Day traders live in the fast-paced world of price and volume data, taking advantage of an asset’s fluctuations within time spans of a few seconds to mere minutes. Day traders are up long before the markets open, reading the news, performing market scans, and watching channels like CNBC and Bloomberg in order to get a reading on the market direction for the day. When the opening bell sounds, day traders have already narrowed in on the stocks, derivatives, or currencies that are going to be traded for the day.
Day in and day out, this cycle will repeat itself, as traders attempt to be one of the very few who can successfully sift through the random flux of the markets and make a profit. If a career in all of this maelstrom seems exciting to you, we explain the educational degrees that would be beneficial to trading in this incredibly lucrative, yet risky environment.
With the advent of electronic trading systems, day trading has become more accessible for the retail traders and has grown in popularity. In the United States, a person merely needs to put up $25,000 worth of capital in their account to circumvent the pattern day trader rule and begin trading through one of the many discount brokerages available. With margins sometimes four times the amount of initial capital, and brokerages competing with one another to offer the lowest commissions, day trading is increasingly becoming a potential source of income.
Retail traders come from a diverse array of backgrounds and just like any other form of self-employment, formal education takes a back seat to experience, diligence, and passion in the chosen field.
In the 80s and 90s, traders were employed based primarily on their tenacity, charisma, and intuition in trading, working up the ranks as assistants to floor traders or clerks on the stock exchanges. Traders from this era learned from the school of hard knocks, and it was not uncommon to find traders with little or no formal post-secondary education in the pits. However, as times changed, and the world of electronic trading has made the trading game a lot more complex and competitive, firms are under pressure to recruit the brightest minds from the top-ranking universities. Below are a few types of degrees that recruiting departments of investment banks and hedge funds tend to gravitate towards:
Traders come from a variety of backgrounds, reflecting the extremely vast array of styles and techniques unique to each individual. However, as the markets are quantitative in nature, it would be useful to pursue a degree in a quantitative discipline if you wish to make a career out of trading. That said, an understanding of economics and finance is also extremely important, and degrees in business administration, finance, or economics can also be viable means upon which to launch a career.
[ Many day traders are largely self-taught with a background in finance, economics, or mathematics. If you’re interested in day trading and would like to get a head start, check out Investopedia’s Become a Day Trader course for a comprehensive introduction including over five hours of on-demand video, exercises, and interactive content from a full-time day trader and Wall Street veteran. ]
U.S. Securities and Exchange Commission. "Margin Rules for Day Trading."
Crimson Education. "The Fastest Way to Become a Trader on Wall Street."
Vladimir Dobrushkin. "MATLAB Tutorial 2.6: Black Scholes Model."
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