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?"

Comments

No no no no no!!!

[spagetti_code]

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) 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.

Stocks and bonds...

[MetricT]

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.