What a proprietary trading firm looks for

The Mako Group is a proprietary trading firm that specialises in equity and fixed income derivatives. On their web-site, Mako discusses the characteristics they are looking for in potential recruits. It’s interesting reading for aspiring and actual traders alike. Here is a summary, along with some of my thoughts:

Characteristics of a Strong Candidate

Discipline - Mako believe “Discipline is the single most critical factor to success.” While I believe the degree of discipline required to succeed is, in part, related to the strength of the trader’s edge, I firmly agree with this statement. Discipline is also the most emphasised trait in the Market Wizards books. 

Humility - “Self-confidence is an important factor, but it must be balanced by a humble spirit.” I believe aspiring traders would do well to note that the caricatures we see in the media, in films like Wall Street and Boiler Room, are just that; caricatures. Humility does not imply meekness. Humility should be perceived as a strength, as it brings about flexibility.

History of Success - “we look for a strong history of success in life challenges that have nothing to do with trading, but more to do with a demonstration that ‘this person can make it happen.” It’s one of the paradoxes that while we strive not become overly emotional in the act of the trade, trading is inherently competitive and emotionally absorbing. It requires pro-activity and constant inquiry.

Trading Experience - “Of the 20% that we hire from the trading community, many fail. They fail to adapt to new styles.” Old ways are not necessarily bad ways, but success in previous modes can lead to traders holding on to outdated beliefs and practises.

A Gift with Numbers - “Our traders will often focus on a set of numbers or relationships from 7 AM to 7 PM without so much as a break for coffee. Concentration is mentally and physically exhausting.” “… The sums are not complicated. But innate quantitative interest and numeric ability are critical.” There is plenty of room in trading for quants and non quants, but all trader’s have to be comfortable with numbers. It’s a life immersed in numbers.

Entrepreneurial Spirit – “Mako looks for candidates who have that personality that is always seeking value.” Trading, at its core, is about being willing to accept risk. There is nobody here telling you what to do and when to do it, so an having an innate drive is vital.

I like Mako’s philosophy is one of learning by doing. Here are some more interesting comments:

“We need to be clear about our objectives in the first months of production experience as a trader. It is not to make money. It is to avoid losing money while learning and making mistakes. Mistakes are best made early when the stakes are small and the causes are clear.”

“Sometimes greed creeps in and encourages you to get more out of a position, even if there is no more upside. Experience the human response early and learn about yourself as a trader before the stakes get big.” 

I recommend reading the full paper (don’t worry, it’s short).

PS – Working for a proprietary trading firm is a possible solution to my problem of inadequate capital. I am not overly eager to head down this route, but it is something I have looked into.