Everything You Learn at Top Trading Firms in 37 Minutes

Summary

In this video, former quantitative trader Alex Monahan shares insights from his experiences working at top trading firms and investment banks. He covers what one can expect to learn and do at these institutions, delving into the intricacies of market making and proprietary trading. He paints a vivid picture of the perks of trading, including lucrative compensation, reasonable work hours, and an intellectually stimulating environment that often likens trading to gambling. Monahan also discusses the decision-making skills honed in trading, such as rational thinking, dealing with variance, and understanding market dynamics. He concludes by offering advice for those aspiring to enter the trading industry.

Highlights

• Alex shares his journey from internships to a full-time trading role 📈
• Trading intertwines with gambling, fueling his passion for both 🎲
• He covers the two primary ways trading firms make money: market making and prop trading 💰
• Monahan highlights the less hectic hours compared to other finance roles ⏰
• He elaborates on decision-making and its importance, regardless of outcomes 📊

Key Takeaways

• Trading is akin to gambling, offering thrill and financial reward 🎲
• Top firms like Goldman Sachs and Citadel offer generous internships 🤑
• Trading hours are generally better balanced than other finance jobs ⏰
• Traders must think quickly and make decisions with incomplete info 🧠
• Algorithmic trading is common, and understanding it is crucial 🤖

Overview

Alex Monahan takes viewers on a journey through the bustling world of top trading firms and investment banks. Starting with his personal career trajectory, he explains the pathways he took through prestigious firms and the unique culture within each. His experience at Susquehanna International Group stands out, where he likens trading to gambling - a thrilling comparison that captures one's interest and imagination.

Through relatable anecdotes, Monahan breaks down the core structure of trading operations. He demystifies concepts like market making and proprietary trading, bringing to light how firms profit through bid-ask spreads and algorithmic trading. This exploration is punctuated with the exciting lifestyle perks of working in trading, including lower hours yet high financial rewards.

While shedding light on the essential skills and mindset for a successful trading career, Monahan offers an insightful look at the intellectual demands of the job. Skills such as quick thinking, logical reasoning, and handling market fluctuations are critical, as is continuous self-improvement to adapt to ever-changing market conditions. He also offers straightforward advice for landing a trading position, emphasizing preparation and passion.

Chapters

• 00:00 - 00:30: Introduction and Purpose of the Video In the introduction, the video creator states the intention to explain key learnings from top trading firms or investment banks like Goldman Sachs, Morgan Stanley, JP Morgan, and Citadel Securities. The goal is to provide this information in 20 minutes using a PowerPoint presentation. The creator anticipates and addresses potential viewer questions about the purpose of the video, aiming to offer useful information.
• 00:30 - 01:00: Considering a Career in Trading The speaker reflects on their college days, where they spent a considerable amount of time exploring potential careers through online videos. They express dissatisfaction with the quality of most content but hope to provide valuable insights through their own experiences. The chapter is aimed at those contemplating careers in trading or with major investment banks such as Goldman Sachs and Morgan Stanley. It offers a glimpse into the lifestyle and learning opportunities in these fields, drawing from the speaker's personal work history across three different positions.
• 01:00 - 01:30: Internship Experience and First Job The speaker talks about their internship experiences at financial institutions like Caner Fitzgerald and Morgan Stanley, working on various trading desks. They then discuss their first job out of college as a quantitative trader at Susana International Group, a leading trading firm in Philadelphia. The chapter aims to provide insights into the daily activities of someone in this profession.
• 01:30 - 02:00: Agenda of the Video The chapter titled 'Agenda of the Video' begins with an introductory note about the purpose of the video, which is to provide guidance to those considering a job or internship in trading. The speaker expresses the hope that the video will be helpful and encourages viewers to learn and absorb the information presented. The chapter is structured around a PowerPoint presentation that aims to equip viewers with a comprehensive understanding of what to expect in a trading role, whether as a job or internship. The speaker mentions their goal for viewers to leave with a clear understanding of their potential responsibilities and learning opportunities in trading roles.
• 02:00 - 03:00: Understanding Trading Firms and Asset Classes The purpose of this chapter is to explain the function and purpose of trading firms and the variety of asset classes they deal with. Trading firms generate revenue by trading a wide range of asset classes, including stocks, derivatives (such as calls, puts, and options), commodities (like natural gas, oil, and corn), and cryptocurrencies. The chapter highlights the diverse nature of trading activities in firms and how essential it is for employees within trading divisions of major investment banks, like Goldman Sachs or Morgan Stanley, to navigate these numerous financial instruments.
• 03:00 - 04:00: Perks of Working in Trading The chapter begins by exploring the primary functions of trading firms and then delves into the numerous benefits associated with working in the trading sector. The narrator shares a personal anecdote about a college friend who was at a crossroads in choosing between becoming a doctor or an investment banker, highlighting the distinct nature of these career paths.
• 04:00 - 05:00: Gambling and Decision-Making in Trading The chapter delves into the intersection of gambling and decision-making within the context of trading. It begins with the author sharing personal insights about why they chose a career in trading right out of college, focusing on the appeals and perks of working in this field. This discussion serves to help others determine if trading could be a suitable career path for them based on shared resonances.
