Say you're at a prop shop that requires an initial contribution...so its basically the retail trading experience. You can trade whatever you please....fx, equities, futures, options, ect.Lots of folks at these places don't have college degrees/or have non-quantitative degrees.Would a masters in financial engineering be of any use in a personal trading environment such as this? Why or why not?

Run! Don't do it! Chicago, the fair city of my naissance, is lousy with these shops. I've been trading for a looong time, and rule #1 is:(drumroll)Never Trade With Your Own Money!If you have a MS in Quant Finance, you will not - I repeat - not have an advantage in this environment. It's a crapshoot, not a game of skill. You are qualified to get a "real" job - go and get one.

why do you say its a crapshoot?

I agree with Papercut ... an MS in anything is as useful to you in that environment as a chocolate teapot. get a proper job. trading is not all its cracked up to be.

QuoteOriginally posted by: yeyewhy do you say its a crapshoot?If afterall, you ask the reason why, then you must obey twice to uncle Papercut's recommendations.

thats really cute. Stop speaking to me in riddles if you're going to answer my question.

Well its not a riddle actually. Papercut implies that they may be anything from a banch of crooks to ones that you shouldnt take them seriously due to their business model. Making such questions implies that you are just inexperienced, i hope....

surely not all prop shops are infested with cowboys, there must be some intelligent players?

James -Seriously, the people who run these shops are just plain, old-fashioned predators. They want the guy to put up his own capital, then they will charge him some license fee for trading software (Trading Technologies "X_Trader" or whatever) and then charge him "commissions" (for what!?) on top of that. Then, if they leverage the guy at all, they will agree to some percentage split of his productivity. Then, he will be given totally phoney "statements" to account for all their backcharges. It's a sham, and if you think about it, it's totally a reverse-Darwinian approach. Only the weakest possible candidates opt for this as a livelihood. So our friend walks into one of these shops, puts down his hard-earned money, gets goaded into a multi-year contract and then has the pleasure of sitting next to people who are all the least knowledgeable and least experienced traders on the planet.That's not trading. That's time-wasting.When some actual investment bank, trading firm or hedge fund pays you a proper, senior level salary with full benefits (like a civilised human being), asks you to trade in a way that is convivial for your own style, then gives you a fat chunk of what you produce, you are a real trader. Further, you are sitting next to the world's best and brightest.

Papercut: Thank you for your comments. There are however some prop shops who employs graduates (REFCO to mention one), gives them some sort of training (while getting paid) and then lets the graduate trade the firms money if he has potential. Do you regard these firms as the same set up?

The whole "proper" thing is funny. If one were any good at trading in the first place, they'd just trade for themselves or go to a prop shop.If you don't need the leverage, go retail.If you take a salary, that implies something:1) you're trading style isn't profitable enough to justify going solo.2) you need a salary to feel comfortable, even though you know that trading on your own would produce much much more.Most prop shops have it setup where you'll receive 95-100 percent payout...which is why commissions are there.Whats the most a "proper" setup will give you? 30, 50 percent?There are advantages to trading solo, or going to a prop firm. The freedom to decide when and if you feel like going to work on any given day is a plus. That isn't going to happen in a place where you're paid a salary/bonus. Commissions based jobs may seem like a scam...but there are people making money doing this...take for example a "financial consultant" a.k.a a salesman of whatever b.s. financial service (insurance, annuities, ect.) I've met a few who do absurdly well, and work about 35-40 hours a week. They were never given a salary, but i'd say making 400,000 a year as relatively uneducated person is good work. And these are folks at no name establishments, like Farmer's Insurance, and Strategic Financial Group. Last week I just got offered a position with Smith Barney/Citigroup as a stock broker/fc which involves a 36 month training program...but even at an elite institution like this, i will have to pay my dues in what seems very similar to a "scam" -- being paid a small stipend to learn/be trained and then eventually make a living on commissions with no base.the training is nice, and the small stipend is unexpected. (nobody in this line of work pays a stipend and training is pretty short and shabby). I'm lucky in this respect...but even after you've made it, everybody at the smith barney office is paying 600-900 a month for desk fees....they've got to rent office space, pay for b.s. supplies like paperclips, and their phone bill is usually very bad. But then again the average smith barney broker supposedly makes over 400k a year...so thats fine by most of them.Whats my point? The setup at a lot of commission's based jobs doesn't seem right...but it works for some people.more risk? more reward.

i looked in to various trading firms last year. but am now headed somewhere else. however i was just wondering which places people perceived as decent and which place are not so great?

