Got a good reason...for taking the easy way out...he was a Day Trader...
October 8, 2013 1:35 PM Subscribe
How many of my hiveites currently work as a Day Trader? What is your day like and if you were doing it all over again, would you still trade?
How about schools like Online Trading Academy? Any thoughts?
I am considering a career change and have a connection to a trading school...anyone have personal experience with this?
I am considering a career change and have a connection to a trading school...anyone have personal experience with this?
What sort of capital do you have to start out with? If you're considering going into debt to do this you should reconsider. Unless you have a run of spectacular luck (and it will be luck) you will need a large starting sum to leverage in order to make rent.
As Dansaman above points out, the only people making bank on this goldrush are the people selling picks and shovels.
posted by fingerbang at 2:14 PM on October 8, 2013 [1 favorite]
As Dansaman above points out, the only people making bank on this goldrush are the people selling picks and shovels.
posted by fingerbang at 2:14 PM on October 8, 2013 [1 favorite]
Oh god please please please don't do this unless you are doing it just as a lark and are looking for an expensive hobby.
I work for a trading firm. We have those PhD quants that Dansaman mentioned. We have a tremendous amount of infrastructure insuring constant market connectivity and high speeds. The job of more than half of our staff is to enable the traders to trade. We are doing really well right now, but that has come after two hard-fought years. And it's still not a sure bet.
There is just no room for day traders anymore. I...am personally unfamiliar with "trading schools" but the concept is pretty laughable. This is not a viable career path. Don't quit your day job. Be careful.
posted by phunniemee at 2:15 PM on October 8, 2013 [6 favorites]
I work for a trading firm. We have those PhD quants that Dansaman mentioned. We have a tremendous amount of infrastructure insuring constant market connectivity and high speeds. The job of more than half of our staff is to enable the traders to trade. We are doing really well right now, but that has come after two hard-fought years. And it's still not a sure bet.
There is just no room for day traders anymore. I...am personally unfamiliar with "trading schools" but the concept is pretty laughable. This is not a viable career path. Don't quit your day job. Be careful.
posted by phunniemee at 2:15 PM on October 8, 2013 [6 favorites]
I would also like to say that anyone who has left the trading world in order to start a trading school was probably not very good at trading to begin with.
It's one of the unspoken rules when hiring new traders: if you're as much of a trading badass as you say you are, you would just go start your own firm.
posted by phunniemee at 2:18 PM on October 8, 2013
It's one of the unspoken rules when hiring new traders: if you're as much of a trading badass as you say you are, you would just go start your own firm.
posted by phunniemee at 2:18 PM on October 8, 2013
I do. I have been trading since 1984 except for two brief stints in the corporate world. I have traded on the floors of exchanges in NY and Chicago. I have traded from upstairs for years. For me, there isn't a better job in the world. But it is not for everyone. My first piece of advice is if you are doing it strictly for the money, don't. Money is obviously a big part of it, but it is important to consider the other aspects first. I got into it because of the black and white of it, meaning you know virtually right away if you are right or wrong, because of the fact that I am the sole person responsible for my living. No clients, no bosses, no co-workers, no nothing but me, my capital and the machine. You have to have a big enough ego to believe in yourself yet a big enough ego to admit when you are wrong. If you do not have strong financial discipline and the ability to put your emotions aside while making analytical decisions, you are not for this business.
I have also trained over 50 traders. I would put up the money and train them and we would split the profits. I took all the losses, so my incentive was to really work with the person to become successful. Or tried to train would be a better way to put it. Some wouldn't listen, some weren't capable of being disciplined and some did great. I did not teach a specific method, but rather I taught the underlying fundamental concepts needed to be successful no matter what you trade. I have traded equities, derivatives, commodities and precious metals. Ultimately, at its most basic, you need the same skills for any thing you trade. I argue they are the same skills for pretty much anything in your life other than the emotional things like love.
If you are trading with money that is blood money or the rent or critical to your living, you will lose it. Or, you won't make because you will trade too defensive and too scared.
I do know Velez and the Online Trading Academy.
I disagree that teaching trading means you don't know how to be a successful trader. The analogy I use is a sports coach. Many can teach yet cannot play for their life. I had an options teacher in grad school who knew how to derive the black scholes formula by hand, but when we went to the floor for a mock trading session, he could not trade his way out of a paper bag.