• 05:00 - 06:00: Market Making and Proprietary Trading The chapter titled 'Market Making and Proprietary Trading' begins by detailing the professional background of the speaker, who has worked as a trader for three years before founding their first company. The narrator shares insights gained from their time at prominent firms such as Sasana, Cantor Fitzgerald, and Morgan Stanley, emphasizing the lasting value of their experiences there. The chapter also aims to guide listeners on the interview process for securing a trading job, offering preparation tips and addressing common questions, particularly those frequently posed on Twitter about the speaker's experience in quantitative trading.
• 06:00 - 08:00: Asset Classes and Daily Trading Life This chapter explores the world of trading firms, discussing the top companies and their characteristics. It emphasizes that the list is not exhaustive, considering there are thousands of trading firms globally. The focus is on personal experiences while applying for trading jobs, noting that some firms are more technically oriented.
• 08:00 - 10:00: Importance of Logic and Rational Thinking The chapter 'Importance of Logic and Rational Thinking' discusses the nature of work at high-frequency trading firms, where algorithmic trading is predominant. It highlights that individuals working at such firms are not engaged in traditional trading tasks like making phone calls to buy stocks. Instead, their roles are more centered around developing and refining algorithms that execute trades. The focus is on improving and backtesting these algorithms, illustrating a highly technical and quantitative work environment. Firms like Jane Street, Citadel, Susquehanna, SIG, and Hudson River Trading are examples of companies operating in this domain.
• 10:00 - 12:00: Bet Sizing and Handling Variance The chapter discusses the difference between technical trading roles in highly quantitative firms and those in traditional investment banks like Goldman Sachs and JPMorgan. It notes that while both types of institutions have trading divisions, highly quantitative firms tend to employ more technically skilled individuals. The chapter underscores that this distinction is not absolute, as investment banks also have quantitative trading divisions.
• 12:00 - 16:00: Learning and Adapting in Trading Markets The chapter delves into the evolution of trading markets from a traditional, old-school, high-pressure trading environment to a more modern, technology-driven approach. It contrasts the stereotypical 'Finance Bros' from places like Morgan Stanley, who were often engaged in phone-driven trading, with the current landscape at modern firms like Jane Street, Citadel, and Sig, where coding and computer-based operations are prevalent. The discussion highlights the importance of understanding the internal workings of trading firms and their strategies for making money, setting the stage for further exploration into trading methodologies.
• 16:00 - 18:00: Interview Process and Skills Required In this chapter, the focus is on the interview process and the skills required for trading. The transcript discusses two main types of trading firms: Market Making and Proprietary (Prop) Trading. Market Making involves setting lines and offering prices to buy and sell securities, providing an example of a bid-ask spread in a given currency. Understanding these concepts is crucial for breaking into the trading industry, especially for those taking their first job in trading.
• 18:00 - 21:00: Frequently Asked Questions and Conclusion In this chapter, the concept of bids and asks in trading is explained through the perspective of a market maker. The market maker is willing to buy an asset for a certain price (bid) and sell it at a higher price (ask), taking a small profit from the spread between these two prices. This explains the role of market makers in providing liquidity to the markets by facilitating transactions between buyers and sellers and managing the risks associated with holding the asset.

Everything You Learn at Top Trading Firms in 37 Minutes Transcription

• 00:00 - 00:30 what's up YouTube in this video I'm going to explain to you everything that you will learn at a top trading firm or Investment Bank like Goldman Sachs Morgan Stanley JP Morgan Citadel Securities and I'm going to try to do it in 20 minutes so hopefully you're ready to nerd out I got a little PowerPoint put together and you know you may be wondering a couple things first of all why are you making this video and then second of all you know why should I even listen to you so why am I making this video is Hope it's useful information I
• 00:30 - 01:00 remember you know when I was considering first jobs internships while I was in college I spent a lot of time you know kind of watching videos online most content is horrible so hopefully this video actually provides some insight if you're considering you know working in trading working at an investment Bank like Goldman Sachs Morgan Stanley hopefully this video you know gives you a little glimpse into what your life is going to be like things you're going to be learning now I worked at three
• 01:00 - 01:30 different trading firms or investment Banks I interned at caner Fitzgerald as well as Morgan Stanley um so you know I was kind of on different different trading desks but these were just internships however the first job I took out of college um I was a quantitative Trader at Susana International Group which is a firm located in Philadelphia it's one of the top trading firms you know in the US and the point of this video is to kind of go through everything you do in a the day
• 01:30 - 02:00 everything you learn everything they teach you and if you're considering a job in trading applying to a job in trading whatever I hope you find this video helpful so without further Ado let's get nerdy let's get into this PowerPoint so here we go I got my PowerPoint pulled up um and again the goal of this video is when you get to the end of this video you completely understand what you're going to be doing what you're going to be learning if you take a job or an internship in trading so I have a little agenda here you know for you uh for for you guys but the
• 02:00 - 02:30 first thing I'm going to explain is like what do trading firms do because I think there's a lot of confusion what is the purpose of a trading firm how do they make money um this is probably unsurprising but when you're working at a trading firm or an investment Bank like Goldman Sachs or Morgan Stanley in a trading division there's a bunch of different asset classes you could end up trading a bunch of different things there's stocks there's derivatives calls puts options there's Commodities like natural gas oil corn there's even cryptocurrency now right most trading firms have cryptocurrency divisions because crypto has gone so mainstream so
