Is Equity trading a good option if you are a math whiz but have no real trading experience?

Question

What is the attrition rate for new traders. Is it a skill that can be learned or something you have to be a natural at?

Answer 1

The attrition rate for daytraders is near 100%. The attrition rate for swing traders (one day to a week or two) is much harder to measure, but probably exceeds 95%. Millions of people trade occasionally, holding positions for a few months or years, but it's statistically improbable that the majority of them can beat the market, and a lot fewer if you adjust for risk. Most answerers here will probably say that trading is a fool's game and you should only invest in index funds, mutual funds, and maybe individual stocks with holding periods of years or decades.

It's an endless argument if traders are made or born. There are some recent books on a famous experiment of training a somewhat random group of people to trade, and several of them were amazingly successful. They were called Turtles, and if you search a list of stock market books for "turtle", the titles will come up.

A lot of math whizzes are crunching numbers to try to come up with profitable trading systems or at least tricks to give them an edge. They're called "quants". Other math whizzes (some with Nobel prizes) spend their careers "proving" that any edge is the product of chance or is at least transitory.

There is little argument that proper money management and position sizing will give you an edge over the blindly emotional investors. Money management starts with simple arithmetic, but can quickly get sophisticated with probability, risk measurements, volatility measurements, etc. This is probably the best place to apply advanced math skills.

My own take is that you should paper trade for a while, and if you're profitable on paper, start with tiny trades at interactivebrokers.com, where most trades are $1 commission, and see how you deal emotionally with making and losing real money.

Answer 2

Not necessarily.

Trading is not an exact science, and many mathematicians and engineers get frustrated when the stock does not do what they've calculated it should do, and start arguing with the market.

This does not mean that as a math whiz you can't come up with a formula that takes into account human psychology in trading.

Trading is an entirely learned skill but you have to have passion for the markets to get through the learning curve.

Answer 3

Over 90 percent of new traders fail within first year!
As for the question of whether trading skill is learned or a natural talent -- check out the link.

Answer 4

Its learned, with a lot of time and more than a few mistakes. Much like taking up golf. Lose a lot of games before you get good. In my opinion, the most important part of trading is psycology. A lot of authors agree with that idea. The price of the stock is determined by what people are willing to pay for it in the open market and those people are governed by psychological factors. Try reading Elder's "Come into My Trading Room".

Answer 5

Most day tradiers and option traders crash and burn in a very short time


It's a learned skill + luck+ a lot of research- don't start with option- try getting a few books from the library-
you can also by stock from the large cap corporation for a very small fee- right from them- no broker or e-trade needed.