Moving from Tech to Trading? 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?"
Re:Awesome question, I have one too. (Score:4, Insightful)
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. (Score:2)
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 som
Re:Awesome question, I have one too. (Score:2)
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 y
Re:Awesome question, I have one too. (Score:2, Offtopic)
Re:Awesome question, I have one too. (Score:2, Offtopic)
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 smal
Re:Awesome question, I have one too. (Score:1)
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. (Score:2)
Re:Awesome question, I have one too. (Score:2)
Re:Awesome question, I have one too. (Score:2, Interesting)
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 ca
Re:Awesome question, I have one too. (Score:5, Funny)
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!!! (Score:5, Informative)
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:
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!!! (Score:4, Interesting)
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!!! (Score:2)
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
Re:No no no no no!!! (Score:2)
Re:No no no no no!!! (Score:2)
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!!! (Score:1)
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) sho
Re:No no no no no!!! (Score:2)
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!!! (Score:2)
I'd quibble with your "buy the dow" advice a bit, though. Goo
Re:No no no no no!!! (Score:2)
Re:No no no no no!!! (Score:2)
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 involve
Re:Awesome question, I have one too. (Score:3, Informative)
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
Re:Awesome question, I have one too. (Score:2)
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 aut
Re:Awesome question, I have one too. (Score:2)
Re:Awesome question, I have one too. (Score:5, Interesting)
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. (Score:1)
what I know (Score:5, Insightful)
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 (Score:5, Insightful)
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 (Score:2)
Daniel
Re:what I know (Score:2)
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 th
This is great (Score:1, Funny)
Wait, what was the question?
Re:This is great (Score:2)
"Hey Slashdot, should I make a major career change or not?"
Out of the wood work come the arm chair traders (Score:5, Insightful)
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? (Score:2)
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 t
Re:Why lose 2k? (Score:1)
Re:Why lose 2k? (Score:2)
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 (Score:2)
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 int
Find a forum that actually has some Traders in it (Score:3, Insightful)
why are you asking us, talk to the traders (Score:2, Informative)
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!? (Score:2)
All well and good, but... (Score:2, Informative)
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 ver
Re:Off-topic! Mod story down. (Score:1)
An intermediate step first. (Score:3, Insightful)
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. (Score:1)
Re:An intermediate step first. (Score:3, Interesting)
Let me help. (Score:1, Funny)
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
Learnin
Quant/Algorithmic (Score:4, Interesting)
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: (Score:3)
Why ask Slashdot? (Score:2)
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 deci
Stocks and bonds... (Score:4, Informative)
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: (Score:1)
More accurately... (Score:2)
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
Re:More accurately... (Score:2)
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 marke
Re:Stocks and bonds... (Score:2)
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 th
Re:Stocks and bonds... (Score:2)
Re:Stocks and bonds... (Score:2)
I'm just a believer in knowing the rules before you break them. Since I was just w
zerg (Score:2)
There are plenty of schools that offer financial engineering certs, find one and go through it.
What the hell were you thinking?
Trading... (Score:5, Interesting)
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... (Score:2)
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 tradi
Re:paper Trading... (Score:3, Insightful)
Re:paper Trading... (Score:2)
I never argued with the emotional side of it. I totally understand that.
Re:Trading... (Score:2)
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
Interesting career consideration, but (Score:1)
fancy FX markets (Score:1)
Investor (Score:2, Insightful)
That said, I'll recommend the following books:
The Intelligent Investory, Ben Graham.
The Essays of Warren Buffett, Cunningha
Think about this... (Score:1)
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 (Score:1)
Option trad
Dont ask Slashdot (Score:2)
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
Re:Dont ask Slashdot (Score:1)
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. (Score:2, Informative)
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 introdu
Re:Follow that dream of yours. (Score:1)
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 act
Options and Futures is a Suckers Game (Score:1)
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 th
List of books (Score:1)
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
a few notes (Score:1)
an unprofessional opinion on being a quant... (Score:1)
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 g
Depends what market (Score:1)