Thinking of Quitting IB for Day Trading...
Long story short, I am a current AN2 at a notable MM shop and Covid has constantly made me think of entrepreneurial ideas given I feel like I'm rotting in my apartment every day on the desk. I've had big ideas, ranging from start-ups to a YT channel but ultimately, no execution given lack of big-picture practicality and literally no free time to really think.
That's when I thought of day trading -- I've had success in the past turning small accounts (~$5K > $20K in a month, ~80% profitable trades on record) and in my current state, I have roughly low six-figures I could attribute to similar investing methods while obviously taking stringent measures to limit my capital risk. I'd like to test my skills and see if I could make something out of this (i.e., quit my job and go straight into full-time day/prop trading) but given FINRA regulations, I can't day trade while on the desk.
Assuming I'd allocate say ~10% of capital MAX in day/swing positions and allocate all my time to diligence and strategic executions going forward...
(1) How practical is this opportunity in the long-term versus the opportunity cost of leaving my job?
(2) Is there a workaround where I can test my live trading while not interfering with FINRA regulations?
(3) Any other ideas around this? I'd ultimately love to transition...
You know there is a bubble when a banker thinks he can become a star trader
Nah it's not like that, I have no bias towards the current bullish market but with the capital I'm coming in with (think ~$200K), if I can even just make ~$500-600 each trading day (~roughly 3% alpha on a 10% max position size), that matches my current income as an analyst. And with my past records, I'm able to do that and more -- I'm thinking conservatively here for success over longevity
And your track record of one month makes you confident? I've had better returns with a month of betting on UFC fights. Make sure you're legitimately good before you walk away from a highly desirably job into a dogshit job market
To answer #2 first, yes: there are a number of website (can’t think of any specific atm, on mobile) that will allow you to paper trade strategies with no actual money. Of course, keep in mind that this will not be exactly identical to real trading.
I don’t mean to sound rude but quitting an IB job to day trade in a low six figures account is retarded. In fact, I think any full time day trading unless you have an 8 figure net worth and you’re only trading up to 7 figures is a terrible idea. Also, your history of “successful” trades, during the past several years of history’s longest bull market and a miraculous COVID recovery, are meaningless as an indication of the future.
The main problem with this is that you are forgoing a stable income to gamble your money. When you have a job, you can lose your entire investment portfolio (which would nonetheless be devastating), but as long as you have a job you can put food on the table. Similarly, if you lose your job, you can rely on your portfolio as you find a new one. But When your job is your investment portfolio (outside a professional context), if you lose it, you’re out on the street and can’t pay for dinner or rent.
Also, the numbers simply don’t work out. What’s low six figures? Let’s say 200k. First, if you want to survive, you should begin by taking out a years worth of living expenses. What is that? If we are being very modest, low COL, small apartment, not much going out or big purchases, that’s maybe 20k. So you don’t have 200k, you have $180k. Now over the next year, let’s say you are able to do average. Congrats, you matched the market, which is better than a lot of people who actively trade their own money. Actually let’s say you beat the market, which is not a common and sustainable occurrence, especially with all your short term capital gains. So let’s say you gain 15% after tax. Then you have 207k. Next year, so you don’t risk homelessness, put aside another 20k. Now you have 187k. Notice a problem? You are barely compounding your wealth, which is what you can easily do when you are setting aside the money for later use while you have a job. And what if COVID 2.0 hits and your portfolio tanks 50% and you panic (don’t pretend this is 100% preventable) and you are unable to capitalize. Then you only have ~100k. Do average the following year, maybe make a pity profit of 15k.
My point is that in 99% of times the numbers do not work out. Do not be fooled by r/wsb seeing people knock it out of the park on one investment, cause while that happens, it will be 99.9% luck— and you’re betting your entire living on it.
