I was waiting for this post... are you saying traders at hedge funds can make this money... but engineers don't? I thought algo traders required engineers, or is there a systematic split from the pure traders who look at funky graphs and the engineers who work on the backend systems?
To be fair, the tools they develop to understand a chaotic system like the stock market might be interesting outside of the field of algorithmic trading.
"the impression I always got was that the engineers/algorithm guys were always second fiddle to the traders"
This is mostly a stereotype of working at a large iBank. Proprietary trading shops and hedge funds have very rarely worked that way, especially after the rise of electronic trading. In fact, most often now, if someone is coming from one of those environments with the title "trader" they were most likely a clerk that was doing a lower paying job that just wasn't worth automating.
My time in finance generally and algo trading specifically was much more "nerd amongst nerds" than any other development job I've ever had.
And then the math geniuses that could be the next Einstein are slaving away in cubicles writing algorithms for the stock market. So much potential lost in the pursuit of increasing someone else's wallet.
I don't know, I disagree that they're not solving really interesting problems. My first jobs out of college were at hedge funds, pretty much by accident, and I got the chance to work with a ton of really smart people -- many of whom were math or engineering PhDs -- in a very challenging environment.
One two-person team I got to work with was doing something resembling stat-arb, and was pushing about $250 million of trades in the last 10 minutes of the market. Beyond getting to be hands on with some crazy math, building a system to make that happen isn't exactly trivial.
There are engineers working on improving Google Search. There will be engineers working on improving self-driving cars. There are also people working on making improvements to chess-playing bots and Go-playing bots that play the game far better than they could.
Similarly I expect there will always be people looking for ways to improve trading performance in the stock market, even if the strategies are automated and they're making optimization decisions multiple steps removed from the actual buy or sell decision. The nature of the job changes, but the goal remains the same.
But that's professional trading. The kind of trading needed for personal finance seems much less technical and could more easily be automated, since most people aren't looking to try out experimental stock trading strategies with their own money. If machine learning gets applied I think it would be more about understanding and communicating with the customer better.
Ya this is more my point. Taking traditional algorithmic trading skills into a place specifically designed for it and with new market mechanisms.
Whoever spends some time building DeFi/L1 protocols is going to make a killing jumping over to Jump/Jane Street/HRT in a few years with that knowledge.
Those engineers are probably not working on AI. The traders were receiving phone orders from clients and executed them. Now there's a platform where clients put in trades which get executed. The engineers develop the platform and enable the remaining traders to trade orders efficiently.
It's probably at least 30% front-end web developers, many testers, some back-end developers. Execution only trading engines aren't that hard to develop.
Algorithmic trading is the epitome of a meritocracy. I'm highly skeptical of anyone offering a degree in algorithmic trading other than as a historical perspectives. It's an evolving field and extremely cutthroat. I would liken it to going to film school and trying to become Steven Spielberg.
I've always found the whole prospect of algorithmic trading morally dubious. Is algorithmic trading overall a good thing? Is it something we should be encouraging? Can I do good in the world by working in algorithmic trading? Would people become algorithmic traders out of a belief that they're improving the world, and would gladly do it even if the pay was slightly lower than other software developer jobs?
I really don't know. The only reasons I've ever been marginally enticed to do it is that it looks like a fun problem and people make a lot of money off it. But it's hard to beat the job satisfaction at my current workplace. Right now I can release free software, which helps diagnosing and treating neurological diseases.
You’d see that mainly in over the counter and manual trading desks. So in the front office of a bank or corporation hedging commodities or interest rates for examples.
I think OP is asking about programming skills implying automated, systematic trading and algorithmic execution on exchange traded products.
Well it's a lot easier for a trader to learn enough programming to implement specific algorithms than it is for a programmer to learn about financial markets.
Software is eating the world. But I really shouldn't be surprised as I am at this one, since trading is well-known to be the most algorithmic math-geek industry at present.
I actually believe that trading is an interesting problem that should be studied more in Academia and Machine Learning. It has many aspects (sparse rewards, long-time horizons, simulation-to-real-world transfer, non-stationary data distributions, etc) that current ML algorithms struggle with.
Unfortunately it seem like most ML people are not really interested in trading, perhaps because it has such a bad reputation (which is IMO unjustified) - so they work on games instead :)
If you've done any daytrading, you've seen these algorithms in action. I know a few folks who could make a small fortune daily just by "fooling" the algorithms by setting extraordinarily high or low order prices, and rarely actually filling one of those orders. There is lots of money to be had (and lost) by mathematicians in the stock market, and there is a lot to be said for technical analysis... but it's a jungle out there.
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