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Moving from Tech to Trading?

Cliff posted more than 7 years ago | from the coding-to-day-trading dept.

87

DJ Paradox asks: "I've been working in IT for around 11 years now and more recently in IT Security within the Finance/Investment Bank arena. I'm looking into the prospects of a change to an entirely different field, working on the trading floor. I've read a few books on trading but most of them seem to be geared toward the Do-It-Yourself-Day-Trader instead of a professional career. I don't have a finance degree but have a permanent position with a good sized global bank and a manager who is willing to help. So I ask Slashdot if anyone has recommendations for courses, books, websites that I should cover to get a head start in this transition. Have any of you made a similar jump? Should I try to move towards a more trader-aligned tech group first and build relationships? Should I try to go for Equities or Futures & Options trading? What markets would be the best to start/learn with?"

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87 comments

Awesome question, I have one too. (-1, Offtopic)

CrazyJim1 (809850) | more than 7 years ago | (#15844248)

What is the online brokerage that has the cheapest broker's fees? As a little guy(sub $1000), I would like to invest, and dabble in day trading, but the brokers fees on all the sites I've found are nearly the same as if you contacted a live broker. It would make sense for someone to undercut the competition, but I don't know of any sites that have done this.

Re:Awesome question, I have one too. (3, Insightful)

thealsir (927362) | more than 7 years ago | (#15844264)

Save up more money first. You need to have enough in your account to where you can devote a maximum of 20% into one stock and still make a decent amount of money off of 10% or 20% increases. At the $1000 level, commission fees will likely gobble up any gains.

If you want to "dabble" in day trading, you need at least $15K. Day trading requires you to take out many low risk trades if you want to be successful. And I don't like the word "dabble," as anyone who doesn't go into it hardcore tends to lose money.

Brokers that charge flat fees for trading, and don't charge any maintenance fees, are good. Scottrade and TD Ameritrade are examples.

Re:Awesome question, I have one too. (1)

TopShelf (92521) | more than 7 years ago | (#15844404)

I second that motion - at $1000, commissions alone present an insurmountable challenge to successful trading (and there are enough challenges there already).

Put together a plan to save up more money, and in the meantime, read up and devise what strategy you'd like to trade with. You can perform analysis, manage a fictional portfolio and test results in the meantime before placing real money on the line. Above all, don't treat this as "dabbling" unless you're comfortable with losing the whole wad, like someone going into a casino treats their bankroll as "entertainment" money.

Re:Awesome question, I have one too. (1)

thealsir (927362) | more than 7 years ago | (#15845928)

just following up on this, a good site for fantasy portfolio investing is investopedia.com. You trade real stocks but are given a portfolio with $100,000 funny money starting cash. In the main competition, you cannot devote more than 1/5 of your portfolio to one stock, forcing you to diversify and in many cases limiting upside, but limiting downside too.

Do research on market conditions, realize what causes large groups of stocks to go up/down and what causes sectors and individual stocks to go up/down. If you can trend trade, you can make a lot of money.

It's funny comparing the gains between my real and fantasy portfolio. The fantasy one always wins, because decisions are less emotion based. Regardless of how hard I try, emotion always creeps in a little bit with a real portfolio. It's something that really has to be wringed out over time and can be the most damaging to your capital.

Re:Awesome question, I have one too. (1, Offtopic)

npietraniec (519210) | more than 7 years ago | (#15844289)

You're going to have a hell of a time day trading with $1000 - and you haven't done much research, as live broker fees are way higher than fees you'll see at etrade or tdameritrade (which are typically around 10 bucks a trade depending on where you go)

Re:Awesome question, I have one too. (1, Offtopic)

Faizdog (243703) | more than 7 years ago | (#15844312)

I can help you out there. I was in the same situation 2 months ago. I'd been working for two years, and had about $5-10k that I wanted to play around in the stock market with, but all of the big online firms, ETrade, Schwab, Fidelity, etc. had fee structures that were much more expensive than I was comfortable with/could afford.

I finally ended up going with Scottrade, at www.scottrade.com. They're a discount online broker who charge a flat $7 commission per each sell or buy, regardless of how big or small the order.

They're a discount broker, so they don't have all the whizbang services and features of the other guys, but I didn't need any of that. I was comfortable doing my own research and everything. All I need was a cheap way to buy and sell stocks in relatively small quantities online. And Scottrade fit that perfectly.

Check them out and see if it's appropriate for what you want to do.

Disclaimer: I am not employed by Scottrade, the only relationship I have with them is the one described above where I am a happy customer.

Re:Awesome question, I have one too. (1)

martok (7123) | more than 7 years ago | (#15844568)

Also worth a check-out is Interactive Brokers [interactivebrokers.com] . They're who I use and the cheapest around afaik.

One strategy I've found does fairly well for me in options is selling call and put spreads. You need a bit of knowledge in statistics but there's a wealth of information out there on how to do it. I've never been big on long option positions though. They seldom have worked for me.

Re:Awesome question, I have one too. (1)

thefirelane (586885) | more than 7 years ago | (#15844577)

$5 dollar trades here: Ameritrade izone [izone.com]

Re:Awesome question, I have one too. (1)

Russ Nelson (33911) | more than 7 years ago | (#15844371)

You can't "dabble" in day trading. It's a full-time job. You would do much better to buy shares of SPY via Scottrade, and hold them forever.

Re:Awesome question, I have one too. (2, Interesting)

Heir Of The Mess (939658) | more than 7 years ago | (#15844432)

Depends what country you live in. In Australia I use comsec that charges $30 a trade. You need to do a bit of training first as only 20% of people doing day trading actually make a profit as you are competing against all the other people doing day trading.

For your training, take that $1000 and set fire to it. Then after you save up another $1000 and set fire to that. Keep on doing this until you can burn the money without getting emotionally wound up about losing the money. Once you get to that point you can then trade objectively and not make stupid rash decisions which will lose you even more money.

I bet there's some of you out there who think I'm joking.

Re:Awesome question, I have one too. (4, Funny)

mwvdlee (775178) | more than 7 years ago | (#15845231)

Better yet, outsource the burning!
Just sent the $1000 to me and I'll burn it for you.
It'll only cost $100 and also doubles as an introduction to the concept of middlemen.
(tax not included)

No no no no no!!! (4, Informative)

spagetti_code (773137) | more than 7 years ago | (#15844498)

Dont be a day trader. The only people who make money from day-traders are the brokers. They want you to trade. If you dont trade, they dont earn. Hence all these cnnfn, etrade reports blah blah are trying to incent you to trade.

It has been proven (see The Great Mutual Fund Trap [amazon.com] ) that day trading is a way to lose. People always jump in too late and jump out too early and have their profits eaten up by fees (which they pay whether they win or lose). The guys in that book reported on an analysis done of Etrade and Ameritrade records. The numbers were very clear.

The only way to win is:

  • buy into a broad index fund. That will track the dow, and the DOW will rise over the long term.
  • dont buy and sell. Buy and hold (or better - buy and ignore).
  • hold for many years. You will see jumps and dips spanning months and years. But in the long term (many years) you will do better than anything else.

Here's a little info from the book:
They tracked over 1000 mutual funds for 10 years. Of the 1000, 1 (count them... ONE, uno, single) fund gained every year over the DOW. Mutual funds are run by fund managers who know a lot more than you, and have huge resources. Turns out that it is completely random as to wether a fund can beat the DOW.

Every now and them, one fund manager wins big for their fund. And they become hot property. But its random. They will eventually fade.

A side note: there is also a survivorship bias - any mutual fund that does poorly for very long is usually folded into another - that is, it disappears. So the ones that survive are the best, and they aren't better than the DOW on average.

Index funds are the way - they have very small fees, insulate you from any sector tanking, they track the dow, and require 0 effort on your behalf.

The book was a huge eye opener for me, and for the last few years has proven itself.

Re:No no no no no!!! (3, Interesting)

metamatic (202216) | more than 7 years ago | (#15844578)

Pretty much the same information is in the excellent Personal Finance For Dummies [amazon.com] .

60%+ of day traders lose money, and once you factor in fees none of them can match the performance of (say) an S&P500 index fund, on a long term basis. It really is a game for suckers.

