s0r0s
New York, NY
Male, 32
Day Trading: is it a game? A skill? A science? Instinct? Luck? I have no idea, but I do it for a living. Day traders employ a mix of speed, instinct, guts, knowledge and emotional intelligence to trade millions of dollars with a keystroke. The faint of heart need not apply. Ask me anything.
Well, they are both in finance and they both buy and sell securities, but after that there isn't too much in common. The most basic way I can explain the difference is this: Day traders often make hundreds of trades a day based on order flow. Hedge fund guys are trying to find angles/value/market inefficiencies and may spend weeks or months picking their investments. Thats oversimplifying it, but what day traders and hedge funds do really aren't very similar, so its a tough comparison.
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It all depends on a trader's previous success. IF you've shown you can make $50k in a month, then losing $50k in a month is no big deal. As long as your losses stay within proportion to your gains, you won't be fired. But if a trader is making $10k a month and all the sudden drops $100k pretty fast and doesn't look like he's able to turn it around, he is in trouble. It’s also in his best interests to just quit, since he probably won't see a paycheck for a long time anyway.
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Hi Jen, Please see my answer above to the question, "What stops successful traders from leaving to become independent traders (or starting their own firm), instead of sharing their profits with a firm?"
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There are two female traders and over 100 male traders. I don't think this has anything to do with the hiring practices of the firm. Day trading does not seem to be a business that attracts many females.
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#1 - Risk -If things go wrong, your own money is not at risk (you may lose your job, but at least you won't go broke). Also, it's much easier psychologically to trade someone else's money. #2 - Capital/leverage - legit trading firms will give their good traders a lot more money to trade with than they'd ever be willing or able to trade on their own. #3 - Technology - trading firms can pay for better technology, have professional IT people on hand, develop new technology, etc. The average independent trader is going to have a VERY tough time keeping up with technological developments on his own. Also at a trading firm, one trader might find a new way to take advantage of new technology and spread it to the rest of the floor. There are lots of shared ideas, which brings me to the next one: #4 - Opportunity to work as part of a team. There is a lot of shared information on a trading floor. You would lose that if you moved on your own. That said, lots of people have gone off on their own, and I'm sure many of them have been successful. Still, all the successful traders at my firm stayed on. I guess it makes sense: those guys that understand risk/reward and just want to focus on trading (not the entreprenuerial stuff) are more likely to stay on and are also more likely to be successful.
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Not a lot. It’s kind of sink or swim. There is some structured teaching (once a week classes) when you begin, and you are given a trainer when you start. But that’s about it. How much instruction/training you get depends largely on who you are placed with as a trainer.
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If we define luck as random chance, then 0% of it is luck. If we want to include variance in the definition of luck than there is plenty. Generally daytraders are making so many trades in a day that the sample size gets pretty high, pretty fast, and it’s next to impossible for any consistent success to be based on luck. The same few guys are the best traders at the firm every year, month and even week. You can certainly make bad trades and luck out and make money on it and you can make good trades and lose on them, but make enough bad trades or good trades and eventually you will earn what your combined decisions suggest you should earn. Daytraders are trading hundreds of thousands of shares a day and so reversion to the mean happens fairly quickly. There is definitely a lot of variance, but very little "luck" as strictly defined.
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