Become a Professional Trader?
So, You just got done binge-watching movies like The Big Short or Wall Street (the original of course), cruised through a few hours of video on Youtube learning about Institutional Trading and now you have your eyes set on becoming a rich Wall Street professional trader. If you want to become a Wall Street titan, the next Gordon Gekko, I might not be able to help you. You need to understand there is a BIG difference between a retail trader (like me, on a beach) and an Institutional Trader (suit and tie Wall Street type) However, if you want to learn what it takes to become an Institutional Trader trader versus a penny stock trader like me, keep reading and start drinking a lot of coffee, you’re going to need it!
This is definitely not your traditional guide on how to become a Wall Street trader. Basically, I’m going to outline the steps that one might take to go on the traditional route…then I am going to offer the non-traditional route I’ve taken. Then, I’ll let you make the decision! (hint.. choose the one that offers more freedom)
Download a PDF version of this post as PDF.
The traditional route to becoming a Wall Street Professional Trader
Basically, to become an Institutional trader, you’ve got to go through a years-long process of education, then jump through plenty of hoops and obtain proper licensure. To summarize the typical trajectory:
Quick comment: becoming a successful retail trader (like me) or successful institutional trader both take a lot of hard work and commitment. However, if you end up successful in either one, you have a great shot at becoming financially free and maybe even a millionaire.
1. Study finance and go business school. To get your foot in the door on Wall Street, you’re going to have a tough time without a degree; it’s practically impossible, to be frank. If you want to work for any respectable investment bank or hedge fund, you have to have a great degree from a top 20 business school. Is this fair? I don’t think so. Some of the smartest people I know do NOT have advanced degrees from top-tier business schools, but – Wall Street is picky. Now.. every now and again does someone slip through the cracks without an ivy league degree? Yes, it’s just not that common.
2. Train at a brokerage firm. Many Wall Street traders start their careers this way. To get positions at brokerage firms, though, you’ll need that aforementioned degree to be considered. While working in a brokerage firm or hedge fund, you’ll begin to learn more about the industry, stock market regulations and rules, different financial tools, and how trades are carried out. Not to mention, the dreaded work hours! Any rookie at an investment bank or hedge fund should expect to work on average 60-70 hour work weeks.
3. Get your licenses. An institutional trader trades money on behalf of their bank for their clients. Because of that, you have to get licensed in order to trade for others. If you don’t, you’re breaking some serious securities laws. Most every professional trader in finance will have a Series 7 and Series 63 Brokers License. To get these, you’ll have to take and pass an exam (yup, you’ll have to pay for the pleasure of taking it). Once you’ve obtained these licenses, you can begin to make trades for clients. There are also a dozen more types of licenses you may be required to get, depending on what kind of professional Wall Street trader you become.
disclaimer: some of these tests are very tough to pass and require ample study time!
4. Register with FINRA. After you get your licenses, you’ll be registered with FINRA. FINRA is great, it’s a regulatory body that helps keep the financial markets and brokers in check! You can at any time look up a broker or professional trader to see if they’ve had any regulatory actions taken against them. You can see that here.
5. From analyst to associate. This is very big! your first job on Wall Street will most likely include the word ‘analyst’. Simply put, you are the investment bank’s or hedge fund’s low man or woman on the totem pole. Unless you’re a genius, this is where you will start. As an analyst, you will earn your stripes by reading thousands of pages a week, being glued to your computer screen, getting coffee, arriving at the office before 6am, leaving after 6pm, and doing pretty much anything the associates want you to do. I recently sat next to an analyst on a short flight to Vegas. He worked for a very large hedge fund, his job? He was assigned to TESLA. His job was to gather as much information as possible 24/7 about TESLA and report it up to his higher ups. Tedious eh? I think so!
Once you’ve performed well as an analyst for a few years, then you get promoted to an associate investment banker or associate institutional trader. This is where you start making ‘Wall Street’ money. Still working insane hours, but – you finally have autonomy over your book of business and decisions.
6. [optional] Do everything necessary to become a member of the NYSE. To become a member or “own a seat” you don’t just pony up the cash and get a badge. No way. Membership to the NYSE involves jumping through plenty of hoops. To name a few:
- Background check. It makes sense since you’ll be dealing with finances; still, it’s something you will have to do to become a member. You’ll be background-checked and fingerprinted before you can become a member.