Re:No no no no no!!! (1)

William_Lee (834197) | more than 7 years ago | (#15844909)

It has been proven (see The Great Mutual Fund Trap) that day trading is a way to lose. People always jump in too late and jump out too early and have their profits eaten up by fees (which they pay whether they win or lose). The guys in that book reported on an analysis done of Etrade and Ameritrade records. The numbers were very clear.

I wouldn't say this hypothesis has been proven. There are some daytraders who consistently make money over the long term. There aren't many, but it can be done. They also don't use Etrade or Ameritrade to execute trades. With those fees, I'm sure it is near impossible to make money daytrading.

The only way to win is: buy into a broad index fund. That will track the dow, and the DOW will rise over the long term. dont buy and sell. Buy and hold (or better - buy and ignore). hold for many years. You will see jumps and dips spanning months and years. But in the long term (many years) you will do better than anything else.

Sorry, this is not the only way to win by any stretch of the imagination. For the record, there is NO guarantee that the DOW will rise over the long term. Even if it does, there may be VERY long stretches where it trades sideways. In the long term, we're all dead. There are plenty of opportunities for the small investor to use an edge to excel in the markets.

Turns out that it is completely random as to wether a fund can beat the DOW.

There are many who would argue the random walk/efficient market hypothesis is severely flawed. I'm not a huge fan of mutual funds, especially with the proliferation of ETFS, but there are some funds that have outperformed the market over the long term due to brilliant managers. Marty Whitman comes to mind as one of them.

Re:No no no no no!!! (1)

spagetti_code (773137) | more than 7 years ago | (#15845221)


It has been proven (see The Great Mutual Fund Trap) that day trading is a way to lose. People always jump in too late and jump out too early and have their profits eaten up by fees (which they pay whether they win or lose). The guys in that book reported on an analysis done of Etrade and Ameritrade records. The numbers were very clear.

I wouldn't say this hypothesis has been proven. There are some daytraders who consistently make money over the long term. There aren't many, but it can be done. They also don't use Etrade or Ameritrade to execute trades. With those fees, I'm sure it is near impossible to make money daytrading.

these guys reviewed the analysis two of the largest investing databases on earth and came away with *very* clear numbers. That pretty compelling evidence. We (humans) make pretty poor judgements when it comes to investing.


Look - this is like the gambling game. They always emphasis the guy who won, and never the 100 who lost to make it possible. Gambling addicts live on their last big win, even if it happened 5 years ago and they sunk their life savings since trying to repeat it.


Sorry, this is not the only way to win by any stretch of the imagination. For the record, there is NO guarantee that the DOW will rise over the long term. Even if it does, there may be VERY long stretches where it trades sideways. In the long term, we're all dead. There are plenty of opportunities for the small investor to use an edge to excel in the markets.


There are no guarantees about anything - everything is a risk. Government bonds are risky if you think the govt will fold, but the returns are positively anemic. The stock market does have gains over the very long term, but can swing down for several years at a time (e.g. 2000 - 2005). It can swing sideways for a decade or more [typepad.com] (check out 1928!!). But over very long term, it has reasonable gains.


but there are some funds that have outperformed the market over the long term due to brilliant managers

Show me the proof! There are, as with any random system, occasional surprises - perhaps Marty Whitman is one. But
in the end randomness wins out and these "brilliant" managers fade. Read the book, see
the data. 1 in 1000 mutual funds beats the DOW over 10 years. If it was completely random (50-50 each way)
then you would expect 1 in 2^10 = 1024, which is about what we get. Perhaps this Marty Whitman is 1 in 1000.


The important point here is that Mr Whitman and his ilk, with all their resources, and with
all their training and degrees and support cannot beat the DOW in the long term except in
a very rare case. So what chance do you have as a day trader. What chance to you have to even
pick a mutual fund - especially once you strip tax and fees out of your earnings.


Go with a broad index fund. This reduces exposure to a single sector and reduces fees to a minimum.

Re:No no no no no!!! (0)

Anonymous Coward | more than 7 years ago | (#15845626)

1 in 1000 mutual funds beats the DOW over 10 years.

While I do doubt how factual your data is, what I really dispute is your conclusion. Even if 1 in 1000 mutual funds beats the DOW over 10 years, that has basically no relevance whatsoever on whether or not a skilled day trader can. For one thing, mutual funds don't engage in day trading. While I agree with you that for long term investors and even to a large extent for swing traders the market tends to behave randomly, there are *definitely* short term opportunities to make money here and there. This is what the good day traders capitalise on, and it has nothing to do with what the mutual funds do.

The real problem with gaging day-trading by how mutual funds perform is the fact that mutual funds charge large fees compared with individual investors.

$

If it was completely random (50-50 each way) then you would expect 1 in 2^10 = 1024, which is about what we get.

That calculation is bullshit. If it was completely random (50/50 each way), and there were no fees, then you would expect 1 in 1024 mutual funds to beat the market every single year. 50% of mutual funds would be the market over a 10 year stretch.

Of course there are fees associated with mutual funds. So the calculation would be much more difficult, and would depend on the volatility of the market over that period as well as the amount of the fees.

Go with a broad index fund. This reduces exposure to a single sector and reduces fees to a minimum.

If the market truly is random then picking 20 or so individual stocks randomly would reduce exposure to a single sector and reduce fees to a minimum. It would also avoid the one terrible flaw about index funds, manipulation. When a stock gets added to an index fund everyone knows about it before it gets added. Thus mutual funds and swing traders can buy up lots of shares before they get added and then sell them to the index funds. Take a look at the stocks that get added to the S&P 500, for instance. There's a big blip almost every time on the day the stock gets added to the index.

Of course to be cost effective you'd need at least $20,000 or so as an initial investment and $1000 or so each time you wanted to add to your investment (just spend $1000 on each stock, at $10/share that's only a 1% fee over the life of the investment). If you want to focus on large caps then you can pay even less than that - invest in DRIPs directly from the companies. You won't get that low of fees over the long haul even from an index fund.

Re:No no no no no!!! (1)

Nevyn (5505) | more than 7 years ago | (#15847946)

Read the book, see the data. 1 in 1000 mutual funds beats the DOW over 10 years.

That's not what you said previously ... you said over 10 years only one beat it every year (which is a very different metric). It is somewhat well known that a lot of managed funds do badly with regard to a pure index, mostly due to the funds fees, and I'd agree this is a good indication of what will happen to an average day trader. But there are good mutual funds that beat the indexes over 5, 10 and 15 years.

Re:No no no no no!!! (1)

janzen (932060) | more than 7 years ago | (#15844945)

Here are a number of very well respected authors who will back up various portions of the parent poster's argument:

The (Mis)Behavior of Markets [amazon.com] , by Benoit Mandelbrot [yale.edu] and Richard L. Hudson.

Fooled by Randomness [amazon.com] , by Nassim Nicholas Taleb [fooledbyrandomness.com] .

A Random Walk Down Wall Street [amazon.com] , by Burton G. Malkiel [princeton.edu] .

All of these are fascinating reading, and highly recommended. Certainly anyone who pays attention to CNNfn and the rest should read Taleb; anyone who's trading options (and relying on an option pricing model) should read Taleb and Mandelbrot; and anyone who still thinks that investing in mutual funds is a good idea should read all three. The parent's remark about survivorship bias is right on target, and that's by no means the only pitfall out there.

Re:No no no no no!!! (1)

mwvdlee (775178) | more than 7 years ago | (#15845254)

There are daytraders that make money.

The problem is that they're all financial institutions with more money than you can possibly imagine. They can actually influence the market and have enough reserves to go for the long term. Most of these institutions also tend to take enough shares in a company to have a say in how it is run, so they aren't really making money on the stock exchange, they just "own" a lot of companies that are payed for by the losing majority of day traders.

Re:No no no no no!!! (1)

devonbowen (231626) | more than 7 years ago | (#15845888)

Not only do day traders pay fees more often than buy-and-holders, but buying and holding also keeps the tax man away. You'll pay tax on your dividends in any case, but the power of compounding that comes from the capital gains that are only taxed when you sell is enormous. You'd have to rake in insane bucks day trading to make up the difference. Though, amazingly, people rarely figure that into the equation. A lot of big fish stories would wither.

