Hey,
So I have been talking with some people about my aspirations to become a trader, and was told on some occasions that this would be low achievement for someone with the CFA designation.
Do you guys agree/disagree and why?
I mean, traders can make millions of dollars. Sounds like good achievement to me.
I think what they meant is that trades are 95% technical oriented, while in the CFA you may have 1 chapter on technicals and the rest is fundamental based.
Also a small number are very successful, most wash out.
CFA doesn’t have a lot to add for traders. Until recently the CFAI CBOK was anti-technical analysis. Only recently have they opened up a little towards it.
So if you want to be a trader, CMT is more designed for that. I don’t know how much respect it commands in the trading community, but the reading material is certainly more oriented towards it. I went through parts of the Pring book and found it very useful.
And only in Level I, to boot.
About the CMT, are the readings actually just chapters out of 3rd party textbooks? Much like a university course? I’m not gonna spend money to get the charter, but am interested in reading their curriculum and this idea that it isn’t one nice package like CFA provides is new to me…
I have the UK equivalent of CMT and I agree that most traders don’t need CFA. Trading is a different field to investment management. From an economic point of view, traders exist to provide liquidity to long-term investors. They don’t need to understand why the long-term investors are doing what they are doing, they just need to make sensible short-term predictions and manage their risk properly. CFA wouldn’t hurt but it would probably be a poor use of time compared to just working on your trading system.
Obviously, if a trader wants to add value by developing business relationships with investor clients or wants to eventually move into investment management themselves, they should consider the CFA charter.
Thanks for the reply.
Who earns more you think: traders or investment managers?
I don’t honestly know. But I can tell you this–don’t decide on a career based on who makes more.
And remember that when you read statistics such as “The average portfolio manager with 10 years of experience makes $X per year”, that only includes those that survived the internship, worked like a trojan as a security analyst, and finally sloshed their way to the top. 99.9% of people never make it that far. So to say, “I’ll just become a portfolio manager and make $X in 10 years” is probably not really a fair statement.
As far as compensation is concerned, the sky is the limit both for traders and for investment managers.
Traders generally have shorter lifespans however, because their techniques can quickly become obsolete. If their techniques are successful they can quickly make a seemingly unlimited amount of money. If their techniques don’t work or become obsolete, the market will remove them from the field of play. By their mid-30s, most serious traders have either made enough money to retire or have busted out.
Because of the nature of long-term investing, investment managers tend to have a longer lifespan, although actual achieved returns will sooner or later have their effect on the career outcome.
Do whatever you find the most interesting.
What is meant by “trader”?
I started out as an OTC market maker at a global investment bank. That job led to several subsequent positions on the buy side as a trader (in not only equities, but commodities, fx and various futures of all sorts). I even did a stint in the HFT world (I graduated with a CS degree).
Somewhere along the line - call it 8 years in - I decided to go for the CFA designation. A buddy of mine from the iBank we worked at (converts trader) had done it, and considered it to be an “insurance policy.” I figured I’d give it a shot, and eventually earned the designation last year.
I’m now an equity portfolio manager at a boutique firm that manages assets for high net worth individuals. I don’t think anybody would have given me a shot as a PM had I not obtained the designation. Pursuing the CFA charter helped me expand my already expansive understanding of the capital markets, and served as a challenge for myself to see if I could do it.
I can’t speak for people who are seeking the charter to break into the business (probably a bad idea, IMHO). I also can’t speak for those who were making so much money doing what they were doing that it wasn’t worth it (that wasn’t me). I can say that, in my mid 30’s, people seek out and respect my opinions in finance. I am paid to do work that I enjoy at a firm that’s pretty good to me. I wouldn’t say that the CFA did it for this “trader,” but it certainly aided me in my upwards career trajectory.
I am not exactly sure what you mean by “traders” but i have a sense that you are refering to day or swing traders?
Correct me if i am wrong.
In that case, it’s like comparing an entreprenuer to an investment banker or an equity analyst. I know people who have no more than a highschool diploma and own million dollar businesses, but that’s always the case, should you not go to university then??
Traders have no use for a CFA, and the CFA doesn’t target people who want to be traders.
The End
Question:
A few people above mentioned traders busting and I’m curious how their experience looks on a resume if they ran a losing book. What transferable skills do they bring to the market? What type of exit opportunities exist? I’m not a trader with no interest in going that route, but very curious.
I honestly think successful traders or professional traders think very differently than your business school grads/ resume building/ networking/ working for big firms type of individuals.
I think they think more closely to entrepreneurs and self-starters.
if they make money out of trading, great, but if not, they are unlikely to build a resume and try to find a job at an investment bank or try to be an equity analyst or work at the backoffice from bottom up… they are more likely to try another business idea or change their strategy, partner up with others and invest in other things like commodity, real estate or something.
So people will invest with unsuccessful traders to try new ideas with other’s money?
Only Sith deal in absolutes.
You’ll be surprised!
how many times do you see self-starters make millions or even billions, go bankrupt, but then bounce back because there are other investers bail them out or they got into other investments with some seed money somewhere…?
That’s quite an absolute statement there