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Moving from Tech to Trading? 87

Posted by Cliff
from the coding-to-day-trading dept.
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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Moving from Tech to Trading?

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  • what I know (Score:5, Insightful)

    by acvh (120205) <`moc.sragicsm' `ta' `keeg'> on Thursday August 03, 2006 @09:55PM (#15844268) Homepage
    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 (Score:5, Insightful)

      by dubl-u (51156) * <[ot.atop] [ta] [2107893252]> on Friday August 04, 2006 @12:59AM (#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.

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

    Wait, what was the question?
    • 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?"
  • by Average_Joe_Sixpack (534373) on Thursday August 03, 2006 @10:10PM (#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.
    • 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 t
      • 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.
      • 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.
    • 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 int
  • by drgould (24404) on Thursday August 03, 2006 @10:15PM (#15844345)
    Elite Trader [elitetrader.com], for example.
  • by Anonymous Coward
    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.
  • 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 ver
  • by richg74 (650636) on Thursday August 03, 2006 @10:39PM (#15844426) Homepage
    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.)

    • 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 h
      • 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 cheerf
  • by Jester998 (156179)
    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
    Learnin
  • Quant/Algorithmic (Score:4, Interesting)

    by inverselimit (900794) on Thursday August 03, 2006 @10:47PM (#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.
    • 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
  • 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 deci
  • Stocks and bonds... (Score:4, Informative)

    by MetricT (128876) on Thursday August 03, 2006 @11:08PM (#15844515) Homepage
    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.
    • 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
    • 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
      • 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 marke
    • "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 th
      • 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 man
        • 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 w
  • 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... (Score:5, Interesting)

    by William_Lee (834197) on Friday August 04, 2006 @12:58AM (#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.

    • 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 tradi
      • by garyrich (30652)
        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 somet
        • 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.
    • 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
  • 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]
  • by Anonymous Coward
    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.
  • Investor (Score:2, Insightful)

    by mnemonic_ (164550)
    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, Cunningha
  • 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!

  • 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 trad
  • 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
    • 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*

  • 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 introdu
    • 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 act
  • 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 th
  • 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
  • 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
  • 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 g
  • 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

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