Proprietary trading companies, often shrouded in mystery and intrigue, are firms that trade financial instruments with their own capital rather than on behalf of clients. These companies are a unique breed in the financial world, and their recruitment practices can sometimes seem perplexing to outsiders. So, why do these legitimate, non-scam proprietary trading companies hire traders? Let’s dive into the intricacies of this industry to uncover the reasons behind their hiring practices.
Understanding Proprietary Trading Companies
Before we delve into the why, it’s essential to understand what proprietary trading companies are. These firms use their own funds to trade stocks, futures, spot markets, foreign exchange, and even European and American stock markets. They are distinct from public funds or sunshine private equity funds, as their primary source of income is trading profits. This definition excludes many firms that might seem similar but operate differently.
Proprietary trading companies come in various forms, which can be categorized as follows:
- By Trading Targets: They might focus on stocks, futures, spot markets, foreign exchange, or even gold (though the latter is often associated with scams).
- By Organizational Form: They can be private equity firms, unregistered private entities, agency companies, financing companies, capital management firms, or even private enterprises with investment departments.
- By Recruiting Objects: They might hire experts as assistants, novices for team trading, or veterans for newly established teams.
- By Trading Methods: Their strategies can range from scalping and high-frequency trading to intraday short-term, band operation, trend operation, or free trading.
This diversity means that proprietary trading companies have varied needs and approaches to recruitment, setting the stage for why they seek traders.
The Need for Traders: Why Hire?
At the heart of the matter, proprietary trading companies hire traders because trading is a task that requires human input. Despite advances in technology and the rise of quantitative trading, the human element remains crucial. Here’s why:
1. Trading is Complex and Demanding
Professional trading involves tracking a large number of targets and monitoring markets simultaneously. It’s not a task that one person or even a small team can handle effectively. Even seasoned traders need to invest significant time and energy, especially if they’re not operating on longer time frames like daily charts. The sheer volume of data and the need for quick decision-making make additional traders a necessity.
2. Team Trading is Essential
Many proprietary trading companies rely on team trading to manage the workload and diversify strategies. There are two main types of team trading:
- Consistent Trading Teams: Led by a fund manager, these teams focus on strategy execution and risk control. They work together to ensure trading is rational and effective, requiring multiple traders to coordinate efforts.
- Differentiated Trading Teams: These teams need a large number of traders to participate in trading under a unified strategy or with different strategies. They often recruit novices for the former and veterans for the latter, depending on the team’s goals.
Team trading amplifies the need for recruitment, as it’s impractical for a single trader to cover all aspects of a complex strategy.
3. Quantitative Trading Still Needs Humans
While quantitative trading has gained popularity, it hasn’t eliminated the need for human traders. In fact, most successful quantitative strategies in China are a hybrid of quantitative and manual trading. The key to success often lies with the traders, as quantitative tools primarily facilitate execution rather than replace human judgment. Even the most advanced algorithms require human oversight to adapt to unpredictable market conditions.
Challenges and Misconceptions in the Industry
The proprietary trading industry is not without its challenges and misconceptions, which also influence hiring practices:
- Scams are Prevalent: Especially in regions like Shenzhen, many so-called proprietary trading companies are scams. They often target novices with promises of easy money or high returns. Legitimate firms hire traders to distance themselves from this stigma and build credible teams.
- Amateur vs. Professional Trading: There’s a significant difference between amateur and professional trading. Amateurs might dabble in trading as a side activity, while professionals dedicate their full attention and resources to it. Proprietary firms hire traders to ensure a professional approach, as the stakes are high with their own capital.
- Limitations of Quantitative Trading: Pure quantitative trading in China hasn’t yet achieved stable profits, unlike in some foreign markets. Even the most reliable quantitative strategies often require human intervention, reinforcing the need for skilled traders.
Insights from a Seasoned Trader
Having spent a decade in the trading industry, including stints at various proprietary trading companies and private equity firms, I’ve gained valuable insights into why these companies hire traders. The answer is straightforward: trading needs people to complete it. Even the most sophisticated strategies and technologies can’t replace the human element in trading.
For those aspiring to enter the trading world, it’s essential to approach it with the right mindset. Trading is not a get-rich-quick scheme; it’s a demanding profession that requires dedication, discipline, and continuous learning. If you’re interested in pursuing a career in trading, consider joining a legitimate proprietary trading company that values teamwork and professional development.
Currently, I’m part of a new trading company in Wuhan that focuses on building a strong trading team under a unified trading system. We’re looking for novices who are passionate about trading and willing to commit to the profession—ideally young people just entering the workforce, with the resilience and focus of a soldier. If you’re a blank slate in trading and ready to embark on a challenging yet rewarding journey, feel free to reach out.
Conclusion
Proprietary trading companies hire traders because trading is a complex, human-driven endeavor. Whether it’s managing the workload, diversifying strategies, or complementing quantitative tools, traders are indispensable to these firms. Understanding the types of proprietary trading companies and the challenges in the industry can help aspiring traders navigate their career paths more effectively. With the right approach and dedication, trading can be a fulfilling and lucrative profession.