Memail me if you want more information.
posted by JohnnyGunn at 2:21 PM on October 8, 2013 [11 favorites]
I have also trained over 50 traders. I would put up the money and train them and we would split the profits. I took all the losses, so my incentive was to really work with the person to become successful. Or tried to train would be a better way to put it. Some wouldn't listen, some weren't capable of being disciplined and some did great. I did not teach a specific method, but rather I taught the underlying fundamental concepts needed to be successful no matter what you trade. I have traded equities, derivatives, commodities and precious metals. Ultimately, at its most basic, you need the same skills for any thing you trade. I argue they are the same skills for pretty much anything in your life other than the emotional things like love.
If you are trading with money that is blood money or the rent or critical to your living, you will lose it. Or, you won't make because you will trade too defensive and too scared.
I do know Velez and the Online Trading Academy.
I disagree that teaching trading means you don't know how to be a successful trader. The analogy I use is a sports coach. Many can teach yet cannot play for their life. I had an options teacher in grad school who knew how to derive the black scholes formula by hand, but when we went to the floor for a mock trading session, he could not trade his way out of a paper bag.
Memail me if you want more information.
posted by JohnnyGunn at 2:21 PM on October 8, 2013 [11 favorites]
I do agree with phunniemee in that if your strategy is based on speed and costs of execution, you will be a loser to the algo firms all day long. You strategy or your edge has to be defined differently than it used to be. Do not ever trade until you can define your edge. It is like the old saying that if you cannot spot the mark at a poker game, you are the mark.
posted by JohnnyGunn at 2:32 PM on October 8, 2013 [1 favorite]
posted by JohnnyGunn at 2:32 PM on October 8, 2013 [1 favorite]
The most common way to make a small fortune day trading is to start with a large fortune. I agree with JohnnyGunn that you should only do this if you know what your edge will be and are confident that it in fact exists.
posted by Aizkolari at 3:00 PM on October 8, 2013
posted by Aizkolari at 3:00 PM on October 8, 2013
Before you risk any money, I would suggest that you get some live data feeds so you can watch S&P futures, VIX futures, gold, 10-year yields, major currencies in real time. Then just sit there and watch them tick. All day. For weeks, months even, maybe a year before you make a single trade. Watch the relationships. Watch the big news stories coming out and look at the effect on the market. Both the knee jerk reaction, and the trend over a few hours, a few days. Be aware of the "events" the market is waiting for and have a thesis for how they will play out. Keep a journal of what levels you would have bought or sold, and what factors led to that decision.
I'm skeptical of paper trading bc there are no consequences. I think risking a small amount of capital is much more instructive.
I disagree that there is no room for day traders. In fact, I would argue there are some niches of the markets where retail players have an advantage over institutional money. You are obviously not going to beat the HFT's at their own game but the thing is, not everybody is an HFT. They are actually fairly minor players in the grand scale of things. Being aware of how "the crowd" is positioned, what people are thinking, how people are feeling, is incredibly important.
However, I agree that most retail traders will fail because they simply aren't jacked in to the system like the big boys. They don't have the streaming news, live market data, research pieces and commentary flowing in. Most people on the Street have tons of chats running with other people, and the big stories get around very fast. They hear other peoples' ideas, get an idea of how people are positioned. As a retail guy you're basically just sitting there alone like the guy in the Fidelity commercial, trading on a wing and a prayer.
I honestly think of trading as a sort of blue-collar profession in the sense that you can't really go to school for it. You need an apprenticeship where you watch senior traders and they yell at you and make you get hamburgers, and you have lots and lots of time to learn and watch the markets and gradually take risk. That is how most traders learned their craft. Yes there are PhD quants with blackboxes but you aren't really competing with them.
But definitely don't quit your day job. Just do the math, you need a ton of capital just to make a living, assuming you constantly make money (which you will probably not), and if you're living off the gains then you can't grow your capital meaning you are stuck running like a hamster in a wheel. Don't forget you need to pay taxes too. I mean speaking for myself I have a decent job in the financial industry, a decent chunk of capital, and I trade p.a. and I still doubt that I could make it without the income from my day job. Keep the dream alive, but beware of the risks. Good luck.
posted by pravit at 3:49 PM on October 8, 2013 [2 favorites]
I'm skeptical of paper trading bc there are no consequences. I think risking a small amount of capital is much more instructive.