I'd quibble with your "buy the dow" advice a bit, though. Good advice for someone that has no idea. But people like Warren Buffet would most definitely disagree that you can't beat the Dow. And your example of 99.9% of mutual funds that don't beat the Dow every single year is questionable. If I beat the Dow by 5% every year and then miss by 0.1% one year, I'd be counted in those stats despite being extremely wealthy.

Devon

Re: Trade from your IRA to keep taxes at bay (0)

Anonymous Coward | more than 7 years ago | (#15845954)

I believe that if you trade from your IRA account, you keep defer the taxes until you redeem your income from the IRA at retirement.

Random Walk theory is nonsense (0)

Anonymous Coward | more than 7 years ago | (#15846085)

Counterexample [yahoo.com]

10,000 invested with SPX in 1969 would net you about 300K today. 10,000 in Phillip Morris would net you 2 million. And that's if you used the dividends (4% yield today) to buy crack.

Re:No no no no no!!! (1)

harryk (17509) | more than 7 years ago | (#15846782)

While I think that you're post is interesting, and informative (and had I any mod points I'd have given them to you) I think many of the postings are missing the original guy's question. He's looking to make a career change. I don't think (unless I misunderstood) that he particularly cares about making money for himself. He's looking to work as a day trader, so what he trades isn't important right now, is it?

Re:No no no no no!!! (1)

Requiem Aristos (152789) | more than 7 years ago | (#15848088)

spagetti_code is generally correct. You can outperform most fund managers by the simple technique of picking stocks at random, and the market as a whole has tended to average 11% returns over the long term.

I would point out that you get poorer results if you look at random 20 or 30 year slices of the "long term". Since this is the time period many people might be investing for, the index fund option is much less appealing.

The random performance of the market is due to the large number of companies involved. If you look at specific companies, and choose on the basis of good management, good finances, etc., you can easily find companies that will go up in value even when the indexes are heading down. For example, the S&P500 dropped 35% from '00 to '03, but Unilever went up 40% in that same period.

Re:No no no no no!!! (0)

Anonymous Coward | more than 7 years ago | (#15848567)

"Mutual funds are run by fund managers who know a lot more than you, and have huge resources. Turns out that it is completely random as to wether a fund can beat the DOW."

So, on the one hand, you're saying that a fund manager knows a lot more than this guy. Yet on the other completely contradictory hand, you're saying that a fund managers performance is completely random, thereby implying that the fund manager really is adding no value through his management. Actually, according to you, it sounds like this guy would be perfect for the job of a fund manager since he basically knows nothing about finance and portfolio management.

Re:Awesome question, I have one too. (2, Informative)

Quantum Fizz (860218) | more than 7 years ago | (#15844620)

I'd recommend Scottrade. I used to have E*Trade, but they're real bastards, for every 3-month period you don't buy/sell anything they charge you a $40 fee. That adds up real fast. So I just transferred my portfolio to Scottrade, where I can sit out for months on end as I'm a student and don't have much money.

I think Scottrade has commissions of $7, which E*Trade aproaches if you make enough trades (their commissions start at $15 and go down as you make more trades to $7). But as someone else said, if you've got only $1000 or so to play with, I'd suggest buying and holding some stocks for long-term investments and not really day-trading. Day-trading requires buying/selling stocks on slight upticks, for which the stock commissions (remember, you get them buying AND selling) really eat into for you to make a profit. Ie, a stock increase of a few cents would be useless to you (unless you're playing with penny-stocks which is highly inadvisable), but would be great for someone who bought a few thousand shares.

Re:Awesome question, I have one too. (1)

SophtwareSlump (595371) | more than 7 years ago | (#15845837)

I looked at Scotttrade when I opened up my Roth IRA about... oh 5 years ago now. They were quickly scratched off my list when I asked if they allowed you to reinvest dividends for free. At that time, you had to pay the same commission ($7) to reinvest dividends for each stock, each time a div was paid out. Not sure if that's changed since then.

The last book Siegel wrote (Future of/for Investors) was a great read. Interesting points about how when a stock gets added to one of the major indexes, the stock automatically becomes inflated in price, since all the institutions have to buy the stock, therefore driving down returns of the whole index.

Re:Awesome question, I have one too. (1)

Knara (9377) | more than 7 years ago | (#15846936)

I looked at them about 2 years ago, and I _think_ that they now let you do commissionless dividend reinvestment, but I can't recall exactly. I think my problem with them was that they were still mostly meatspace-based. Mailing things seems so unnecessary.

Re:Awesome question, I have one too. (5, Interesting)

Sparohok (318277) | more than 7 years ago | (#15844710)

I trade for a living, though technically speaking I don't day trade.

I agree that you need more money. You can't trade stocks with $1000, even as a hobby. The costs will eat you alive.

I disagree with all the people recommending web-based brokers like Scottrade. If you are serious about trading there's really just one way to go, a direct access broker like Interactive Brokers. They are light years ahead of the web brokers in technology and trading costs are much lower, $1 commissions on up to 200 shares. You can also trade just about any financial instrument in the Western world from one account. You will learn much more about trading using a real direct access platform.

Re:Awesome question, I have one too. (1)

Strategos (978492) | more than 7 years ago | (#15865109)

Depends if you are looking to trade stocks.

what I know (4, Insightful)

acvh (120205) | more than 7 years ago | (#15844268)

Floor trading is a pretty extreme job. Most floor traders work their way up from entry level runner positions. One way to avoid that is to buy or lease a seat, the AMEX is pretty cheap these days. Of course, you'll need clients for that.

I like your idea of moving the tech group for a trading group, that would get you in contact with some of the action, and you could get a better idea if it's what you want.

It's exciting, but stressful.

Re:what I know (4, Insightful)

dubl-u (51156) | more than 7 years ago | (#15844873)

Floor trading is a pretty extreme job. Most floor traders work their way up from entry level runner positions.

Yes, and that's exactly what the original poster should do. It's been a while, but the trading firm I used to work for was geared for turning bright but unskilled people into traders. Set aside your pride and jump back to being an entry level employee again for a while. Hopefully your maturity and smarts will let you climb the ladder quickly.

I'd echo other people who advise you to stay away from day trading or just buying a seat. Learn the business from people who know what they're doing. You will avoid a lot of novice mistakes, which in trading can be very, very expensive.

Re:what I know (1)

KDan (90353) | more than 7 years ago | (#15845728)

To make up for your lack of a finance degree, you might want to look into going on one of the trading courses offered by the Derivatives Institute. That way potential employers won't take a glance at your CV, sneer, and say "so beyond the fact that you've spent some time working in banks, what are your qualifications to work for us?"

Daniel

Re:what I know (1)

GlobalEcho (26240) | more than 7 years ago | (#15846955)

I don't think the submitter would be floor trading. It appears he plans to stay with his global bank, which is much more likely to involve OTC trading, based on customer flows, prop desks, etc.

I think the most reasonable place to start would be to try to internal transfer to a junior trading position on the FX trading desk. Such positions come up a lot because so many people hate keeping up with the time zone differences. There is a lot of flow, and there are not nearly as many currencies out there as there are, say, equities.

This is great (1, Funny)

baldass_newbie (136609) | more than 7 years ago | (#15844292)

How many /. teenagers are looking at the screen trying to figure out what it is you're asking.

Wait, what was the question?

Re:This is great (1)

0racle (667029) | more than 7 years ago | (#15844542)

This isn't flamebait, it's true. This ranks up their with asking Slashdotters for legal advice, it's completely retarded.

"Hey Slashdot, should I make a major career change or not?"

Out of the wood work come the arm chair traders (5, Insightful)

Average_Joe_Sixpack (534373) | more than 7 years ago | (#15844320)

You don't state your level of trading experience (ie have you ever day traded), so I am going to assume you are a complete newbie. Unfortunately, you are going to be way out of your element and will get slaughtered if your only experience comes from books ... and that's if they even let you on a trading floor/pit.
 
My advice would be to put those grand aspirations on hold and get yourself a trading account from a discount broker (Etrade/TDAmeritrade/Scottrade). Fund the minimum which is usually around 2 grand and start trading. You'll probably wind up losing but the knowledge gained will be worth more than any course or book.

