Making a Career in Algorithmic Trading

The article “Making a Career in Algorithmic Trading” first appeared on QuantInsti blog.

The advent of algorithmic trading in the late last century caused a massive “techtonic shift” in the way trading took place in exchanges worldwide. This is a perfect source if you wish to make a career in Algorithmic Trading. Here, we highlight some important factors for job seekers in the domains of High Frequency Trading, Automated Trading, Quantitative Trading or simply Quant Jobs.

Irrespective of the diversity in your profile, educational history, or professional journey, achieving the status of a top algorithmic trader remains attainable with a fundamental grasp of the field. It is about time everyone realized the true potential of algorithmic trading.

We’ll cover:

• Jobs and Career in Algorithmic Trading
• Types of Quants
• Who Employs Quants?
• List of companies that hire Quants
• What Do Recruiters Look for in a Resume?
• Algo Trading job requirements
• Tips for Algo Trading job interviews
• Salaries for a Career in Algo Trading
• Algo Trading salaries
• Variation in Algo Trading jobs and salaries
• Skills Required for a Career in Algo Trading
• Qualifications to Become a Quant
• Impact of Ml and AI on Your Algorithmic Trading Career
• Learn and Upgrade to Establish Your Career in Algo Trading
• Useful Resources to Boost Your Career in Algo Trading
• FAQs About a Career in Algorithmic Trading

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Jobs and Career in Algorithmic Trading

The last couple of decades have seen an exponential growth in the algorithmic trading market and it continues to grow at a significant pace.

According to the report published by Research and Markets, the global market for Algorithmic Trading estimated at US$14.7 Billion in the year 2020, is expected to garner US$31.1 Billion by 2027, growing at a CAGR of 11.3% over the period 2020 to 2027.

Today, algorithmic trading and high-frequency trading are recognized by companies and exchanges all over the world and have become the most common way of trading in the developed markets. Be it trading in stocks, derivatives, Forex or commodities, trading firms worldwide adopted algorithmic trading in a big way.

Big banks, hedge funds, and other trading firms are now hiring the best talent to stay ahead of their competition and to gain big bucks leading to a surge in algorithmic trading jobs.

Students, engineering graduates, developers and even old-school traders are aspiring to build a career in algorithmic trading. As per Bloomberg, Citibank hired 2500 programmers for the unit that houses its traders and investment bankers, bulking up on coders and data scientists as technology reshapes the business.

Developers from non-technical backgrounds (like telecom industries or verticals which focus heavily on programming) are in demand. Why? They’ve spent years within the same industry they have enough relevant knowledge about the basics and the nuances of programming which are essential to Trading.

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Types of Quants

People frequently enquire and are curious to learn about various online trading jobs, algorithmic trading jobs, futures trader jobs, etc. in their journey of an algorithmic trading career.

Here we list down a few profiles to understand what types of roles are available in the industry and what type of skills would be required to take them up.

• Desk Quant – Implement pricing models that are directly used by traders
• Model Validation Quant – Implement pricing models to validate Front Office models
• Front Office Quants (FOQs) – Develop and manage models for calculating the price of assets on the markets
• Investment/Asset Management Quants – Develop models for mitigation of losses in investments
• Research Quant – Research and create new approaches for pricing
• Quant Developer – A developer/programmer from the field of finance
• Statistical Arbitrage Quant – Identify data patterns and suggest automated trades based on the findings
• Capital Quant – Model the bank’s credit exposures and capital requirements

These are some of the roles which prevail in the market among the various other types. Developers are also sought after in the domain of High-Frequency Trading (HFT Trading).

Who Employs Quants?

Some of the questions asked for employment in Algorithmic Trading domain are:

• Who will hire Algorithmic Trading professionals?
• Who will give jobs to Quants?
• What companies hire Quants?

List of companies that hire Quants

Here’s a list of some famous companies that employ Quants:

• Commercial Banks that hire Quants
  • RBS
  • HSBC
• Investment Banks that hire Quants
  • Citibank
  • Goldman Sachs
• Hedge Funds that hire Quants
  • The Citadel Group
• Accountancy Firms that hire Quants
• Software Companies that hire Quants
• Finance Firms that hire Quants

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What Do Recruiters Look for in a Resume?

Recruiters are always on the lookout to hire the most talented and skilled individuals out there for their organisations. But when hiring for the domain of algorithmic trading:

• What do recruiters look out for?
• What describes an algorithmic trader job description or a quantitative analyst job description?
• What type of job will help one’s algorithmic trading career?

Algo Trading job requirements

Following are some requirements from established companies in the Algo Trading domain, for selection of candidates that they look out for:

• For the position of Trading Strategy Development, the knowledge of Python & R would be an advantage.
• To become a Python Developer an advanced skill-set in programming languages like Python is largely preferred
• A domain knowledge in stock markets (quant, fundamental, technical, derivatives, macro, etc.) and strong Logical skills are valued
• Those with Master’s in Applied mathematics or statistics, MBA from IIM, B.Tech computer science can become Quantitative Researchers and Traders with the ability of successful implementation of profitable trading strategies (from ideation to execution i.e. research, design, back-test and execution) as well as knowledge and experience of working with data analytical tools like R, Python, etc.