I disagree that there is no room for day traders. In fact, I would argue there are some niches of the markets where retail players have an advantage over institutional money. You are obviously not going to beat the HFT's at their own game but the thing is, not everybody is an HFT. They are actually fairly minor players in the grand scale of things. Being aware of how "the crowd" is positioned, what people are thinking, how people are feeling, is incredibly important.
However, I agree that most retail traders will fail because they simply aren't jacked in to the system like the big boys. They don't have the streaming news, live market data, research pieces and commentary flowing in. Most people on the Street have tons of chats running with other people, and the big stories get around very fast. They hear other peoples' ideas, get an idea of how people are positioned. As a retail guy you're basically just sitting there alone like the guy in the Fidelity commercial, trading on a wing and a prayer.
I honestly think of trading as a sort of blue-collar profession in the sense that you can't really go to school for it. You need an apprenticeship where you watch senior traders and they yell at you and make you get hamburgers, and you have lots and lots of time to learn and watch the markets and gradually take risk. That is how most traders learned their craft. Yes there are PhD quants with blackboxes but you aren't really competing with them.
But definitely don't quit your day job. Just do the math, you need a ton of capital just to make a living, assuming you constantly make money (which you will probably not), and if you're living off the gains then you can't grow your capital meaning you are stuck running like a hamster in a wheel. Don't forget you need to pay taxes too. I mean speaking for myself I have a decent job in the financial industry, a decent chunk of capital, and I trade p.a. and I still doubt that I could make it without the income from my day job. Keep the dream alive, but beware of the risks. Good luck.
posted by pravit at 3:49 PM on October 8, 2013 [2 favorites]
My brother in law is a day trader and my sister hates it. It's been really stressful for the family. He sold his share in a business (he's a smart man) for eight million and has whittled that money away ever since. The GFC hit him hard, and last time we were over he was unable to come to dinner as he was sweating over a possible margin call.
posted by mattoxic at 4:17 PM on October 8, 2013 [1 favorite]
posted by mattoxic at 4:17 PM on October 8, 2013 [1 favorite]
Also. I was just thinking about this. I have no idea why retail traders tend to gravitate towards stock picking or even worse, trading obscure single names, but in general, single stocks are a total crapshoot. I honestly have no idea how mom + pop retail traders have the cojones to take huge risk buying and holding random stocks. Your best bet is sticking to big macro things like SPY, IWM, TLT, GLD, etc.
posted by pravit at 4:45 PM on October 8, 2013
posted by pravit at 4:45 PM on October 8, 2013
I think the a critical component of day trading is defining your time criteria. As pravit mentions, buying and holding random stocks can be a crap shoot. On the other hand, I have traded many a stock I had no idea what the name of the company was beyond the ticker symbol, but I planned to be in it for minutes, not days or even hours.
Pravit hits it on the head about it being a blue collar job. At least you need a blue collar perspective. It is a job. Every day you have to figure out how to make money. It is a grind day in and day out. It takes a skill set that is hard to define. I have seen guys with a no more than a high school education make millions and guys with masters degrees fail miserably. Street smarts over book smarts.
He also makes good points about watching for a while. Trading is about recognizing patterns, watching the screen and saying to yourself, "Hey, I have seen this movie before, I know how it ends," and then taking decisive action.
It also requires all day focus. I won't answer my door or even talk to anyone other than another trader during the hours I am trading. When my kids were younger, they knew that until they heard the bell at 4:00, daddy was working and could not be disturbed. You need support from your significant other and family to make a go at it.
I add another thing. From a personality perspective, you need to be an introspective person. You need to be able to objectively sit down at night and go over your trades and figure out what you did right and wrong. I don't mean look at the P&L either. I would say my best trade ever was a loss, but the decision to get out was spot on and if I had stayed in it, I likely would have been out of business. That leads into another thought. Money management. The key to being a successful trader is being in business so you are a trader. The only way to win is to be able to play. Make sure your risk is commensurate with your capital. Always, ALWAYS, when deciding whether to get into a trade or not define your risk and your exit door first, then figure out your reward potential. Simplifying a little more look at the amount of risk and reward versus the probability of each and have a positive expected value before you get in.