- Lots and lots of paperwork. If you want to be intimidated, take a look at the paperwork necessary to even apply for NYSE membership.
- Attend an orientation program. Once you’re approved for membership, you’ll need to attend an orientation.
- Take an exam. Yup: more tests. You’ll have to take an exam before you’re admitted to the NYSE, and you must pass.
Only after these steps (and a few more things you’ll need to do that I didn’t even get into) you’ll become a successful Wall Street Trader. Finally!
I’ve done both! I’ve been a retail trader, better known as a day trader and I’ve also been a hedge fund manager. If you couldn’t tell, I’ve chosen the life as a day trader… I love the freedom.
My road to becoming a trader was a little bit different than the one detailed above. Yes, I went to college. But I didn’t wait till I had a degree to start trading, and I ended up turning $12,415 dollars into more than $2 million before graduating college.**
When I was in high school, my parents let me invest the $12,415 dollars I’d been gifted (lucky, I know) in bar mitzvah gift money. They figured I’d lose it and learn a big lesson. But I devoted myself to truly learning how to trade.
I had made over $100,000** trading penny stocks while still in High School.
Long-term investing was never for me. Trading always was much for exciting. The immediate thrill of a profit was all I needed. I was addicted!
I started with mutual funds and traditional investments but was disappointed by the low returns…It was like watching paint dry on the walls. In looking for a type of investment that would deliver quick returns, I discovered penny stocks. Plus, I didn’t have a lot of money to start with; so blue chip type stocks were out of the question. I need quick movers! I had some ups and downs at first, but I began to see that by reading charts and tracking companies, I could identify patterns that could deliver me profits.
I was obsessed. I was constantly skipping classes in college to trade penny stocks and launched a hedge fund. I began to garner attention, and was even featured in the documentary the documentary “Wall Street Warriors.”
Ultimately, for various reasons the hedge fund didn’t work out (including a MAJOR trading loss – best learning experience ever). This was for the best in the long run as the restrictions on the hedge fund industry kept me from answering any questions about my trading strategies. You can read more about it in An American Hedge Fund. This is when I went back to basics and decided to focus on trading with a small account and started a blog, this blog.,
How to become a day trader: a better method (in my opinion)
Like I said at the beginning of the post, I’m not here to make you the next Gordon Gekko. However, if you want to become a day trader who primarily trades penny stocks, these are the most important steps you can take:
1. Learn all you can about trading. Before you ever make a trade, devote yourself to learning all that you can about trading. I established the Tim Sykes Trading Challenge so that I could teach my students all the things I had to learn the hard way. For many, this is a great way to kick start a trading career.
2. Study, study, study. Sorry! Wish I could say it would be super easy, but it’s not. You need to learn. Don’t just learn. Keep learning. Study charts, study companies, study everything stock related you can. Knowledge is power in the stock market. With penny stocks, to gain an edge in the market, you need to be able to study the market and identify patterns.
For some traders, paper trading (simulated trading) is the perfect way to put their studies to work. Without investing real money, you can test your theories based on pattern recognition. It’s a great way to see if you’re thinking along the right lines with your investments.
3. Get your setup in place. To start day trading, you don’t need a ton. You need a laptop, an internet connection, and a brokerage account. However, these things are vital, so be sure to have all of them in place before you start trading. With everything going mobile these days, you can even trade from your phone!
4. Start small, aim small and miss small. It’s always a good idea to start small as a trader. You can easily blow up your account if you make a bad trade; why end your career before it even begins? Keep your position size small when you start; this will make it easier for you to keep learning as you go, particularly since you’ll probably make some mistakes in the beginning.
5. Let yourself grow over time. This builds on the last point. You’re probably not going to impress anyone by making risky trades, especially if you lose big. Let yourself grow slowly, over time. Learn from your mistakes, and refine your methods. Look at what is working for you and what types of trades are most consistent in terms of making profits. Focus on those, and increase your position over time. This is how you create a steady, and long-term career as a trader.
In conclusion, if you want to become a Wall Street trader the traditional way, I’m not going to stop you. However, I prefer to take the road less traveled and trade from any and everywhere in the world. If you prefer my approach to trading, you can consider checking out my Trading Challenge team to learn the lessons I have to share.
Do you want to become a Wall Street trader or Retail Trader?