QuoteOriginally posted by: uiouio Papercut: Thank you for your comments. There are however some prop shops who employs graduates (REFCO to mention one), gives them some sort of training (while getting paid) and then lets the graduate trade the firms money if he has potential. Do you regard these firms as the same set up?I won't comment on that particular firm.All these shops want you to do is day-trade, going home 'flat.' If the 'trader' fails, he has gained nothing - not even experience (certainly not money), and the next shop won't look at him. They will act like they are 'investing in you' by giving you some pittance while you are 'training', but if you don't produce you'll get fired. I've seen it happen - they are just hiring as many guys as they can, randomly, some survive. Those who do are getting ripped off.QuoteOriginally posted by: yeye If you take a salary, that implies something:1) you're trading style isn't profitable enough to justify going solo.2) you need a salary to feel comfortable, even though you know that trading on your own would produce much much more.Are you joking me? How many lifetimes worth of actual work will you spend accumulating the savings you will need to short 10,000 ATM Eurodollar straddles? If you actually think this way, kiddo, then don't say I didn't warn you. In fact I think you may be exactly what they're looking for. One thing is certain - you have absolutely no idea of what trading is or how it works. Good luck.

This thread seems to be pretty negative on the whole prop trading experience.For retail prop where you pay them it is probably fair - this is a scam.Where they pay you, no matter how little it is slightly different. OK Macfutures, Saxon etc will not pay a decent salary but they are making an investment in that you can lose so much before you get kicked out.It is not true that these firms only day trade - many do overnights and some allow positions to be held longer - having said that they do focus on ST trades.The existance and proliferation of these firms would suggest that at least on a gross level traders can make money at least in the ST. On a net level I do not know what proportion of traders are 'successful' and to what extent.Career wise if you dont make it you will never get in to a respectable bank or insurance company or whatever and no other trading company will touch you with a 10Ft pole.I will be taking up an offer with one of these firms - If I can do it I get a share of the profits and some of these guys can make very nice money. I serve my 2 years or whatever on my contract then either move firm or go it alone. If I dont succeed I only lose living expenses for 6-12 months - and I live cheap. I could of course go the bank / respectable company route and make £20-30 grand as a grad. I dont have the motivation to do this - just seems mind numbingly dull and an unworthy way to spend my life. I am not a quant if I had more qualifications I could make a bit more.... There is no advantage to being a quant in a prop trading environment. But what it offers you is a shot at making several hundred thousand very quickly.I would love to hear from someone who has actually been in a prop firm and to know how well people are actually doing in them ..... The fact that this info is hard to come by is interesting but I dont know what to make of this.

I've got a prop trader's trainee job in a small start-up. Those guys who run it are very experienced and they try to teach me when they have a minute and promise to give me money to trade within a year or so. I don't know the exact name (if it exists at all) of those strategies which we use: pattern recognition (?), stat. arbitrage (?). I wanted to ask those people in the know about my future career. Let's suppose I'm given some money to trade, and let's suppose our start-up survives, also assume that I'm pretty good at trading and by using the techniques which I’ll learn can average about 15-20% a year more or less consistently (I don't know how reasonable is this assumption but whatever). What happens if I loose this job for whatever reason in let's say 3 years when I already learnt enough about markets/trading. We don't use any sophisticated math like stoc. calculus, PDEs or SDEs. I learnt a lot of this stuff on my own while preparing for quant interviews, but if you don't use it you loose it...I've never programmed in C++ for commercial projects, but tried to study it on my own by implementing some simple techniques but also don’t use it now...So my question is how hard will it be for me to find a comparable trading job in another hedge fund if I loose this one in several years and whether I still can apply for quant jobs after that? I still probably won't be able to trade for myself, because to make about $150K/yr I need to have at least $1M in cash (taking into account all the expenses on Bloomberg or some other real time/historical data provider and similar expenses). Feel free to PM me if you’d like.