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

Quant/Algorithmic

[inverselimit]

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.

Re:Awesome question, I have one too.

[Sparohok]

I trade for a living, though technically speaking I don't day trade.

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...

[William_Lee]

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.