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: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 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.
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: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: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.
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:An intermediate step first. (Score:3, Interesting)
Here are a few books that are excellent sources for the theoretical side of finance:
Having a look at these books in the library will also give you a feel for the math level involved in derivatives.