• 02:30 - 03:00 the first thing I really want to cover is what do trading firms do the second thing I want to cover is what are perks of working in trading you know like when I was in college I even remember like I had a friend who you know he invited me over to where he was living um and he basically asked me I don't know what I should do I don't know if I should you know continue in my Premed path and be a doctor or if I should become an investment banker and what I ended up telling him is you know I I don't know man like that's your life a doctor versus an investment banker like those are two completely different professions
• 03:00 - 03:30 so I'm kind of going to go through what I think the perks of working and trading are why I decided for my first job out of college my first internships I wanted to work in trading what appealed to me and if that resonates with you you know maybe trading is a good career for you um if it doesn't resonate with you you know maybe you need to try a new YouTube channel next I kind of want to cover what do you learn at a trading firm like what and and and this goes from higher level points into more of the nitty-gritty the math um what are you going to learn and how does this benefit you in your life like let's say you're only a Trader for a few years I only
• 03:30 - 04:00 worked as a Trader for three years before starting my first company um so but a lot of the things that I learned when I was working at sasana and also in my internships at caner Fitzgerald Morgan Stanley to investment Banks I learned a lot of things that are still valuable and have helped me throughout my life um I also want to cover the interview process so if you decide yeah man trading is for me how do you actually get a job what are things you need to prepare for and then I just have some frequently asked questions you know on Twitter a lot of people have asked me about my experience as a quantitive
• 04:00 - 04:30 Trader so I kind of want to cover some of those things but the first thing I want to explain is what are the top trading firms right and again this is subjective and also it's not inclusive you know there's thousands of trading firms in the world so I don't want to see any comments on this video that's like hey you left you left off you know oper you left off City Bank because this by no means is meant to be fully inclusive of all the firms available but what I wanted to say is when I was applying to jobs in trading what I very quickly noticed is there are firms that are more technical they're very
• 04:30 - 05:00 algorithmic um a lot of them are also known as high frequency trading firms basically all of the trading is done by computers through algorithms so if you take a job at a very quantitative you know trading firm or in a very quantitative trading position you're not actually going to be sitting there on the phone saying yeah man I'll buy $10,000 in Apple stock that's not what you're going to be doing you're going to be writing algorithms that ultimately execute the trades you're going to be improving them back testing them so I would say in highly technical quantitative firms I would consider Jane stre Citadel Susana Sig HRT Hudson River
• 05:00 - 05:30 Trading to fall under highly technical or very quantitative firms you're going to be spending or most people again this isn't one siiz fits all but most people who are working at these firms are more technical than let's say people who are working at Goldman Sachs or an investment Bank investment Banks like Goldman Sachs JP Morgan Morgan Stanley they have trading divisions and in general again this isn't perfect Morgan Stanley Goldman Sachs they both have these are two investment Banks they have quantitative trading divisions as well um but in general you know this is
• 05:30 - 06:00 old school Wolf of Wall Street type trading right when I worked at Morgan Stanley it's a lot more Finance Bros people sitting on the phone that sort of vibe compared to you know when I was interviewing at some of these companies like Jane Street Citadel and when I ultimately got my job at Sig it's much more you know people working hard on computers a lot of people coding so the first thing I wanted to kind of go through because I obviously think it's really important if you want to be a Trader is you understand like how do trading firms work how do they make money so there's two main ways that
• 06:00 - 06:30 trading firms will make money the first one is much more common especially if you're taking your first job in trading and it's Market Mak and then there's also prop trading so what Market making means is you're setting lines you're offering prices where you will both buy and sell a security so you can see an example right here you know where um for a given I'm not sure what this is supposed to be a stock or something but the bid ass spread is 5 cents or I guess not 5 cents you know five Eur and pounds
• 06:30 - 07:00 whatever the bid is $25 the ask is 255 so basically if I'm a market maker I'm saying hey I'll buy this for $25 that's my bid I'll buy this for $25 or I'll sell this asset at $255 so I have a 5-cent spread in my market I'm saying I'm willing to buy the asset or I'm willing to sell it at slightly different prices because I'm taking on the risk so essentially what market makers do is people who want to sell you know they'll sell to the market maker for $25 and then the market maker will turn around and try to you know
• 07:00 - 07:30 sell that asset to somebody else a buyer for $255 so that's how market makers work right like they are you are making money by charging a spread around fair value and this is the case for Commodities like oil for fixed income for stocks for derivatives like calls and puts is this is the main way that trading firms are making money is they are Market making they are offering prices where you can buy and sell in quite simply opening up the casino taking action the same way a sports book will set odds on both teams
• 07:30 - 08:00 if you bet on the Super Bowl maybe you know the Chiefs played the Eagles on FanDuel sports book They're going to offer odds for both the Eagles and the Chiefs you can bet on either team and their goal you know fandel Sports books Sports books are market makers is they're making money by charging a spread right the same way a trading firm a market maker like Seer Citadel they're making money by charging a spread which is called the bid ask spread so bid ask spread in this scenario is 5 cents um and then there's also prop trading which I would say especially when you're leaving College if you're taking a job as a Trader prop trading is you know
