Moving from Tech to Trading?

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.

[thealsir]

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.

what I know

[acvh]

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.

Out of the wood work come the arm chair traders

[Average_Joe_Sixpack]

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.

Find a forum that actually has some Traders in it

[drgould]

Elite Trader [elitetrader.com], for example.

An intermediate step first.

[richg74]

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:what I know

[dubl-u]

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.

Investor

[mnemonic_]

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.

Re:paper Trading...

[garyrich]

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.