Why lose 2k? (1)

kninja (121603) | more than 7 years ago | (#15845206)

I agree with the parent, but rather than lose 2 grand, just sign up for a FREE account and practice trading with that. I think there are others, but the only one I found with a quick google was Forex [fxcm.com]

Read John C. Hull's "Options, Futures and Other Derivatives" which is the absolute minimum BASIC knowledge you should have for trading the market. The day trading books might make more sense after reading that. You work at a bank, and I would be very surprised if someone, somewhere didn't have a few books like this lying around that you could loan.

Also, you can read some mathematical finance texts, and maybe take a few courses (I believe Stanford and Carnegie Mellon have good programs, if you consider education an option at this point, if you can get in, and if are interested in becoming a quant).

Good luck, and I hope you don't get whipsawed too badly in the beginning.

Re:Why lose 2k? (1)

Average_Joe_Sixpack (534373) | more than 7 years ago | (#15845533)

The fantasy stock sites usually don't account for volume, halts, distributions/dividends and usually have painfully slow execution times. Not to mention you have no vested interest since your money is not on the line.

Re:Why lose 2k? (1)

Ignignot (782335) | more than 7 years ago | (#15845959)

When you use real money, it feels different. At least that's how it is for me. A lot of trading has nothing to do with knowledge of how to price options or if there may be an arb between two contract's volatilities. A lot of it is just guts.

I say use at least 5k dollars, though. And read real money by Jim Cramer, because while he is a bit of a cheerleader, I think he also has a lot of experience that he puts into his book.

Re:Out of the wood work come the arm chair traders (1)

garyrich (30652) | more than 7 years ago | (#15847614)

Those brokers are all geared towards individual "investors". If you do "trading" you are going to hit their screens for a "pattern day trader" and your $2k becomes a minimum $25k balance. And all you can get are common stocks, options and bonds at fair but not great commissions. A $10 commision will kill you on small trades done frequently.

If you were to go this path to gain experience (not sure it's the way to go really) you need a deep discount broker that gives you good derivitaves exposure. I use interactivebrokers.com for options, futures and forex. If you trade futures you don't hit the "pattern day trader" radar and can trade as often as you want with a theoretical $2k balance. Of course, it's really really easy to blow up a $2k account balance trading futures in a few days and be broke.

The quant route is a good way to move from IT. Get a paper account that has API access (IB has that) and start looking at coding algorithms for trade scenarios. Look at Medved and other free tools that are out there - look at how they work under the hood. See if you can do better.

Find a forum that actually has some Traders in it (3, Insightful)

drgould (24404) | more than 7 years ago | (#15844345)

Elite Trader [elitetrader.com] , for example.

why are you asking us, talk to the traders (2, Informative)

Anonymous Coward | more than 7 years ago | (#15844355)

some people from my group made the jump to trading. they started developing trader apps, then moved to desk support, and learned enough about the dealio doing support that they moved to trading.

that would be a long-ass road to travel from IT security though. can you code?

long story short, find a job where you get to learn about finance, and if possible, get to know traders and what they do.

DEALIO!? (1)

pestie (141370) | more than 7 years ago | (#15846105)

Dear God, did you just use the word dealio in a sentence??

All well and good, but... (2, Informative)

BengalsUF (145009) | more than 7 years ago | (#15844399)

It doesn't sound like you have talked to anybody that would actually be your boss if you made the move to the trading floor. Having worked in the same environment, if you had asked them you would know exactly what you need to do to move into that area.

You would probably need to start by going to training for and passing the exams for the Series 11 and Series 63 exams. Furthermore, you would need to be sponsored by your employer to take these exams. You knew that, right?

Oh, and plan on starting at the very bottom and taking a massive paycut for the privilege.

Off-topic! Mod story down. (0)

Anonymous Coward | more than 7 years ago | (#15844424)

Moving from trading to tech, I could see. But from tech to trading? Do we look like FinancialDot to you? Who the hell approves this stuff?

Hundreds of relevant stories in the queue, and this is the best they could approve? Give me a break.

Re:Off-topic! Mod story down. (1)

alfs boner (963844) | more than 7 years ago | (#15847968)

Parent comment exemplifies why I'm so glad the editors completely disregard the users here.

An intermediate step first. (2, Insightful)

richg74 (650636) | more than 7 years ago | (#15844426)

I actually did a move somewhat similar to this -- quite a few years ago. I started out in the financial services industry as an applications developer, and eventually moved/grew into investment management. Perhaps ironically, I am now back much more on the technology side of the business.

You suggested that you were considering an intermediate move into a more trading-oriented tech group. I think that is a good idea. You can learn a lot from reading, and from more-or-less formal education. I got an MBA in finance and am a CFA. But having day-to-day contact with what's actually done will really help your learning -- and there are some things about the nitty-gritty of trading that you won't learn from books. Also, having more direct exposure will help you make sure this is what you want to do, and will let you see different niches in the market "ecosystem".

Being a successful institutional trader involves a number of skills and personal characteristics. The more you can learn about it going in, the better I think your chances will be. As far as which market: focus on the area that you're most interested in. There is one caution: really understanding the process of valuing options and other derivative securities takes a non-trivial level of math understanding. (I was lucky there -- my undergrad degree is in physics.)

Re:An intermediate step first. (1)

Sb1 (930524) | more than 7 years ago | (#15844960)

DJ Paradox -- I agree mostly with (richg74):You suggested that you were considering an intermediate move into a more trading-oriented tech group. I think that is a good idea. You can learn a lot from reading, and from more-or-less formal education. I got an MBA in finance and am a CFA. But having day-to-day contact with what's actually done will really help your learning -- and there are some things about the nitty-gritty of trading that you won't learn from books. Also, having more direct exposure will help you make sure this is what you want to do, and will let you see different niches in the market "ecosystem".

But, If you want to jump into it really soon some things to think about; Do you have enough (6 figures+ ?) money (you don't have to if pro shop finances some of it)? By that I mean do you really have enough staying power for 1-2 years, i.e. making 2k one day or 10k-20k one month, then loosing 5-50k a month for 2-3 months in a row?

But, the best option regardless is to start and read up on using proper money management (portfolio position sizing) techniques, thus hopefully avoiding above scenarios. Better yet if you do not jump right into a pro shop (maybe one year from now) is to start slowly and read as much as you can and start to papertrade. Will you be programing your own system or use something more professional like eSignal, Tradestation, or cheap good begginers program (so I've heard) Amibroker? Do you want to backtest and keep all the data on your hard drive or rely on downloading bits and pieces from an online software company?

Being a successful institutional trader involves a number of skills and personal characteristics. The more you can learn about it going in, the better I think your chances will be. As far as which market: focus on the area that you're most interested in. There is one caution: really understanding the process of valuing options and other derivative securities takes a non-trivial level of math understanding.

Yes, exactly.

However, as (BengalsUF) stated: It doesn't sound like you have talked to anybody that would actually be your boss if you made the move to the trading floor. Having worked in the same environment, if you had asked them you would know exactly what you need to do to move into that area.

Have to agree here, but read on.

Taking the day trading route, commisions will eat at you. You can still make money, but should be the last thing to jump into with a lot of money. Maybe the best way to test out day trading is to try Forex with one of those firms that allow you to trade $1 or so per trade, like papertrading but real (except for liquidation). I would also recommend looking into Interactive Brokers [interactivebrokers.com] for an online brokerage.

A couple of beggining books I can recommend to get you started are Come Into My Trading Room [amazon.com] , Trade Your Way to Financial Freedom [amazon.com] , Give you a headstart and you'll also want to check out some trading forums, EliteTrader [www.elitetrader.comtitle] is a good one and Trade2Win [trade2win.com]

Good Luck.

ps If you get steered into really looking at Forex (still not fully regulated), really look into the broker that you choose (Refco FX Asscociates)!! Not to worry if you try "papertrading" with $50 or so.

