Individual Trading or Wealth management?
Hi all,
This question is something that I have been pondering about for a long time. I am a college student that is studying Finance and I have friends with non finance backgrounds that trade equities on their own as individuals. That was my initial goal, to learn a strategy and in the long run be able to trade on my own because they have a lot of flexibility in their day to day life, we all started with the dream of "financial freedom" but since I am in college (we started in high school) my family has told me that I would be good for a career in Asset management or Wealth management and they are discouraging me from trying to learn trading and to just focus on school.
My concern is that I wouldn't have the ability to trade because of restrictions and that I wouldn't be able to go from wealth management to trading on my own as that is what I want to be able to do. My friends make a lot more than what I would be making in my first few years in wealth management but that is based on their capital.
Of course, if by the time I graduate I don't make anywhere near what the bank is offering me, I would take the job and see how I can transition later on. But in terms of transitioning, has anyone here gone from wealth management to investing or trading on their own? Assuming I accept the job, at what point would we learn strategies? Or is this something that we have to figure out ourselves?
Your parents are trying to do what they're supposed to and keep you safe, but most parents are dream killers. Day trading generates a lot of emotion from almost everyone that hears about it. Many people will tell you that you're crazy, you can't beat the markets, and you're going to lose everything. In most cases, they're right, but individual day traders are beating the markets. How many years have your friends been profitable? If your friends have been consistent for a few years, truly have an edge, and control their emotions, then you can learn from them and reduce your learning curve if you listen to what they say. You're also young, so you can take the risk.
The key things to remember are:
1. Not all profitable strategies work for all people. Just because your friends have an edge that works for them doesn't mean their edge will work for your personality.
2. You will lose money before you make money. Don't listen to these people that say they started trading three months ago, and now they're making six figures or whatever. If they're not completely lying, they got lucky, and the market hasn't humbled them yet. Never listen to anyone that hasn't taken an L and been humbled.
3. Don't trade with money that you can't afford to lose. You should be ok with losing any money that you've determined to be your risk if the trade goes against you. If you need a trade to work to make your rent, then you're setting yourself up for failure.
4. Expect to take a year or more to become consistent.
5. Treat your trading as a business. In a sense, you're an entrepreneur. Track your trades, and refine your strategy that works for your personality. You're like a startup, so keep your overhead and expenses low. That means don't buy extra services you don't need like chatrooms, super trading computers with 50 monitors, expensive scanners with a million features you don't need, a trading platform (a free one like thinkorswim is all you need when you're starting), and try to minimize commissions. The point is to keep your expenses low while you're trying to learn how to be profitable. You don't want to be losing money because you're paying for stuff you don't need yet. You don't even know who you are as a trader so fancy equipment isn't going to boost your performance yet.
6. Treat yourself like an athlete. Trading is a performance activity. It's hard to be disciplined while trading when you're not disciplined in other aspects of your life. Go to sleep early, work out (fit body, clear mind), eat healthy, have a morning routine, record your trades, and watch them over like a professional athlete watches tape, study, and learn.
7. Don't listen to people that aren't successful traders. They're not going to understand your struggle and respect what you're doing until you can support yourself from your trading. A lot of people are going to think you're gambling, and then they're going to think you're some sort of genius once you're successful. Try not to talk about it too much with anyone that doesn't trade.
8. Not every profitable strategy works in every market. You can find a profitable strategy that works for your personality, but the market conditions aren't favorable for your strategy. It doesn't mean you have a bad strategy. It just means you have to either stop trading until the market changes in your favor again or adapt to the new market conditions. A lot of people that thought their shit didn't stink because they were "pros" in a bull market are getting crushed. Anyone can buy high and sell high in a historic bull market. Not everyone can trade in a bear market.
9. It takes time to learn what works for you and what works, period. Be patient and survive.
10. A lot of traders fail because they're undercapitalized, but it's also dangerous to start with too much money. $10,000 that you can afford to lose is a sweet spot. That's enough to lose and survive, but it's not so much where you'll start over trading because you're over the PDT. If you can't turn $10,000 into $25,000, you shouldn't trade with $25,000. That's just my personal opinion.