I sum up by saying it is a great business for some people. It is not right for everyone. It takes a lot of hard work and discipline. You need to be able to put your emotions aside. You need to be comfortable relying on your wits for a living. You need to treat it like a business. And, like any business, there are start up costs. You will likely lose before you become consistently profitable.
posted by JohnnyGunn at 5:09 PM on October 8, 2013 [4 favorites]
Pravit hits it on the head about it being a blue collar job. At least you need a blue collar perspective. It is a job. Every day you have to figure out how to make money. It is a grind day in and day out. It takes a skill set that is hard to define. I have seen guys with a no more than a high school education make millions and guys with masters degrees fail miserably. Street smarts over book smarts.
He also makes good points about watching for a while. Trading is about recognizing patterns, watching the screen and saying to yourself, "Hey, I have seen this movie before, I know how it ends," and then taking decisive action.
It also requires all day focus. I won't answer my door or even talk to anyone other than another trader during the hours I am trading. When my kids were younger, they knew that until they heard the bell at 4:00, daddy was working and could not be disturbed. You need support from your significant other and family to make a go at it.
I add another thing. From a personality perspective, you need to be an introspective person. You need to be able to objectively sit down at night and go over your trades and figure out what you did right and wrong. I don't mean look at the P&L either. I would say my best trade ever was a loss, but the decision to get out was spot on and if I had stayed in it, I likely would have been out of business. That leads into another thought. Money management. The key to being a successful trader is being in business so you are a trader. The only way to win is to be able to play. Make sure your risk is commensurate with your capital. Always, ALWAYS, when deciding whether to get into a trade or not define your risk and your exit door first, then figure out your reward potential. Simplifying a little more look at the amount of risk and reward versus the probability of each and have a positive expected value before you get in.
I sum up by saying it is a great business for some people. It is not right for everyone. It takes a lot of hard work and discipline. You need to be able to put your emotions aside. You need to be comfortable relying on your wits for a living. You need to treat it like a business. And, like any business, there are start up costs. You will likely lose before you become consistently profitable.
posted by JohnnyGunn at 5:09 PM on October 8, 2013 [4 favorites]
Totally anecdotal but it's all I have. A friend of mine, a co-worker, we programmed mainframe puters all day, he fell in love with the idea of being a day trader. I know this guy well, he's disciplined, determined, pretty smart, too, he's not razor sharp in people skills but he knows money pretty well, or so it seems from my seat in the house.
So: As noted above, he studied this stuff day in day out, week in week out, month after month, blah blah blah. He read everything he could get his hands on, studied it all, really. He traded all the time, dry runs, like as if he was playing poker for chips, did that to see his abilities and his weaknesses. He was great at it! This thing was bullet-proof! He's ready to rock and roll. He saved up enough cash, a good chunk of change, to steo into it. And he stepped into it.
He got fucking crucified.
It was like he got into a knife fight but the other guy has a straight razor and all he had was the cardboard tube from a roll of toilet paper.
It was not pretty.
I don't know what the deal was -- he was not, as you might imagine, he was not real talkative about it, though going in he was pretty much thinking (and talking up) that he was a cataclysmic force of nature to be set loose upon the face of the earth. My take on it: Not everyone can play for money. When the money drops, the bullshit stops.
posted by dancestoblue at 5:53 PM on October 8, 2013
So: As noted above, he studied this stuff day in day out, week in week out, month after month, blah blah blah. He read everything he could get his hands on, studied it all, really. He traded all the time, dry runs, like as if he was playing poker for chips, did that to see his abilities and his weaknesses. He was great at it! This thing was bullet-proof! He's ready to rock and roll. He saved up enough cash, a good chunk of change, to steo into it. And he stepped into it.
He got fucking crucified.
It was like he got into a knife fight but the other guy has a straight razor and all he had was the cardboard tube from a roll of toilet paper.
It was not pretty.