The way you're thinking about returns though is for traditional longer-hold strategies. I'm looking to generate single digit % returns on a daily basis. As noted, the success rate is roughly ~80% on doing so.
you're not going to beat the market because your "80%" statistic is worthless
Paper trade for a year, if you're "strategy" holds up, sure go do it. But 99% sure you have no real strategy and you got lucky
So the game you're looking to play is basically short-term stock market gambling, an area where you have 1) no edge against those that do it professionally, 2) no professional experience trading, and limited personal experience with small-dollars. Sure, you may have 80% profitable trades but I'm guessing that's on a low "n" and it's also only half the picture - doesn't matter if you have 80% profitable trades if the remaining 20% are big-dollar bets that blow you up.
Statistically, amateur day traders lose money (or break-even at best) over the long-term so what you're proposing strikes me as a foolish decision given the IBD career trajectory. If you're absolutely dead-set on trying to make a living day-trading with your own capital, carve out some time each day to paper-trade consistently, and do that for a year or more. If this track record holds up then sure, go for it as your full-time income stream but more likely than not it won't be a viable path...
Just join a MM HF and do it with $1bn of someone else’s money
So this is what a market top looks like?
How do you work in finance and not realize this is a bad idea lol. If you’re that good then get a job managing someone else’s money and you’ll make more no matter what your returns. If you can’t get a job doing that then maybe you shouldn’t be trading your own savings.
No wonder you ended up at a MM...dumbass
YOU WONT
Just move to a bank that let's you trade ETFs and their derivatives with no hold periods. I sell weeklies and monthlies on 3x levered or volatile ETFs then run the wheel if assigned - day trading doesn't mean you need to be engaged with RH the whole day unless your scalping illiquid contracts.
$500 on $200k (.25% per day / ~1.25% per week) is moderate risk/return profile if you're long theta. I'm making as much as I would if I was a "day trader" while still working in IBD.
Sure bro lets go you too can become steve cohen
I think you might be underestimating the mental and emotional aspect of this plan. Day trading, swing trading, etc are different when they're just on the side and you are working full time making a really nice income. Once you leave that, and the trading is your sole source of income and livelihood, I think the mental games and emotional strain could impact your trading more than you know. Once that comes into play, I imagine it would be much harder to trade your actual strategy. Example, big draw down you didn't see coming, thoughts start creeping in...
..should I just sell and cut losses? Wait I know I'm right, I need to hold with strong hands, I don't want to give in and take the loss. Another 5% draw down the following few days. Are you still convinced you're right? Yikes, I'm losing so much money but I know I'm right. Another 5% draw down. Buy more? Sell it all at a huge loss? Am I even good at this anymore? What the hell have I done I was making $150k/yr.
Gambling is brutal on the psyche. That's why we dump billions into places like Citadel and Millenium and pay them out the ass to do it.
Helpful take, thanks. I think in general people also underestimate the mental and emotional aspect of banking as a junior - I've lost my freedom and feel like on a daily basis I'm doing everything but perfecting a longer-term craft.
That might be true as well. But you at least have strong financial security.
If you had a couple mill I'd say do it. Or if could grow what you have into a couple mill while still employed. What you have right now is not nearly enough to take the risk that you want to take.
i think you should do it.
More interesting and its a hell of a bull market.
I'm an intern and I made 30k in short term trading this year and I can guarantee I'd have absolutely no success doing this as an actual job.
Posting anonymous for reasons..
Obviously in your current situation this would be idiotic. You need to have enough capital that you could stomach 1-2 years worth of drawdowns and not be wiped out.
A few other points - do you have a rock solid system? Can you code it? Can you backtest it? If you are trading based on hunches you will get crushed when your emotions become involved (and they will).
Ideally you would have a source of cashflow to cover basic living costs such as rentals or a more standard stock portfolio that you don't touch. You then trade with the rest of your cash and when you win and are compounding, you continue to syphon some out and back into your safe assets.
I'm not going to say it isn't possible. I personally am aiming to achieve the same thing so I can get out of the big corp grind. I'm working on refining my strategy and compounding. Still probably a decade away from leaving my day job though.
A lot of people are saying its completely idiotic... Ignore them and go for it dude. Whats the downside? Stocks never go down.
Also when you're bankrupt and have fucked your life over quite a bit, give us an update post!
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