11. Learn trading psychology, but more than that, learn your psychology. Trading is hard because you have to understand yourself. A lot of smart people lose in the market because they're not used to being wrong, and they're not ok with being wrong. For example, if you have mommy and daddy issues and somewhere inside of you you can't allow yourself to be wrong because you need to prove to your parents that you're not a failure, trading will expose that. That's just an example. You have to be comfortable losing, and a lot of people can't handle being wrong. The market doesn't care about your feelings. You can't care about anything but making a good trade.
You have to be able to handle your parents trying to talk you out of trading while they watch you struggle. They're going to judge you, and you can't be sitting there trying to hold onto a losing trade because you can't face your parent's judgment.
12. Don't follow anyone's trades.
13. After all that, trading just might not be for you. However, you won't know unless you try. The best time to learn is when you're young and you don't have responsibilities like a family to support. If you try to trade then you're going to find out a lot about yourself. At the end of the day trading is a solo endeavor. Only you can hold yourself accountable for your mistakes.
Thank you!
Yes I know a few people that went from big asset management firms to day trading. Not many, and they make lots of money. But they knew exactly what they were doing, and why it was going to work. I also know many people who went directly into day trading, and they basically all blew up. But I've heard stories of success through the grapevine. To me it doesn't seem like a great lifestyle, and I feel like there are easier ways to make money. On the other hand, some people really like that kind of action, and have fun doing it.
Another point to consider is that the market is changing a lot as algorithms become more sophisticated. So while you may have a strategy that works great for a few years, what do you do when it stops working? Not a ton of great exit opportunities there. You might do better to join a prop shop and do your day trading there so at least you have something to put on your resume, and maybe some mentorship. Plus they can give you some business cards to show your parents.
The comments on this post are awful. DO NOT DAYTRADE. Daytrading is a myth created by brokers to get fools like you to tighten their spreads and collect more fees. Even if it did work, it is unlikely you will have enough capital to actually make a vocation out of it. The greatest investors in the world are lucky if they get 20% returns a year. And by lucky, I mean that is considered extremely rare. Anyone who gets near that return in a hedge fund is likely a billionaire. That means, assuming you have $100,000 in capital (you probably don’t), then you would receive just $20,000 dollars a year. That’s less than a McDonalds worker and that’s before tax and assuming that you get a 20% return (which would be unheard of).
Threads like this increase my confidence that market inefficiency will always exist
DELETE
You can do it if you're well capitalized but think about the long run...
Can you sit alone for 10 years straight and be prepared mentally to make decisions every day.
50% returns are great with smaller amounts of capital under 10mil ... What do you do when you don't make a dime in 6 months?
Get the professional experience first and keep a watchlist running a few thousand bucks to hold positions for a few days to weeks. That keeps you focused and able to track your ideas better.
The above comment "greatest investors in the world are lucky if they get 20% returns a year" ... This applies to "Investors", not active traders. Hedge funds are running 500m+ AUM and that's where things get tricky and it's not as easy to be so active and quick.
You have no idea what you’re talking about
What bothers you?
I know a few day traders who have been at it for many yrs and do pretty well. Most people don't have their discipline. Don't confuse trading with investing as they are quite different. You're not looking at fundamentals and time horizons in trading. You're looking for momentum and spreads to execute profitable trades. Far more like gambling than trading. That said, I know some professional gamblers who do quite well. They're also quite disciplined and have completely taken emotion out of the equation. Have their plan on making 1k per day or whatever and implement it. They play 5 days a week, treat it like a job, and go home afterwards. Strange lifestyle compared to us but they prefer that to a real job.
In either case, you need to really know what you're doing. The algo stuff concerns me as I can see scenarios where they blow up your trade but you know that going in.
Day trading is how I lost $140k in less than an hour
I cannot believe people on WSO, on an AM forum, who are more likely to be educated (in finance), are actually encouraging day trading.
Even if you don't believe it is incredibly difficult to day trade and that markets are mostly efficient, please DO NOT pass up a career in finance just because it will affect your day trading. Please, at least just work professionally a couple years and save up a bit before you do decide to day trade FT or whatever. The skills you gain will still help you, and obviously the savings is a no-brainer.
Just take up the job, and educate yourself more abt trading in your free time while maybe building and backtesting a strategy. That way you might be more prepared if you rlly want to day trade FT.
There's also ntg stopping you from hard recruiting for S&T, prop trading or HF. Since you're so passionate abt trading, why not just make it your career
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