• 08:00 - 08:30 much less common also much less lucrative but basically what a you know what you're doing as a prop Trader is the firm is using its own money so you know when you're working at a trading firm you're essentially gambling the firm's money that's what appealed to me about becoming a Trader is it's very similar to gambling you're gambling other people's money but basically prop trading is when a firm is using its own money to buy or sell positions and kind of to buy and sell Securities and take positions in certain assets so much more like a hedge fund or you know an investor you're trying to operate and
• 08:30 - 09:00 get Alpha get an edge you know over the market to provide an expected return so to give you a sense of how much money you know this sort of stuff makes as you can see right here and I hope it's clear enough in the video but this is just how Goldman Sachs made money I believe the year was 2021 it maybe 2022 but you can see Goldman Sachs its highest grossing most profitable you know division was Market Mak $15.4 billion in Market Mak so Market making is super lucrative you know it's honestly shocking how much
• 09:00 - 09:30 money some of these companies make just Market making just setting lines just having the bid ass spread and trading successfully a lot of trading is now done algorithmically it's done through computer programs it's not always a guy picking up a phone you know and calling someone else to make a trade that that still happens but usually for larger trades not for you know every little trade on Fidelity that a guy is making or when a guy goes into his Robin Hood account to buy Nvidia like that most of that trading volume or Market making volume is done algorithmically so I kind of said this earlier but
• 09:30 - 10:00 there's a bunch of different asset classes so for example when I interned at Morgan Stanley um it was like a 10we internship may have been a little bit longer but they put you on three different desks each desk was for about three weeks so I worked on fixed income bonds I worked on Commodities and actually when I started working you know at sasana um my first job out of college I first worked on the natural gas desk so you're literally trading natural gas a physical commodity and it's actually really complicated it's really interesting um because in different
• 10:00 - 10:30 parts of the country you know depending on Supply demands shortages weather right if there's a huge storm in Texas it may be harder to get you know natural gas into Texas and the price goes up it's a market supply and demand so long story short there's a bunch of different asset classes so if you decide to become a Trader you could be trading equities um stocks um you also could be trading fixed income you could be trading alternative Investments like crypto gold silver it's ultimately going to depend on your skill set your interest um and what firm you end up working
• 10:30 - 11:00 at so probably one question people want to know about is what are the perks of working in trading so I wanted to kind of go through this briefly and I would say this is the main thing that's going to stand out to most people so I said money and interesting which is true is this is crazy bro look at this average average monthly pay for Wall Street interns Jane Street which is known by many people it's actually where Sam bankman freed the cter the founder of Ft who is now in jail um Jane Street is
• 11:00 - 11:30 where I think he started his career or maybe he interned there their average monthly pay for an intern is $16.3 th000 so you know obviously money compensation is a big part um a big reason why a lot of people want to work in trading is you get paid pretty well at all of these top firms um you also get you know nice dinners free trips stuff like that another benefit of trading is relatively low hours compared to most financial jobs so for example if you decide to
• 11:30 - 12:00 work as an investment banker or even a lawyer you're going to be working a lot more hours than as a Trader like when you are a Trader the stock market most markets are open from 9:30 to 4:00 the Stock Market opens at 9:30 a.m. on weekdays it's never open on weekends opens at 9:30 it close at 4: so after 4 obviously there's things you can work on you can improve upon you can review your results from the previous day but after 4 p.m. there's no more trading your day is done so when I worked at Sig you know there were definitely a lot of times where once it hits 4 p.m. people are
• 12:00 - 12:30 writing up their their their end of day recap and they're headed home so the hours are not that crazy like you hear horror stories in Investment Banking of people having to work 100 hours a week that is not the case in trading or at least it wasn't for me in my internship at Morgan Stanley caner Fitzgerald and then my full-time role at Sig I really never was forced you know to work that much I mean don't get me wrong 40 hours a week is still a lot of time um in in some weeks I definitely worked more at Sig I wanted to extra time but you
• 12:30 - 13:00 definitely have a very solid work life balance as a Trader so the next thing I kind of wanted to go through is you know trading is gambling and it sounds crazy to people but the similarities between poker being a professional poker player and a Trader on Wall Street they are very similar in terms of you know decision making uh what you're thinking about bet sizing taking risk allocating Capital gambling is trading trading is gambling so for example when I was working at SS Guana they literally had
• 13:00 - 13:30 poker tables in the office you know my first two years at Sig um as a as a Trader at Sig I literally spent hours playing poker as part of the training curriculum that Sig there's actually an article in the Wall Street Journal about this I literally probably got to play and I was paid for this right this was during work I was paid essentially to play poker and get better at poker because it's a big belief at Sig that poker decision-making you know optimal bet sizing thinking with imperfect information it's a big belief at Sig
• 13:30 - 14:00 that you know learning how to play poker and how to think about poker will actually help you become a better Trader a more profitable Trader for the firm so especially when you start at Sig you spend a lot of time you know playing poker and I have friends who work at other trading firms like Citadel um like Goldman Sachs and there's a big poker culture in a lot of these firms now you know they literally teach you poker make you play poker in your job the the main reason you know I took a job in trading though like obviously the money's nice the pretty good work that the pretty good work life balance um all those