I don't know what the deal was -- he was not, as you might imagine, he was not real talkative about it, though going in he was pretty much thinking (and talking up) that he was a cataclysmic force of nature to be set loose upon the face of the earth. My take on it: Not everyone can play for money. When the money drops, the bullshit stops.
posted by dancestoblue at 5:53 PM on October 8, 2013
dancestoblue: My take on it: Not everyone can play for money. When the money drops, the bullshit stops.
What do you kids say nowadays? Word.
pravit mentioned it as well, you can simulate trade all you want, but until there is real money, even if it is small, you will not know how you will react and trade under pressure. I know folks who trade their own money real well but cannot trade someone else's money and I know people just the opposite. It is a comfort level. Some are more responsible knowing it is someone else's and some are much more conservative with their own money.
A lot of people think about getting 100% of their own money when it could be a better deal to get 50% of the profits using someone else's money. It depends on your personality type and on the actual deal. I would rather get 50% of my profits using someone else's $1,000,000 in capital than 100% using my own $400,000. It is all about leverage and liquidity. Can you increase your size to overcome the split?
There are firms out there, reputable ones, that will give you leverage on your capital in exchange for a small piece of the profits. The downside is in the leverage. Trade larger, lose more more quickly.
Someone mentioned it up thread, but it is worth repeating. Find a mentor or someone who can analyze your trading on a regular basis. In the beginning it is like an apprenticeship. When I was trading on the floor, I had a clerk. He did all the crappy dirty work, but stood with me most of the day, day in and day out, asking questions and listening to me babble about trading. Sure, he had to get lunch and we even put him on a plane to get lunch for us in Philadelphia (we had never tried a Pat's or Jim's cheesesteak living in Chicago) round-trip that day, but it was worth it to him. Look at the difference between what they pay you (small amount) versus your living expenses as tuition. You are going to either pay that tuition to the other side of the trade or use it to your advantage and pay it getting value.
It is how I first learned. I was a specialist clerk on the Amex. Pay your dues as cheaply as possible.
posted by JohnnyGunn at 6:35 PM on October 8, 2013
What do you kids say nowadays? Word.
pravit mentioned it as well, you can simulate trade all you want, but until there is real money, even if it is small, you will not know how you will react and trade under pressure. I know folks who trade their own money real well but cannot trade someone else's money and I know people just the opposite. It is a comfort level. Some are more responsible knowing it is someone else's and some are much more conservative with their own money.
A lot of people think about getting 100% of their own money when it could be a better deal to get 50% of the profits using someone else's money. It depends on your personality type and on the actual deal. I would rather get 50% of my profits using someone else's $1,000,000 in capital than 100% using my own $400,000. It is all about leverage and liquidity. Can you increase your size to overcome the split?
There are firms out there, reputable ones, that will give you leverage on your capital in exchange for a small piece of the profits. The downside is in the leverage. Trade larger, lose more more quickly.
Someone mentioned it up thread, but it is worth repeating. Find a mentor or someone who can analyze your trading on a regular basis. In the beginning it is like an apprenticeship. When I was trading on the floor, I had a clerk. He did all the crappy dirty work, but stood with me most of the day, day in and day out, asking questions and listening to me babble about trading. Sure, he had to get lunch and we even put him on a plane to get lunch for us in Philadelphia (we had never tried a Pat's or Jim's cheesesteak living in Chicago) round-trip that day, but it was worth it to him. Look at the difference between what they pay you (small amount) versus your living expenses as tuition. You are going to either pay that tuition to the other side of the trade or use it to your advantage and pay it getting value.
It is how I first learned. I was a specialist clerk on the Amex. Pay your dues as cheaply as possible.
posted by JohnnyGunn at 6:35 PM on October 8, 2013
Response by poster: Thanks for all the responses...it truly has given me pause to jump into this. Time for some retrospect.
posted by keep it tight at 7:48 PM on October 8, 2013
posted by keep it tight at 7:48 PM on October 8, 2013
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I just want to make sure you realize that day trading is much about people selling services to people with dreams and making money on those services. It's not about it actually being a good career choice for most people because it's incredibly risky, you can totally lose your shirt, and the chance of "success" (by any measure) is incredibly low.
posted by Dansaman at 1:52 PM on October 8, 2013 [2 favorites]