Re:An intermediate step first. (2, Interesting)

richg74 (650636) | more than 7 years ago | (#15846766)

I agree with almost everything that Sb1 says. When I read the original "Ask Slashdot" post, I took it that DJParadox was asking about becoming a trader in an institutional setting: "on the trading floor". (Note that, in industry jargon, that doesn't necessarily mean on the floor of an exchange. Any big space that is set up primarily for trading is called a "trading floor".) In that situation, a decent firm will not let a new trader do anything that might cause a catastrophe -- for the firm. They may cheerfully give you enough rope to hang yourself personally.

Here are a few books that are excellent sources for the theoretical side of finance:

  • Portfolio Selection: Efficient Diversification of Investments by Harry Markowitz
  • Investments, by William Sharpe, Gordon Alexander, and Jeffrey Bailey
  • Options Markets, by John Cox and Mark Rubenstein
There is also another very good book on options and derivative securities by Hull; unfortunately it's at home so I can't give you the exact reference.

Having a look at these books in the library will also give you a feel for the math level involved in derivatives.

Let me help. (1, Funny)

Jester998 (156179) | more than 7 years ago | (#15844429)

I have put a great deal of effort into consideration of your question, and I hope the following answers will be of use to you.

I don't have a finance degree
No problem, it's not like it's *your* money you're spending. In fact, I personally use the "Bank of Joe" for all my financial transactions. It's run by this guy down the street, who has no formal training, or even a real vault, but he seems eager enough. His service fees are *killer* though.

have a permanent position with a good sized global bank
Learning by osmosis, always the best way. It definitely helped several of my friends to succeed at university.

So I ask Slashdot
As a career move, this ranks somewhere around "seppuku... with a butter knife".

if anyone has recommendations for courses, books, websites
I recommend taking some courses in formal logic. I understand the curriculum is both interesting and enlightening.

Should I try to move towards a more trader-aligned tech group first and build relationships?
Sure, but she might get mad when you take advantage of that plural relationship.

Should I try to go for Equities or Futures & Options trading?
This is a tough call, but I'd have to say "yes".

What markets would be the best to start/learn with?
Your options are, of course, varied; however, I recommend a local farmer's market. Their produce is far superior to those of bigger chains, and who better to learn from than the people who grow the crops?

Here's a quarter... (1)

repruhsent (672799) | more than 7 years ago | (#15844433)

...call someone who cares.

Quant/Algorithmic (4, Interesting)

inverselimit (900794) | more than 7 years ago | (#15844451)

I would advise you to try to start out as a 'quant' or a developer of 'algorithmic' trading solutions. Quants use programs and math to kick ass on the trading floor. Some quant houses don't care at all about wall st experience because they view things in a statistical/algorithmic way. They always always need good IT people. Think DE Shaw, Barclays, etc. Read Willmott forums and such places for info and job leads. Almost all of these jobs will be in New York/Connecticut and London. Another keyword is 'financial engineering;' there are masters programs that can certify you in this and your background is probably appropriate. Check out 'Financial engineering news.'

Algorithmic trading is another route. Big brokerages all have algorithmic trading platforms, which automatically split up an order into tiny pieces to sell throughout the day, on different exchanges. You could get into working on these systems, which are in a continual arms race, and see where that leads.

The bottom line is to use your IT background. Like most fields, trading is getting more computational/mathematical, not less, so you need to leverage your abilities. Start with solid books like Bodie, Kane and Marcus: Investments and Hull: Options, futures, and derivatives to get some foundational knowledge. Ignore the retail-oriented 'technical' trading/day trading stuff. Read the WSJ and Institutional Investor and things like that.

Good luck.

Re:Quant/Algorithmic (2)

jcr (53032) | more than 7 years ago | (#15844834)

Quants use programs and math to kick ass on the trading floor.

Correction:

Quants use programs and math to try to kick ass on the trading floor.

-jcr

Why ask Slashdot? (1)

Pedrito (94783) | more than 7 years ago | (#15844484)

I don't mean this in a mean way, but really, Slashdot, News for Nerds. You work in an investment bank. I'd think your resources for investing information there would be much better than here.

Changing fields is fine. I'm doing it myself, but take some time and research the field. There are books that are career oriented for all sorts of fields and I'm sure there are for finance and investing as well. Read about the different types of jobs and see what appeals to you.

I spent a few years before making the decision to go into medicine, albeit, there's a long-term investment in education in going that route that you don't really have with many other fields. So you may not need to take as much time to think about it, but do take some time and think about it. Research it, learn about it, figure out if it's what you really want to do.

I have a friend who worked in bonds for a while and he hated it. I have an uncle who did the same thing and loved it (and was incidentally very good at it and has made a mint). If it really appeals to you, go for it. But do the research. Make sure it's what you want before you divert yourself from an existing career.

Stocks and bonds... (3, Informative)

MetricT (128876) | more than 7 years ago | (#15844515)

Trading in options, futures, and other derivative instruments should be reserved strictly for Ph.D's with their own Beowulf cluster, or people who aren't losing enough money by day-trading. You can get in more trouble, quicker, than you can imagine.

Don't dis a finance degree. I did grad work in physics and work at a supercomputing center, and I have a large amount of respect for how hard finance can be. I've taken a few finance classes, and it ain't basketweaving. It's *hard*, in the same way physics is hard. If you think you are going to waltz into that field and compete with degreed people, you are either smarter than I am, or delusional.

Stick with stocks and bonds, but spend a year or two practicing. You don't need to trade stocks every minute/hour/day to make good money. Just look at Warren Buffet. Buy a copy of Ben Graham's "Intelligent Investor" and "Securities Analysis", Marcia Stigum's "The Money Market", Annette Thau's "The Bond Book", Robert Hagstrom's "The Warren Buffet Way", and Jim Collins "Good to Great. Read them, several times, and then test your knowledge with your own money before you blow someone else's.

Re:Stocks and bonds... (0)

jcr (53032) | more than 7 years ago | (#15844880)

Trading in options, futures, and other derivative instruments should be reserved strictly for Ph.D's with their own Beowulf cluster, or

Oh, please. Trading options isn't brain surgery. Just like any other securities, do your research to decide which way you think they're going to move, and don't sell naked calls or buy on margin.

I trade options on AAPL shares a couple of times every month, and I do it with the portion of my money that I don't mind risking for the higher returns. Mostly though, I just sell covered calls that are two or three dollars out of the money, and buy more shares with the premium. If the stock has a down day, then I jump on it and close out the position early instead of waiting for expiration.

-jcr

Re:Stocks and bonds... (0)

Anonymous Coward | more than 7 years ago | (#15844911)

*leveraged* derivatives are extrememly dangerous.

Unleveraged derivatives are much less so. It is of course just as easy to lose your shirt, its just that with a leveraged derivative when they come to make a margin call they may not stop at your shirt, pants (why do you think they are named 'naked' calls (and puts)? Hmm?), houses, cars, kidneys and naming rights on your offspring are all fair game.

More accurately... (1)

Overzeetop (214511) | more than 7 years ago | (#15845571)

Trading of almost any sort, including stocks, but far more appropriately options, futures, and derivatives, is Gambling, but is legal all over the US and is a sanctioned sport.

Yes, there are legitamate reasons for all three instruments and they can be, and are, used by a small number of institutions for the intended purpose, which is to limit risk and provide certain guarantees of performance. Mostly, howeverm they are used for gambling. It's no different than betting the ponies. You research the background, estimate the conditions, allow for some randomness, and then GUESS what will happen to the price and place your bet accordingly. Oh, sure, it's better than buying a lottery ticket, but really no different than any other paramutual game. The house still takes their margin/cut (known as brokerage fees), and makes money whether you win or lose.

If I were king, I'd outlaw all options, derivatives, and futures (Imo, they're the reason oil is $70+/bbl - the cost of extraction hasn't substantially changed, and E/M's bottom line proves it). If you want to place bets, do it in Vegas like everybody else.

Re:More accurately... (1)

humblecoder (472099) | more than 7 years ago | (#15853964)

Actually, options and futures (which are both considered derivatives since they "derive" their value from some underlying asset), when properly used, can actually REDUCE your investment risk.

For instance, say you own a block of stock in XYZ corporation. Let's say that you are a risk averse type and you want to make sure that the price of the stock doesn't go below $50 per share. In order to do this, you can buy a put option, which is an option to sell the stock for $50, regardless of what the actual market price of the stock is. If the stock price goes below $50, you can still sell your stock at $50 because of your put option.