• 14:00 - 14:30 things are you know great amazing I don't mean to underplay them but what really I loved is I'm gambling for my full-time job right when you're a Trader at a trading firm like Sig like Citadel you're essentially gambling other people's money all day long so if you've been on this YouTube channel uh before you know I love sports betting you know I make a lot of sports betting content so I would literally go into work right I would trade all day other people's money in financial markets I would gamble all day long that's what you're doing as a Trader and then I would go
• 14:30 - 15:00 home and I would bet on Sports and I would just gamble my own money not in financial markets but in sports in sports betting and obviously what I learned as a Trader made me a much better Sports better uh just being more markets oriented more data driven but regardless what appealed to me about trading was it was gambling as a full-time job what is better than gambling as your full-time job other people's money like that's fun and the second reason trading appealed to me is markets are always different right there's always crazy stuff happening in the world so I'll give you an example is during Co there were crazy swings and movements in
• 15:00 - 15:30 airline prices right obviously Co brought a huge scare to what's going to happen to the hospitality industry are we still going to have all these planes and stuff like that so during Co I was trading Airlines and every day was like a movie I mean Airlines up 10% down 10% it was really interesting to follow it was interesting to follow the current events and it was fun to trade right like when I was considering professions going into different jobs out of college a lot of jobs seemed boring right uh become a software engineer at Google work on the same button and changing
• 15:30 - 16:00 around the color that didn't seem that fun what appealed to me about trading is every day you wake up there's crazy things happening in the world stocks you know new products in Tech all these things that are moving markets around you get to follow all that stuff and gamble on it that's fun that's what appealed to me um and ultimately made me take my first internship in trading and then my second internship and then my full-time job as Susana International Group so you can see right here here's kind of what I was talking about it's literally insane um why this Street firm wants its traders to play poker I
• 16:00 - 16:30 literally got paid to play hundreds of hours of Poker it's pretty amazing there's actually a full video there's a full video like a 17-minute video on this article so if you kind of want to learn more about that you can check that out so now I kind of wanted to go through important question is what do you learn as a trainer and you know this is obviously kind of going to be the bol of the video but the first thing you learn is just how to think rationally um how to think rationally so logic right
• 16:30 - 17:00 and obviously this is you know very vague but I'll give you an example is at Sig you know you learn a lot about decision- making because a good decision does not mean a good outcome right so at Sig um when I started to become a Trader my bosses or the people you know that were interviewing me they were always questioning my thought process if I decided to buy a certain stock why are you deciding to buy that stock why did you make this offer why are you only buying this much why aren't you buying more why are you buying this stock not this other stock long story short it's
• 17:00 - 17:30 not necessarily about the result it's about the process and the decision making and having rational logical datab backed thinking that gets you you know to the decision you make so I'll give you a simple example is let's say you know the chiefs were plus 1,000 odds against the Eagles in the Super Bowl so this is a sports betting example but I think it's applicable is if you could have gotten the Chiefs at plus 1,000 the game was about even money plus 1,000 if you don't bet on Sports means you're betting a 100 to win 1,000 in profit so a 10 to1 you
• 17:30 - 18:00 know profit margin you're putting down 100 to win 1,000 in profit if you're getting plus 1,000 odds so obviously the Chiefs got blown out so it wouldn't have mattered right if you got plus 1,000 plus 100,000 whatever minus 110 which is what most people were betting them at - 110 -10 -130 regardless you would have lost your bet right however obviously Chiefs plus 1,000 would have been crazy everybody in the world would have taken that bet the game was a coin flip 50/50 for Eagles versus Chiefs so anybody who
• 18:00 - 18:30 had a brain would have taken Chiefs plus 1,000 it was the right bet that would have been a smart bet that would have been a great bet you literally could have gone to another sports book and hedged if you got the chief at plus 10,000 you could have hedged out of all your risk and guaranteed a profit that's called Arbitrage but long story short you know good decisions making good bets doesn't always mean you're going to make money right just because you have Sound Logic and every trade you make doesn't mean you're going to make money with every single trade you know like there were days at Wana where I lost millions
• 18:30 - 19:00 of dollars I thought I was really on top of my game I was really on top of things but I lost money what's awesome about trading firms like Sig is they really train you to not be focused on the result but be focused on your decision- making how did you get to the conclusion of what price you wanted to buy or sell something at uh how did you determine how much risk to take all sorts of things like that um and I honestly think that teaches you to become a smarter or better human right just being able to make good decisions so I'll give you a simple example is let's say I'm drunk right I'm very drunk but I also need to
• 19:00 - 19:30 pick up my kid from school if I drive right maybe I drive I drive drunk I pick up my daughter I come home whatever I don't actually have a kid so I don't even know why I'm giving this example but regardless you know sure whatever the outcome was fine but it was a horrible decision and over the course of a lifetime making horrible decisions is going to hold you back it's going to get you in trouble whatever um but I also could have done the right decision and taken an Uber and that Uber could have gotten in an accident right so I made
• 19:30 - 20:00 the right decision by not driving myself and taking an Uber but I still had a bad bad outcome so making a good decision doesn't always mean good outcome and you really need to be certain and think about you know your decisions very carefully like if you're putting a million dollars of the firm's money into something you're making a big trade you really need to think through all the variables Nobody Knows the future nobody knows what's going to happen in markets we could have another Co start tomorrow so you are always as a Trader making decisions in learning to make better decisions with incomplete information
