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High Frequency/Quantitative Trading

High Frequency

Trading has evolved from a risk-taking, high-touch field to a technology-focused, model-driven one. Many big-money players have moved money out of discretionary funds and into higher-yielding, less risky quantitative strategies (most good quant strategies are fully maxed out in capital they can utilize). Quantitative trading can be thought of as making money trading, by leveraging machine learning programs and mathematically precise pricing models, instead of needing a strong understanding of economics or the macro market as a whole.

There are a few ways quant trading firms make money, from simply having an edge in speed to building extensive machine learning algorithms to create future price predictions on stocks, derivatives, and now cryptocurrencies. How efficiently you can program your computer to quickly process information is what separates the successful traders from the ones who fail. While being a quantitative trader is still a fast-paced job, the day-to-day operations are significantly more focused on building models and managing portfolio risks than manually executing and researching trades.

In lieu of a deep understanding of macroeconomics (which was a crucial skill set for a more traditional wall street bank trader), there are other areas that are important to master to be successful at a high-frequency trading or quant shop. Market structure, execution latency/processing efficiency, and connectivity are all extremely important to learn about as you level up in your trading career. It is very important to be self-motivated and continue to push yourself to learn, as most places run very lean teams (which allows relatively young traders to shine if they are able to perform well).

Unlike banking, most traders at HFTs can expect to have weekends off and work a sub-60-hour workweek. Since the US markets are closed on the weekends, other than occasionally answering a few emails, there is no real work to be done. That does not, however, lower the pay. Since most good HFTs have such great returns on capital, it is a great field to enter for a high-paying job that doesn’t require one to sleep in the office.

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