bear in mind that these are people that are of the target age with the relevant qualifications.
Although the options are limited there is hope. The key to breaking into the industry comes in the form of two opportunities.
The first opportunity is that of working inside a smaller prop trading firm. The second opportunity is that of working in a different role in a related firm first.
How Prop Firms Operate
A prop firm is where a trader or group of traders pool some capital and trade it. They do not trade client capital and seek to generate their own profit from their trading activity.
They sometimes bring in other traders to help spread the risk and lighten the load.
The founders have usually worked inside larger investment banks or trading firms. They leave to set up their own shop for the freedom and flexibility it brings.
These smaller firms can often be a lot more open to hiring new talent from different backgrounds.
They are also a lot more entrepreneurial in their overall business approach. Many firms will allow people to pay to take part in their training process.
Each applicant is usually filtered to ensure the right people enter the firm. Anyone passing the application process can select to pay for the training.
The reason firms do this is to protect themselves from wasted time training the wrong candidates.
It also serves as a robust income stream to support the costs associated with running their own firm.
Some firms will refund the cost of the training if the applicant is accepted as a trader.
With the advent of the internet, some firms now operate almost entirely online. These can make the process of working with them much easier.
It is important to avoid faux prop firms. These are firms that make all of their money from students rather than from trading.
This is a common practice in the online prop trading world.
You need to be sure that the firm itself is actually trading the markets profitably with its own capital.
Joining A Prop Firm
One of the key factors that differentiate a faux prop firm from a legitimate prop firm is the application process.
Legitimate firms will always be picky with their selection process. This is because their capital is at risk.
They will also put you through a period of training before allocating any capital.
To generate market profits they need intelligent people who are serious. If you are a complete beginner it is unlikely you will be accepted.
A faux firm will allow you to begin trading almost right away with no regard for your trading approach.
They will also make it quite complicated to actually trade profitably. You might find lots of restrictions and loop holes in their terms and conditions.
It’s important to avoid these firms as it’s highly unlikely they can assist you with trading successfully.
Your first step should be to research online for legitimate prop firms. This will give you a list of opportunities.
Your second step is to contact each firm and ask for details about the application programmes they offer.
You need to know all of the steps involved and exactly what they are looking for. This will help you identify legitimate firms.
The final step is to apply to the firms that seem the most attractive. Having a profitable track record in any form will help you get in the door.
Another way into a prop firm could be to simply offer to rent a desk on their trading floor. You will have to pay a monthly fee but it will get you on the inside.
This is a popular concept with city based traders. They trade their own money within a professional environment.
After a couple of months you will know everyone personally and your chances of being accepted will be almost certain.
Applying directly for trading roles will put you straight into a highly competitive environment.
According to a study by e-financial careers, 71% of trading applicants have an economics degree. 27% of them also have a Master’s degree.
You will be competing against high performing graduates and people with industry experience.
If you do not have the money to pay for a desk or for training there are other ways to get into trading related roles.
One of the biggest is to apply for analyst based roles. This requires many of the same skills as trading without the pressure to perform.
There are many firms that provide analysis for trading firms and even brokerages.
Analysts have to be tuned into the market and understand exactly how events will impact prices.
Securing a role of analyst is still competitive but the bar is slightly lower than for the role of trader.
The job is tough. The financial times reports that the average city analyst is expected to work between 80-100 hours each week.
The role itself is also intensive. Much of the day is spent staring at screens and digging into complex financial data.
Having an analyst role on your CV can make it much easier to get a trading job later on.
You can prove your skills more easily for this role by creating your own content and analysis. This will let the hiring firm see instantly how good you are.
You need to understand the markets and can communicate well. This can be a fantastic method of demonstrating your value.
There are also other types of business that will help to prepare you for a job inside a trading firm.
These include brokerage, financial management, financial journalism and even fintech companies.
How To Get A Job Inside A Trading Firm
If you’re struggling to find a position try breaking the task down into more achievable steps.
For example, start by applying for entry level positions inside a small brokerage. You could also try for entry level roles in accounting or compliance firms.
Once you have the position secured you can then attempt to move up to more advanced positions.
The experience from the previous step will be perfect for the role at the next step. Within a couple of years you could have a CV packed with financial trading industry experience.
Another angle could be to focus on trading your own small account. This can lead to building your own asset management business.
Whatever approach you take you should always be working on your network.
This means meeting people and attending industry events. Try to connect with people doing the roles you want to do.
According to firstbird.com, 41% of new company hires come from referrals from existing employees.
This means that you have more chance of finding the role you want by knowing someone on the inside.
This all takes time but can be a powerful tactic to finding the job you want.
Remember, that there are many different paths you can take. Don’t give up just because you failed at the first application.
If you want it enough there plenty of opportunities to approach it from different angles. With persistence and creativity your chances of getting a trading job are hugely increased.
If you have any questions or comments about this article please leave them below.
I read each one and try to respond to as many as possible. I also use them for ideas when creating new articles that can help you break into the world of professional trading.