• 20:00 - 20:30 right so for example and it's the same thing in sports betting right like if I am betting on if I go and I bet the Celtics to win the NBA championship Jason Tatum could hopefully he doesn't to be clear he could get injured tomorrow and Jaylen Brown and porzingis and Derrik white their whole team's out they're not going to win the championship you're always making bets making decisions as a Trader within complete information you also learn about bet sizing risk versus reward right like obviously making money and as
• 20:30 - 21:00 much money as possible is what the firm wants you to do but it's also you need to think about bet sizing what is my confidence in this trade how how sure am I right and also you can't lose your shirt right like once you make a trade you know that trade is final it's not like if the stock goes cratering down you can go back to the person you know you bought it from and say hey I I actually don't want to do this trade once you make a decision it's done so long story short bet sizing risk verse reward you also learn how to deal with variance like again there are days as a Trader you're going
• 21:00 - 21:30 to lose money um there were days I lost millions of dollars I felt horrible I never want to lose people's money the firm's money whatever but there were days like you know you're going to lose money so you learn to get used to variants if you're an investor or a Trader or a sports better nobody wins every single day right unless you're arbitraging in some way nobody's winning every single day so you really as a Trader you learn to deal with variance and sometimes going through tough periods losing streaks stuff like that which I do think is valuable whether you're betting on sports whether you're investing is if I decide to buy the S&P
• 21:30 - 22:00 500 today it could go down 4% tomorrow I didn't necessarily make a bad decision by deciding to invest some of my money in the stock market it's just you know I had some variant so you learn thinking rationally you learn Game Theory you also learn maximization which I think is really important right like if you make $5,000 in two different separate trades versus $15,000 in one trade obviously you prefer to make $115,000 in one trade as opposed to doing two trades and making $10,000 total so you're always thinking about
• 22:00 - 22:30 maximization right like how can I make as much money as possible off this trade if I make a trade and I sell something at $10 when I could have gotten $1 I actually missed out on a lot of money so you always want to maximize charge as much as possible buy for as little as possible but at the same time you need to be competitive all of these trading firms Citadel sus Wana Goldman Sachs Morgan Stanley they're in competition with one another for orders so it's not like I can say hey I'll bet the chief's at plus 1,000 and expect someone to give that to me you know if I'm trading Sports let's say um so long
• 22:30 - 23:00 story short thinking about maximization I'd also say you very quickly learn that you're not that smart you know right away when I started trading I had opinions hey this stock is going to go up this is what's going to happen to Airline stocks and the truth is I could never it's very hard to time the market exactly no one's that smart nobody can tell you for a fact if Facebook is going to go up over the next month or down and a lot of that is because we don't know what's going to happen in the world we don't know what their earnings are going to be we don't know if there's going to be new competitors we don't know if there's going to be regulation changes
• 23:00 - 23:30 the world is always changing we don't know if there's going to be any freak events like Co that send the market into free-for-all so long story short what you do learn as a Trader is you don't know everything you're never always right and also markets are pretty smart right like you have to respect the market Money Talks so by that I mean you know if Nvidia stock let's say is $200 and you think it should be worth 205 why are you smarter than everyone else in the world there are millions the people hedge funds really smart people running
• 23:30 - 24:00 really complicated models doing all sorts of research deep diving into the entire industry 200 is the price fair value where supply and demand are equal so if you think Nvidia should be worth more or it should be worth less why are you smarter than the rest of the world all the other top hedge funds everyone else because this is the price where it's trading right now that's what's fair at the current time right things change so maybe right now Nvidia is worth $200 if Co hits tomorrow and you know the economy tanks it's like okay okay maybe Nvidia goes from $200 to $100
• 24:00 - 24:30 the valuation of the company is cut in half share price you know all a share price does all a stock price represents is the valuation of the company so if Co hits tomorrow and Nvidia goes down fair value drops new information entered the market the same way if you think about the Eagles Chiefs game the game was about even money the chiefs were slight favorites obviously if Patrick Mahomes gets injured on his way to the stadium the Market's going to move the odds are going to change there's no information Patrick Mahomes the star quarterback isn't playing the Market has to adjust so long story short you learn a lot
• 24:30 - 25:00 about markets Fair markets and the world is smart and you have to respect money you have to respect what the market thinks because if you're just following your gut you're going to get killed as a Trader longterm honestly you'll probably never even get a job in the first place if you're just following your gut as a Trader at any of these places it's very data driven and you know there's no luck long term you either have an edge or you don't you know which is the same thing with sports betting anybody can win a bet anybody can win a parlay the hard part is winning long-term winning year-over-year actually having an edge
• 25:00 - 25:30 and winning long term and so many people get caught up in the day-to-day of did I make money did I lose money so here is an example you know when I was at Sig I was an option Market maker so you know again I explained Airlines I was trading calls and puts on airlines but here you can see a market making example right there's a stock option and let's say you think that stock option is worth a $140 right $140 that is fair value you know all your models all your complex computations because I want to be clear