Tips for Algo Trading job interviews

Mentioning these qualities while being thorough with them would increase your chances of being selected by them. There are people who have become successful traders although being from a commodity background, being Finance & Tech Grads, being Technocrats and Engineers, etc.

One should be able to demonstrate a strong understanding of the core areas that are highlighted in their resume. Don’t mention skills you don’t have, or have only a partial or basic knowledge of – that would leave a negative comment. Not to forget the basic rule ie. being honest about your profile and skills.

Recruiters also tend to give positive weight if the candidate has undertaken a project work or published any research papers in his/her areas of interests.

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Salaries for a Career in Algo Trading

One of the most commonly asked questions is: How much do algorithmic traders make?

There exist a variety of roles for multiple businesses and companies, depending on the type of knowledge and skills you possess. QuantInsti’s career cell shares these numbers on the QuantInsti website, stating job opportunities & salary packages bagged by the participants of their algo trading course.

Algo Trading salaries

• Data Scientist: INR 1.5 million per annum
• Algo Trader: INR 800,000 per annum + incentives,
• HFT trader: up to INR 2 million per annum,
• Quant Research Analyst: INR 2 million per annum,
• Quantitative Research: AED 1,00,000 + up to 40 % incentives per annum,
• Trader: SGD 120,000 + performance linked bonus per annum,
• Trader Derivatives: HKD 384,000 per annum + performance linked bonus

It is a known fact that salaries & bonuses are lucrative in algorithmic trading firms.

Variation in Algo Trading jobs and salaries

They vary:

• with different job roles and cadres
• with companies where bonuses get equally split between traders and programmers based on the profitability of a strategy
• with the type of the trading firms (e.g. Family office, or bank, or High Frequency Trading (HFT) firm etc.) and
• the strategies (low-frequency trading strategy / high-frequency trading strategy) that are deployed by the firms

Salaries are based on the posts or designations for which one is hired. Salaries for the following and other posts would be as per the hierarchy of that respective company.

• quant trader salary
• algorithmic trading salary
• quantitative analyst salary

This results in different types of roles and jobs in the Quant or Algorithmic trading space. Equities market also offers a broad range of career opportunities.

Check out Quant Trader Salary to learn specifically about the salaries in the industry.

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Skills Required for a Career in Algo Trading

A quant designs and implements mathematical models for the pricing of derivatives, assessment of risk, or predicting market movements.

Following are the most important and relevant skills that one would be required to have to progress in the domain of Algorithmic Trading and will prove to be essential in one’s algorithmic trading career path:

Analytical skills

Having an analytical bent of mind is a very important quality for any quant trader/developer, and is valued in an interview.

For example, an interviewing candidate may be given a huge data set and asked to find patterns from the data. Candidates get evaluated on how they approach any given problem and their ability to justify their solutions objectively.

Mathematical skills

As the core of algorithmic trading revolves around algorithms, data, and programming, having reasonable programming skills and a basic understanding of statistics and calculus is important for any job seeker in algo/HFT trading.

For example, if a candidate is applying to a firm that deploys low latency strategies, then an expert level of programming would be expected from such a candidate.

Programming skills

Knowledge of a programming language is an added advantage as it enables you to function independently. Traders are inclining towards learning long-term effects and benefits of Coding especially Python.

Python is good for conceptualizing, backtesting of strategies, and has many libraries for validation and visualization of results. It can also be used by firms for strategies that are not dependent on low latency. On the other hand, C++ is usually used by firms that trade very low latency strategies.

Thus, if the objective of an aspiring developer is to get into an HFT firm, then irrespective of the language that he starts with, he will have to finally end up learning C++.

The strategy development process

While devising any strategy, it is important to understand the risks and rewards associated with that strategy in order to determine whether it has an edge in the markets. This is done during the backtesting of a strategy.

The frequency of trading, instruments traded, leverage also needs to be taken into consideration before going live with the strategy in the markets.

A single strategy doesn’t guarantee profits year-after-year. One has to formulate and overhaul strategies regularly basis using advanced mathematical models & statistics to remain profitable in the markets.

To understand various algorithmic trading strategies, you can learn about the algorithmic trading strategies, paradigms and modelling ideas.

Understanding the Financial Markets

Quantitative trading involves dealing with large financial datasets, trading in different instruments like stocks, derivatives, Forex etc. Hence, even if you are coming from a non-finance technology background, as a developer in a quant firm, you need to have a fair understanding of the financial markets.

Trading firms usually make their new recruits spend time on different desks (e.g. quant desk, trading, risk management desk) to gain an understanding of the markets.

Besides these, it is necessary that one is equipped with the domain knowledge. To know more on skill sets required, check out this infographic about the top skills for nailing a Quant or Trader interview.

If one is thorough with these points, they need not ask questions like: What are the skill sets required to become an Algo trader?

Besides these, one could also develop the following skills:

• Quantitative analysis
• Programming skills
• Statistics and Probability
• Knowledge of financial markets and trading
• Logic and reasoning
• Econometrics

Visit QuantInsti blog for additional insights on algorithmic trading career.