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Non-Tech : Meet Gene, a NASDAQ Market Maker -- Ignore unavailable to you. Want to Upgrade?

To: bonnuss_in_austin who wrote (152)	7/27/2000 9:56:57 PM
From: Bilow	Read Replies (2) \| Respond to of 1426

Hi bonnuss in austin; Re trading as a career. Market makers, and daytraders (the real ones, not the Altech losers that end up shooting up "daytrading" offices) have career paths that are very similar. A typical trainee is about 24, is calm, reasonably intelligent, has very fast reflexes, and is expected to be very honest. Honesty is most important for traders because of the human mind's almost infinite ability to fool itself. Fooling oneself is how traders end up holding big losers. Trainee wages, both at Goldman Sachs or at a daytrading firm are low, around $12000 per year or so. For months the trainee does "gofer" activities for the real traders. At first he is expected to simply adjust to the environment, one typically with large amounts of noise and information. Then he might read the wire news on the loudspeaker, watch for size on an INCA workstation, or provide other services for the traders. Eventually, the firm trusts him with a very small trading account. The money is not his own, and because of this, the firm can control his trades. Typically, he will be restricted to trade no more than 100 shares, and that only on a few relatively calm, reasonably priced stocks. (Like DELL or COMS.) At first he will be expected to lose money on this account, but he will be placed near better traders, and by watching them, he will gradually learn to read the sentiment of the market. Being able to predict stock price movement over short time intervals is a skill that is easy to learn. If that were all that was required to make money daytrading, it would be an easy business indeed. There are a lot of people who buy and sell stocks without having any idea whether they will be 1/8th higher or lower 2 minutes later, and who frankly couldn't care less. These are the people who provide good entries to the daytrader. But there is competition to get sweet fills, and when it becomes obvious it is too usually too late. Simply put, short term trading, like any other human competition, is dominated by a few people who are very good at it. They take the vast majority of the profits. That there is little available to those who are not quite good enough is not to indicate that it is impossible, but only to show that it is a very competitive activity. As the aspiring trader becomes better, his account size is increased, he is allowed to put on larger positions, and eventually he may be trusted with huge positions. There are several advantages to working for a daytrading firm. First, you have someone who can order you to quit for the day when you start doing something stupid. This is more useful than someone who has never been connected to a Nasdaq workstation can imagine. Second, since your profits are contributing to the firm's bottom line (instead of merely your commissions), the firm will tend to provide you with absolutely top notch system support. This is extremely important. The daytrader and the firm he trades for form a partnership. There are a number of methods of paying traders. Unlike most careers, it is simple to determine how much money a trader brings in. (Accounting for market makers is more complicated, hopefully Gene will comment on this.) Daytraders are also very liquid. If he doesn't like the deal he is getting at the firm he is trading at, he can easily pull up stakes and go to another. For that reason, daytraders get very sweet deals from their firms. You can expect to keep something like 3/4 your profits (calculated after commissions), with the remainder retained by the firm. I hope that this gives some sort of an indication of what trading is like. Hopefully some of the other traders (and they know who they are) will add some commentary. -- Carl

To: bonnuss_in_austin who wrote (152)	7/29/2000 11:20:05 PM
From: gene_the_mm	Read Replies (1) \| Respond to of 1426

REGARDING MM'S CAREER SPAN... B-I-A... As the NASDAQ market changes so does the landscape of trades. With the face of the NASDAQ market changing so rapidly, it has become a frenetic pace that many older trades find uncomfortable and can no longer hack (not all of them but many). Thus, historical time spans no longer apply to this new paradigm of trading. The NASDAQ market requires lightning fast responses and is now what I consider to be a 'burn-out' business. I would guess that the career span of a very successful MM would be no longer than 15 years as an 'in-the-trenches' trader. After that time I think management positions or trading trainers are the best bet. This is purely my opinion but the nature of the business has gotten so brutal I can't see anyone lasting longer than that without having a nervous breakdown or heart-attack. All the best, -- Gene