• 25:30 - 26:00 like obviously there's a lot of crazy trading math like the Greeks Delta Theta gamma Vega like we're not going to go through all the formulas you know necessarily in this video but let's say you think 140 is the fair price for an asset you can make a 40 Cent spread 120 bid 160 offer so if somebody buys you know for 160 you think you have 20 cents of edge right or profit margin on your trade you just sold something that you believe is fairly priced at 140 for 160 you made 20 cents that was your Edge 20
• 26:00 - 26:30 cents above fair value you sold it for so your Edge or Roi should be about 20 cents long term that's what a market maker does right is you're providing liquidity so when I log on to Fidelity I can buy or sell any stock it'll be done almost instantaneously is the reason I can do that is there's other market makers who are willing to take on the risk match my order you know with someone who's interested in the opposite side of the transaction but you can see right here you know I'll give you a simple example is let's get rid of this example and let's just say you know I
• 26:30 - 27:00 know for a fact a stock is worth $10 right I could buy that stock for $9 sell it at 11 and ideally someone sells it to me for N9 I turn around flip it right away for $111 I just make the $2 bit ass spread but basically whenever I make a trade I have $1 in Edge um however as a Trader again it's risk versus reward is there may be another Market maker so if I work at Sig maybe there's some guy at Citadel who says oh your Market's too wide 9 out 11 $2 I'm willing to take this trade not for
• 27:00 - 27:30 $1 a edge or $2 bass spread I'm willing to do it for a $1 bass spread I'm going to make my market $950 at 1050 I'll buy at a more competitive price and I'll sell at a more competitive price so now if I'm the guy who's 9 out 11 somebody comes in 950 at 1050 I'm never going to get any trades done because I'm not even offering the best price so I need to match it or do better but at some point it's not even worth it right like maybe if it were you know maybe if it were $9.99 at 10:01 a 2cent bit ass trade a 2cent bit spread I say hey look I'm out for the risk this isn't worth it to make
• 27:30 - 28:00 two cents like I need a bigger spread so maybe there's some markets that you know you're fine not really trading in not being as competitive because you view them as riskier than other people do so the next thing you know that kind of impacts you as a Trader is there's always new information right so like impacting fair value um which also means you don't want to lose your shirt right like let's say tomorrow in the Lakers game I bet all my money I'm so confident the Lakers are going to win I put all myone down LeBron James gets injured you
• 28:00 - 28:30 know that's going to massively move the market so information um which could mean order flow or it could mean literal new information you know maybe a CEO dies right that may affect the stock of a price maybe a new regulation you know against pharmaceutical companies that's going to affect you know the stock price of fiser or something like that but long story short there's always new information I keep saying long story short so I apologize for that this video I'm recording it pretty late at night but there's there's always new information coming into the market and
• 28:30 - 29:00 that could be news that could be economic news that could be you know political news you know which president ended up winning all these things impact the market but order flow also impacts the market so I'll give you a simple example is let's say I'm trading the stock $9 at $11 and everybody is just buying from me at $11 I thought that stock was worth $10 everyone in the world is buying it at $1 so maybe I'm actually wrong right because the Market's telling me I'm wrong because everyone's buying from me at $11 so if
• 29:00 - 29:30 everyone the smart hedge funds everyone starts buying this from me at $1 maybe I was wrong and the price is actually $150 not $10 I thought the stock was worth $10 people keep buying it at $1 so maybe it's worth $150 if everybody all the smart people all the top headphones are just buying this from me at $1 $1 maybe my fair value was wrong my analysis was wrong I can't be that confident I can't lose my shirt and just sell infinite stock at $1 so I need to adjust my assumptions I need to do some more research I need to adjust my price
• 29:30 - 30:00 to ideally try to get back to a spot ideally where there's roughly 50/50 you know buys and sells because then I'm just making that bit ass spread N9 out of 11 I'm making $2 for every person who you know sells to me and then buys from me like I'm making $2 if I'm buying at N9 selling at 11 so long story short long story short long story short um order flow is going to impact you know what you believe is fair no one's going to be perfect if you think video is worth $200 and everyone is selling it
• 30:00 - 30:30 to you it's probably worth less than $200 considering everyone else in the world is selling it to you so as a Trader you learn how to think about information in order flow what trades what counterparties are these really smart people who are selling you this or buying this from you like really top hedge funds or you know is this some Average Joe in you know some random internet clip went viral on Tik Tok or something like that so everyone's buying the stock but you don't put a ton of weight into opinion and again you always need to
• 30:30 - 31:00 think about tail RIS too just like what could happen so let's say I'm an Nvidia Trader and trading all these options on Nvidia I need to understand if Nvidia goes down 20% like it did I believe this month or maybe it was a month ago with news of a new competitor out of like China or something like that Nvidia went down 20% you can't bankrupt The Firm if a stock goes down 20% like people have been so used to over the past few years just seeing Nvidia tick up Tick up Tick up Tick up nobody was really prepared like you kind
• 31:00 - 31:30 of get lulled into that state of the world that hey Nvidia is just going to you know slowly but surely go up and then it drops 20% so you always need to be considering tail risk things like covid the financial crisis in 08 Nvidia you know there's always crazy things happening in the world and you can't bankrupt The Firm because you will get fired um because the stock goes down 20% you always need to understand your risk what if the stock goes down 30% 20% 10% what am I on the hook for so you know you're also following along with like current events when are
• 31:30 - 32:00 earnings reports uh when are new product launches you need to make sure you're aware of those things again because it should be factored into your price so again you know there's a lot of math behind trading that you're kind of going to learn about but I would say these really are the most important things um that we just kind of went through all the math it's big formulas complicated but whatever I'm sure you'll learn it with some you know uh you you'll be able to figure it out but what I wanted to explain next is if you're like yo trading is gambl as a full-time job and you get paid a lot of money like that