In a sense, you buying insurance that your stock will not be worth less than some amount. If the stock stays above $50, then your option is worthless. However, this is just the insurance premium for the certain knowledge that your loss will be limited. Because your loss is limited, your risk is reduced. In general, options like this are a few pennies per share, so you may only be giving up a percent or two of return in order to insure your investment.

Options and other derivatives get a bad reputation, because people buy them not to insure an underlying asset, but to gain additional leverage which INCREASES their reward as well as their risk.

Here is a simple example of this type of investment...

Let's say that you believe that XYZ corporation, which is currently trading at $50, is going to go up to $100. If you only had $1000 to invest, you might buy 20 shares of XYZ, and then when the stock goes up to $100, you could sell those shares for double their value and make $1000 profit. However, another alternative is to buy call option with a strike price of $50. This option gives you the option to BUY the stock at $50. When the stock price is also $50, the call option might only be worth $1, so you could buy 1000 of these options. However, once the stock goes to $100, the call option is now worth $50, since you could exercise your option to buy stock at $50 and then sell the stock immediately for an immediate $50 profit. Thus, if the stock goes up to $100, you would have options worth $50,000! Thus, you have the potential to make more money buying the call option than you do with the underlying stock.

The downside in this situation is if the stock goes to $25 instead of $1000. If you had bought the stock, then you could sell your 20 shares for $25 and still have $500. You lost some of your investment, but you still have something to show for your efforts. However, if you had bought the options, your options would have a value of $0, since nobody would pay you for an option to buy a stock at $50 when you could buy the stock in the market at $25. Therefore, you have lost all of your initial investment.

In summary, while options give you the potential to make a lot of money, they also have the potential to wipe you out completely. However, if you use them to insure some underlying asset, they can be very beneficial and they can actually REDUCE your risk.

Re:Stocks and bonds... (1)

garyrich (30652) | more than 7 years ago | (#15847696)

"Trading in options, futures, and other derivative instruments should be reserved strictly for Ph.D's with their own Beowulf cluster, or people who aren't losing enough money by day-trading. You can get in more trouble, quicker, than you can imagine."

Sounds intuitively correct. But the people that are most succesful at this are *not* that. I don't quite get it myself. They actually tend to be very sharp (a sprinter intellect rather than a marathon intellect required for a Ph.D) folks with a background that includes competitive sports. Maybe it's just that those are the types of people the Goldmans look to hire out of Ivy League 4 year degrees and they are overrepresented in the pool of potential traders.

Oh, and if you haven't read Ben Graham's "Intelligent Investor" and understood everything in it already -- just stop now and go back to unjamming peoples printers and resetting their network passwords until you do.

Re:Stocks and bonds... (1)

wintermute42 (710554) | more than 7 years ago | (#15848718)

I used to be a big fan of fundamental investing and Graham (I've read the Intelligent Investor). I'm sure that this is a good approach if you have a big research department or can afford to subscribe to the results published by a research department. But in the modern market the Graham and Dodd approach is much harder. With Graham you have to consider historical context. Graham came along after the second world war and the end of the depression. Because of the carnage wrought by the Great Depression many people would have nothing to do with the stock market or stock market funds. At the same time, the United States was the only industrial country that had not been damaged by the war. The post war period was one of great economic growth and there were lots of under priced stocks. So Graham's approach to finding under priced assets worked well. It is much harder now. My own favorite approach is statistical arbitrage or similar techniques of using computer data mining and modeling. And even this is not easy. Look, the truth is that profitable investment, beyond Capital Asset Pricing Theory (e.g., diversified portfolios of index funds and bonds) is not easy.

Re:Stocks and bonds... (1)

garyrich (30652) | more than 7 years ago | (#15849288)

I agree that you can't just "do what Ben says" - heck the book is 70 some years old. The world marches on. But - unless you understand the basic of valuation and fundamentals that he teaches you will get badly burned in statistical arbitrage, pair trading, option straddles or anything else. If you don't understand the time value of money - how can "the greeks" (calculus derivatives on option contracts) ever make any sense?

I'm just a believer in knowing the rules before you break them. Since I was just writing the same thing about SQL queries last week, it must just be part of how I think.

zerg (1)

Lord Omlette (124579) | more than 7 years ago | (#15844668)

I don't have a finance degree

I'm tempted to say, "You've dealt w/ computers for a while, so you're really smart. You'll be fine!" That way, someone can eventually do the slashback where you're broke and on the streets.

I've read a few books on trading

There are plenty of schools that offer financial engineering certs, find one and go through it.

What the hell were you thinking?

Trading... (4, Interesting)

William_Lee (834197) | more than 7 years ago | (#15844870)

I'm currently trying to basically do the same thing you are, and trade full time for a living either for a firm or on my own. I can offer some advice for what it's worth. I was a licensed proprietary equities trader at a small Wall Street firm for around 3 years. I had Series 7/55 licenses at the time due to regulations, but they aren't necessarily required. The way these firms work is that they provide capital for you to leverage in addition to your own, and you trade in an intraday time frame (i.e. daytrading). Daytrading is IMO the most difficult time frame to trade in for many reasons including the amount of noise in that time frame, but it can be done profitably. I've seen too many successful traders to know that it can be. Very few make it long term, and it is difficult, but that is one option for you. I guarantee you will learn a ton about trading that way in a hurry.

You can also go for your CFA or something similiar depending on how much academic training you want, and if you feel like it would help in getting a job.

Buying and holding an S&P fund as some have mentioned here may be good advice for those unwilling or uncapable of more actively managing their portfolios, but you'll be leaving a ton of money on the table that way. It is possible with a lot of hard work to do much better than that.

A book can't teach you how to trade, but I would read Reminescences of a Stock Operator, Confessions of a Speculator, Practical Speculation, and Common Stocks & Uncommon Profits to get started. William O'Neil's CANSLIM method isn't a bad one to read up on either (IBD). You may want to read up on statistical analysis also. David Dreman's books are a good place to go on value investing. You can also read up on technical analysis, but tread carefully in those waters. There is a lot of nonsense out there.

If I were to give you one piece of trading advice, it would be to CUT YOUR LOSSES, and make preservation of your capital your number one priority. You can't trade if you are out of capital.

Don't paper trade. It is absolutely worthless for learning how to trade. Trading involves a ton of emotion (we're all human), and paper trading is easy because there are no consequences.

Be prepared to lose. A great trader would be one who wins 60% of the time. The key to success is gaining more on the infrequent winners than on the more frequent losers. If you're a perfectionist, and don't like to lose, look for another field.

Look for a niche and exploit it; don't try to go up against the big boys where you have NO edge.

Use the internet. There is a lot of free info out there that is valuable. Just be sure to separate the wheat from the chaff.

Good luck, and remember trading is a ZERO SUM game. Every dollar you make is coming out of someone else's pocket. Don't ever forget that. Your opponents won't!

Don't get discouraged, and be willing to fail, and try again.

Re:Trading... (1)

Aladrin (926209) | more than 7 years ago | (#15845434)

I have to totally disagree about paper trading. Telling someone not to paper trade because you won't get the emotions of real trading... That's like telling an athlete not to bother practicing because you only get the real feel of the game in a live game.

There are valuable lessons to be learned risk-free. They won't hit home as hard, and you won't learn as much, but you can learn some of the most basic (and harmful) mistakes without losing the shirt off your back.

There will come a point where paper trading is worthless to someone with experience, but for someone that doesn't even know how to learn the trade, it can be invaluable.

Re:paper Trading... (2, Insightful)

garyrich (30652) | more than 7 years ago | (#15847762)

But the parent is correct that it will not teach you the most difficult thing - controlling your emotions. Closing out a losing position is much harder than it sounds. It hits your stops and says SELL but every instinct screams at you to hold out.. it going to bounce... and minute now... arg it went down even more, now it's really oversold... I can't sell into this, it's a bull trap... blatent market manipulation. And that's how you blow up a trading account. It doesn't help that things *do* bounce sometimes and that there are real bull traps out there, etc.

