Fermi Estimation for Trading Interviews
Fermi estimation for trading interviews, including fair estimates, ranges, quote width, assumptions, and market-making caveats.
Trader candidates facing market-sizing or quote-estimation questions.
Trading estimates become decisions
In trading interviews, a Fermi estimate may become a fair value, range, quote width, or discussion of uncertainty. The estimate should support the action.
Use ranges for quote width
If the estimate is uncertain, the quote or answer should reflect that uncertainty. A narrow quote around a noisy estimate is hard to defend.
Concrete example
If estimating an unknown count for a market-making game, give a midpoint estimate and a plausible range, then explain how the range affects spread.
State toy assumptions
Do not present assumptions as market facts. Say what you are assuming, why it is plausible for the toy prompt, and what information would narrow the estimate.
Common mistakes
Candidates often give one number and stop. Trading estimation usually needs uncertainty and decision impact as well, such as how the range affects quote width.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.