• 32:00 - 32:30 seems sick how do you get a job in trading how do you get a job in trading that's what I'm going to go through so the first thing is as a Trader and this is true in the job as well again like I traded options at Sig I was on the natural gas desk when I first started different products but you have to think quick on your feet right if someone wants to make a huge trade and they call you you know you can't say hey man give me 5 hours I'll get back to you A lot of times you have to make decisions quickly or hey you know at this other firm they're offering me a better price can
• 32:30 - 33:00 you match it or do better and you need to think about okay how you know what am I willing to do um and you also need to constantly be following you know all the price movements in the market but regardless as a Trader you need to think quick on your feet so a lot of the questions they'll ask you in trading interviews um all this is public information by the way I'm not sharing any secrets here these aren't direct interview questions I ever had I honestly don't even remember the exact interview questions I had but I know I got a asked a lot of mental math what is 54 * 66 literally questions like that
• 33:00 - 33:30 and it may seem useless but again as a Trader you need to be super detail oriented if you say hey I'll buy this at $14 and you meant to say $140 it's not like hahaa I accidentally screwed up like you could have possibly lost tens of millions of dollars of not even your own money the firm's money and you're on the hook for it so you need to be detail oriented and you need to you know be good with numbers so mental math is something you have to learn you also have to learn I call them brain
• 33:30 - 34:00 teasers these are kind of logic kind of math questions so I included one below that I just saw online from jump trading which is a quantitative trading firm is it's called it's called heavy balls you have 12 identical balls one of the balls is heavier or lighter than the rest you don't know which one you can only use a scale which shows which shows which side is heavier how do you determine which ball is the odd one out with three measurements weird question but like this is the type of stuff I was asked so you may be thinking like oh like put
• 34:00 - 34:30 ball four and four like no you don't want to give some BS answer like what they want you to do is think through it think through it logically think through the math and then come back with like the correct answer ideally again most of these questions that they're going to ask you they're not going to be subjective how are you feeling today what do you hope to accomplish in life I mean they may ask you stuff like that but it's definitely going to be some technical stuff and I'd argue that's the harder part and you can see the answer is like some complex thing you know like here's the solution I don't know man that's um a lot of
• 34:30 - 35:00 information right there so and you can go through it and obviously it makes sense when you once you go through it and this question may seem crazy so out of the blue but obviously it's better to be prepared right and and know this type of stuff um compared to not prepared and not know this type of stuff so there's a literally a billion questions you can look up online that are similar to this brain teaser this mental math question you can practice you know before my interviews I spent a ton of time practicing Mental Math I do it in the shower what's 68 times 42 I don't know let me think about it like I would do
• 35:00 - 35:30 stuff like that to try to prepare for the interview um the next thing I'd say is like a lot of companies um like when I was interviewing at Morgan Stanley for a trading internship they asked me like why do you want to work here you don't want your answer to be passive if you're looking for a job these people are investing time money you know resources into you um they're training you they don't want you to work there for three months in dip you did nothing you came to the company you wasted people's time and then you left right they want people who are going to work there ideally
• 35:30 - 36:00 their whole career so you definitely have a good chance of being asked a question like do you want to work here what do you view as your life goals over the next 10 years and like obviously if you if this isn't true it definitely makes it harder to say and I never want to say lie because that's not what I'm saying but I'm saying like you want to be sure your answers are true and passionate like if you're asked where do you see yourself in 5 years if you do get asked a softball question you don't want to say oh I'm actually hoping to like move to Costa Rico with my girlfriend you don't want to say that you want to say and you know for me this
• 36:00 - 36:30 was true this is truly what I believed is like I love to gamble I want to be working in trading I want to be you know working in trading so that's what I want to be doing like there's no ambiguity here I love gambling I love financial markets this is what I want to be doing like that's the answer they want and any employer would want you know they want people who sound pumped up about the job and are very confident in their ability to do it and be successful at it and also you know that they want to do it um
• 36:30 - 37:00 and are excited about it and they're not planning on bailing in a couple months so regardless practice these brain teasers practice mental math and yeah so I'd say the final thing is just like FAQs um you know like I've definitely had questions about which firm is best to work out which one's best to apply for obviously I'm biased you know I worked at Sig I loved Sig I thought the poker thing was really cool I literally got to play poker at work you know maybe a downside for some people or a lot of
• 37:00 - 37:30 people is you're in Philadelphia the firm is based there whereas a lot of people want to live in New York especially when they're young most trading firms are in New York or Chicago Philadelphia I don't want to call it a D2 City because that's not the case um I like Philadelphia I had no problem with Philadelphia but obviously it's not maybe People's First Option or some people's First Option but I do think there's lower taxes in Pennsylvania so there's always pros and cons but regardless if you have any questions about trading becoming a Quant Trader let me know um you can comment them on this video I'll try to get back to every
• 37:30 - 38:00 single one and I really hope you enjoyed this type of content if you like it I'll try to do more content like it thanks so much for your time