Re:paper Trading... (1)

Aladrin (926209) | more than 7 years ago | (#15851775)

Yes, but the parent also said that paper trading is worthless, and that's blatantly incorrect. Just as with schooling, the hardest lessons can't be learned there, but it can give you the basics and prevent some serious disasters.

I never argued with the emotional side of it. I totally understand that.

Re:Trading... (1)

rcamera (517595) | more than 7 years ago | (#15845519)

i currently work as a developer on a trading floor as a developer and i have seen a few folks from my group move from the tech side to the trading side. as the parent mentioned, the series 7 is not needed for prop trading, but it will definetly help you get a job as a trader down the road.

i would recommend joining a trading floor as a tech guy before jumping completely in as a trader. as a tech guy, you'll be able to see what the traders do, what their strategies consist of, and you'll get to learn their jargon and rules. once know what's required of a trader, then you should make your decision.

Interesting career consideration, but (1)

Fengpost (907072) | more than 7 years ago | (#15844981)

Please understand that trading is not for the faint of heart. The pressure is high, numbers are big and the stress level can down right kill you. However, if you want to be a good at trading, most of the traders I knew in NY and HK told me that certain amount of killer instinct is required to be good at it. Please see this interesting article: http://www.nber.org/digest/mar02/w8508.html [nber.org]

fancy FX markets (1)

Anonymous Coward | more than 7 years ago | (#15845198)

With high leverage available on FX (even 100:1) you could loose everything or double your money in a matter of minutes. This is nerve wrecker, but it is a lot of fun.

Combine IT knowledge for better trading (0)

Anonymous Coward | more than 7 years ago | (#15845594)

Like these guys who built an online stock trading supercomputer [gstock.com]

Investor (2, Insightful)

mnemonic_ (164550) | more than 7 years ago | (#15845691)

Become an investor, not a trader. Before you buy, research the hell out of interesting stocks. After you buy, hold onto them and continue to study their performance and financial condition. Sell when the cracks (if ever) appear. You'll avoid the hustle and bust of a trader's life (more likely, death) and make more money with less work. It's also boring, which is why it's unpopular.

That said, I'll recommend the following books:
The Intelligent Investory, Ben Graham.
The Essays of Warren Buffett, Cunningham.
Contrarian Investment Strategies, Dreman.

Those books teach what others ignore, that identifying good stocks means identifying good companies. People do make money otherwise by gaming the market, selling on sentiment etc. But then again, you never hear of wealthy traders... investors like Buffett get all the attention, because value investing is what works. Get rich slowly or not at all.

Think about this... (1)

(A)*(B)!0_- (888552) | more than 7 years ago | (#15845735)

Let's see - you want to leave the tech field and enter stock trading.

So you go to a tech website and ask how to get into working on the floor? With that kind of logic, I can see why you SHOULD leave the tech field.

I'll make it crystal clear for you. If you're a race car driver, asking a fellow race car driver how to become a beekeeper isn't very smart. Ask a beekeeper!

I'm in the Market right now (1)

Lightness (980102) | more than 7 years ago | (#15845803)

And coming from an IT background like you, what attracted me was technical analysis. Find someone who trades successfully the way you want to trade and use them as a coach/mentor. I use the trainers from http://www.wealthintelligenceacademy.com/ [wealthinte...cademy.com] and the broker http://www.tradestation.com/ [tradestation.com] (great software package for analysis and automation, with a healthy user forum). WIA has a pit-trading course, but I'm sticking with options until I build my account (currently only trading with a $5000 acct).

Option trading will eat you alive without a mentor. Any trading system worth your time will have a strong focus on money management and position sizing so that even though you lose often (everyone does when actively trading) you don't lose much, and when the trade goes your way, you know how to lock in profit.

For fundamentals analysis with a focus on finding good growth companies, the book "Rule #1" by Phil Town is a keeper.
For general investing, everything by Robert Kiyosaki is worth reading.

Dont ask Slashdot (1)

hoggoth (414195) | more than 7 years ago | (#15845897)

You have 'a manager who is willing to help' and you are here asking Slashdot how to become a trader?

Well, here's my advice: Start an open source project to write a day-trading application that can be run in 'live' mode or 'fantasy-trading' mode for practice. Also let it run on live data or stored historical data for re-plays and what-ifs. Oh, make sure it runs on Linux. Probably should write it in Python or Ruby. Let's hear from the community on that important question.

But then again, this is Slashdot, and we are mostly computer programmers not traders so take this advice for what it's worth.

Re:Dont ask Slashdot (1)

alfs boner (963844) | more than 7 years ago | (#15848023)

ou have 'a manager who is willing to help' and you are here asking Slashdot how to become a trader?

Well, here's my advice: Start an open source

*snrrk* HAaaa ha ha ha ha ha ha haaaaaaa HAAAAAaaa ha ha hah ah ha ha ha ha ha.

Fuck open source software. LOL.

*snrrk*

Follow that dream of yours. (2, Informative)

pr0file (238078) | more than 7 years ago | (#15845915)

I see no reason why my fellow ./'ers are all so negative towards this issue. All he asked for was help, and not for everyone to shoot his dream down.

As for the things you can do, well that kind of depends on where you are. In the UK you will need to do a number of exams set by the securities and investments institute http://www.sii.org.uk/ [sii.org.uk] Im not entirely sure what your requirements would be in the US. I used to work as a technology risk analyst for an investment bank and our entire team had to the introduction to securities and investments exam.

To get a job on a trading desk, you generally have to go through a whole heap of hoops, but in most cases, it helps if you are a desk support person *note* not trading support (which relates to the support of the hardware/software used by traders)

These jobs require a fair amount of training to be conversant with the setup, i.e. multiple screens,special phones etc. So banks generally train their staff at training centers dotted around the country/world just so they can see those that will cut the mustard

One thing i will say is that you should give day trading / spread betting a go. It will really test your nerve and help you decide if you really want to go ahead with this

Good luck.!

Re:Follow that dream of yours. (1)

covertbadger (513774) | more than 7 years ago | (#15853234)

One thing i will say is that you should give day trading / spread betting a go. It will really test your nerve and help you decide if you really want to go ahead with this

This is good advice, though I'd recommend playing with small stakes since both activities can chew you up and spit you out in double-quick time. If you're in a country where you are allowed access (which, unfortunately, exludes the US) I'd also recommend an account on Betfair [betfair.com] . A UK horserace in the ten minutes before the off shows more activity than a stock market does all day. Ideal if you want to get your feet wet taking a position and looking to trade out.

Options and Futures is a Suckers Game (1)

dumbarse (560535) | more than 7 years ago | (#15846009)

One of my clients is the Clearing Corp. for "Hard Red Winter" (HRW) Wheat. The Clearing Corp. is the party responsible for matching your trades with buyers and sellers.. At the end of the trading day all trades must be even. All buyers must have sellers..

This is my observation of what goes on in this commonly traded commodity market In the HRW market, there are a limited amount of "pit" traders, and they all know each other..

They will take the edge from every trade and leave the house accounts on the bad side of any unfavorable transaction.

Even if you have a market (mills that need HRW, or farmers that can sell HRW), they may decide not to trade with you.

It combines the worst aspects of High School and exclusive clubs. If you are ready for this kind of environment then go ahead and buy a seat on our exchange!

Oh.. A pit trader once told me a joke..
Want to end up with a Million Dollars trading options?
Start with Two Million...

List of books (1)

middlemen (765373) | more than 7 years ago | (#15848054)

Hi
Here is what you should read :
1. Options, Futures and Other Derivatives, by John C. Hull. (Excellent book, I have read it. Very technical.)
2. Macroeconomics by Andrew Abel & Ben Bernanke (I have this book, but haven't got time to read it. Ben Bernanke is some big shot now of Federal Reserve in USA).
3. Principles of Corporate Finance by Richard Brealey & Stewart Myers (have read some chapters of the book, but not the complete book. was recommended to me by a management student)
4. Wall Street Journal or equivalent for your country ( Stay current with the market).

I would like to give links from Amazon to the books, but you can search yourself.
The key thing is that you have to be well-read and aware of what is going on in your country, and in your country's markets. Political systems and nature do affect the markets, hence the book on Macroeconomics.

--Vikas

Contact a specialist group to become a trader (0)

Anonymous Coward | more than 7 years ago | (#15848825)

First of all, there are a lot of different kinds of traders out there. You got market makers, buy-side, sell-side, day-traders, order entry clerks. All of these people would basically fall under the umbrella of a "trader", yet all of their jobs are very different. You say that you're interested in floor trading, so I don't know why there are so many posts about day trading - they're very different. Anyway, I was a market maker(floor trader) at the CBOE for 8 years. If you really want to do this, since you have no idea how to trade, my suggestion would be to find a specialist group to get on board with. Goldman Sachs bought Speer Leads and now has a large specialist group. There's also Susquehanna, Wolverine, Merrill, Interactive Brokers, G-Bar and many more. Basically, what I'm saying is that you need to find a specialist group that will help teach you how to trade and make markets. You can contact the exchanges to find out the largest specialist groups there. Maybe you already work for a firm that makes markets and you could transfer in house.

Most traders don't have great educations. Really smart guys with PhD's end up as quants and generally don't make good traders. I think they tend to over think things - sometimes you just have to wing it. But this is the thing, independent floor traders, the ones with the most autonomy are dying out, they just don't have enough capital to compete. What's left are these enormous specialist groups that are hiring "monkeys" to sit in the pit and watch a screen that tells them what to buy and sell. They don't think for themselves. The groups have computers that sit and crunch the numbers and aggregate all the different positions into a portfolio that they can model the risk of. That's where the guys with PhD come in. So you'll have one guy from the group selling sp500 futures and then all the rest of the traders in group might be buying individual sp500 stocks as an arb.

So it just depends what you really want to be doing. I left a little after the market topped because you could see that hard times were around the corner. Lots of things have changed since then but the generally trends of more computerization and consolidation persist. As far as equities versus options and futures, I think options are much more interesting. I think equity trading will be 100% computerized very soon. Option trading is harder to computerize just because so many people like to do spreads and it's hard to create a decent interface for that. But it will eventually happen.

In the end I don't know what to tell you. In many ways, market making on a floor is dying to be replaced by computerized trading and sophisticated computer systems that automatically aggregate and manage the risk. But you should already know that since you work in IT.

Re:Contact a specialist group to become a trader (0)

Anonymous Coward | more than 7 years ago | (#15849652)

This is the best advice out of all the replies. Traditional floor trading is a dead end career choice. Almost all the trading floors outside the US are already electronic and here they are on the way out. The two big Chicago exchanges CME & CBOT have gone mostly electronic except for the agricultural markets which are just being converted now. In NY the NYBOT is still all floor trading but the Nymex is starting to go electronic and the Comex will follow shortly. The AMEX and NYSE will also go electronic due to competitive pressures. Get a job with an investment bank or hedge fund and learn the ropes. Don't be afraid to start at the bottom since trading skills can only be learned on the job.

a few notes (1)

nrolland (993449) | more than 7 years ago | (#15853464)

I moved from software dev to options trading. I must say those fields you consider have nothing in common. For successful day trading, my guess is being a lucky monkey will do, so just go ahead and try to survive the longest possible. You should just know that some are better equipped and informed than you are. it's not just about monitoring a specific company, it's about integrating all the information and make strategic thinking about the relations of credit risk costs, interests rates level, forecasted profits, and capital market structures changes. Aka it's not information you can get by staring at your news desktop. So you have to look at where you can get a hedge, by your skills or preference, and try to leverage on those. You will always start low in this domain, getting a bette feel of what's important, but have the ability to move quick. So if you are a good statistician, the best fit is a large bank for some quantitative strategies. If you are more of a probabilist, you can do options and/or structuring. If you are more of a good organizer, go where your skills will help, for instance an exotic options desk. Most importantly, talk with many people. Everyone has a different vision of what finance is.

an unprofessional opinion on being a quant... (1)

1iar_parad0x (676662) | more than 7 years ago | (#15854147)

I'm a student in Math and Physics whose spent several years working as a Software Engineer. I thought about becoming a quant and have spent some time researching how to get a job in the field. With this said, I present to you the results of my investigation. I don't claim to be an expert. However, my opinion is free, so take it as you will.

You've got a foot in the door...
The fact that you work for a bank is good. It may help you get a leg up on getting into a graduate program. Any experience you can get on a trading floor or working as a quant will be golden on your application. The key to the best Finance programs is that they want a high employment rate among their graduates. Pedigree is good. Experience is better. If you're an IT grunt at a place like Goldman Sachs, you practically halfway there.

Math, math, and more math...
If you're going the quant route, you need some math. You need to be conversant in Probability, Mathematical Statistics, Stochastic Calculus, and Information Theory.* There's a reason they hire Physics PhDs (the Ivy League kind) to do work as a quant. Realizing that the pool of disgruntled, yet brilliant physicists is fairly small another entry track among the professional Master's programs in Mathematical Finance has emerged.

Economics and Finance is good too...
If you're going to work on Wall St. you might actually want to know a little something about the market itself. Frankly, I can't imagine how someone could become a trader without some knowledge of economics. Most of the graduate programs seems to be unconcerned with your knowledge of this going into their programs. It seems that math is the ultimate litmus test for acceptance (whether this is good or bad is another question). I guess they figure they can "teach" you the rest.

Pedigree is king...
U. of Chicago, NYU, Columbia, Stanford, CMU, among others have decent Mathematical Finance/Financial Engineering/Computational Finance degree programs. Many of these programs can be completed part-time. Also, Stanford has a certificate program in Finance that you can complete via distance learning. From what I can tell, the certificate program is essentially a couple of core courses from the graduate program.

Network, network, network
SIAM has a Financial Mathematics fair every year. Look it up on the web. Put on a nice suit, polish up your resume, and go to it. Frankly, just taking the step of showing up with some intelligent questions, you bound to get some good insight into the profession.

Any responses/corrections are quite welcome. Like I said, I'm just an amateur myself -- so YMMV.

*Information theory is probably not a hard requirement. Information theory has always fascinated me and I've always been interested in Statistical Physics, Complex Systems, and AIT anyway. On a unrelated note, I've always wondered why Physicists are looked as great quants, when it seems the work smacks of being a good applied statistician.

Depends what market (1)

Strategos (978492) | more than 7 years ago | (#15864972)

I am an engineer and I also have been researching this and playing the markets using simulations for about six months. I recommend you study the markets day to day and try to figure out WHY they are moving and which market you actually want to specialise in, usually you have to try each one to see whats a best fit for your personality and intuitive understanding. Saying that, I am interested in Forex and the best site for that seems to be Oanda purely because they don't bet against you and their spreads are extremely low for the majors, you can get instant fills and instant exits and there is no human involved in each transaction as its completely computerised. After you have figured out the rhythms of the market you choose...that takes about six months in itself... there are really only three pieces of advice you need to know to become consistently profitable. 1. Cut your losses - ALWAYS set a stop loss (this was one of my major downfalls for the first few months but all it takes is one big wipeout to understand why you need to do this, your instinct will be to hang on to losses in case they turn around- this is FATAL if not immediately then eventually.) 2. Let your winners run and set a trailing stop. (your instinct will be to cash in while you can and it takes discipline to resist the urge to take immediate profits) 3. Buy on the rumour sell before the news. (Example: The markets price things in early so by the time an event like the news of an interest rate rise comes along, its usually priced in already so that you might be thinking with three days before say the BOE might rise interest rates, people would be buying the GBP and selling the USD in anticipation of the rise. Wrong, they bought it on the first hint that interest rates might rise 10 days ago and as the event approaches they will begin to sell off the pound and buy the dollar. and the markets will get very range bound on the actual day of the announcement. anyway the point of this is get to know your market and how it reacts to news.) That said these 3 things may sound simple but the dicipline required to actually do them all the time is something that takes time to develop. Whoever said trading without money was not worthwhile is completely wrong. If you can't become profitable in a practice system, you will never make the transition to a live system because you don't have a profitable system in the first place. You also need to figure out your technique, whether you are going to follow trends or be a range trader for example. Whatever you do, make sure you understand the market you are interested in before committing cash otherwise you will get eaten alive, oh and be prepared for a LOT of frustration and anger in the first four months as the market can see to defy logical analysis. A website you might want to visit is investopedia. Hope this helps.
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