To trade successfully you need (at a minimum):
(a) self-knowledge (specifically, the extent of your intelligence, energy, and risk tolerance relative to others);
(b) knowledge of what it is you’ll be trading (stocks, bonds, FX or whatever);
(c) access to markets and current market data; and
(d) knowledge of the market structure and how trading is accomplished.
This course is mostly about (d). But I hope that you’ll pick up a little of (a) along the way.
How will you sustain your advantage? Changes in the structure of all markets are bringing you into more competition with other traders. If you have been acting as an intermediary, you should know that the Internet revolution is premised on your elimination.
For one thing, it’s getting tougher to avoid trading altogether. Knowing how to bid and offer sensibly is becoming one of life’s little necessary skills. Looking beyond the financial sphere, when you set up a market for your product, you often add value to the product. (Investment bankers have long appreciated the usefulness of secondary liquidity in clinching the initial sale.) Besides, you might very well find that trading (or just thinking about trading) is fun.
Definitely not. No knowledge you'd be likely to gain would justify the risk of capital or sanity. Would you try to learn corporate bankruptcy by setting up a corporation and going bankrupt?
Not really. Electronic commerce generally refers to the full range of a firm’s internet-based external activities (including marketing, establishing a presence, payment mechanisms, etc.). This course is much more narrowly focused (on market mechanisms). On the other hand, we’ll be looking at markets in which users (customers) both buy and sell, which is more general than most e-commerce situations.
In a "paper portfolio": you start with one billion imaginary dollars, "buy and sell" stocks at reported prices, and at the end of the month tally your profits or losses. The essence of a trading situation is that your actions affect the prices and actions of others. This doesn't happen with paper trading. Also, with a paper portfolio, it's too easy to rationalize bad outcomes. This may leave you with misconceptions about your own trading prowess and risk tolerance which may well prove dangerous when you move to a real market. You might successfully move from paper trading to real-world trading profits. You might also learn to perform rock music at Shea Stadium by practice playing air guitar.
The facilities that schools advertise as "trading rooms" vary considerably. It's tough to generalize, but most consist of a room with real-time data feeds and software to make paper trades against real-time prices. Familarity with real-time data feeds is undoubtedly a useful career skill: a fast hand on theBloomberg is a nice ability. But this is easy to learn on the job. As for paper trading, I've made my case above.
Trading and Exchanges: Market Microstructure for Practitioners (Larry Harris, 2002, Oxford University Press) is serious and comprehensive.
The shelves of bookstores (virtual and otherwise) contain many volumes that purport to guide you to trading profits. The usefulness of such books is generally inversely related to the extravagance of their claims. (Day-Trade Your Way to Big Bucks = Junk) However, I haven't attempted any comprehensive review and I'm not aware of any.
Fooled by Randomness, by Nassim Nicholas Taleb (2001, Texere; New York) stands as a thoughtful analysis of chance, luck and fortune, and (more importantly) our perceptions of them.
Other books shy away from investment advice. Interviews with traders and profiles of markets (both current and historical) can entertain and offer useful insights into the psychology, culture and sociology of markets. My favorites in this line include:
Smith, Adam. 1976. The Money Game. New York: Random House.
Smith, Adam. 1972. Supermoney. New York: Random House.
"Adam Smith" is the nom de plume of George Goodman. The situations occasionally seem dated, and you'll encounter some gender references that are by current standards offensive. But Smith's overall insights and themes are timeless and universal. The first book (The Money Game, originally published in the '60's) is a minor classic. Taken together, "Timing, and a Diversion: the Cocoa Game" (in The Money Game) and "How My Swiss Bank Blew $40 Million and Went Broke" (in Supermoney) tell a funny and sympathetic tale of financial hubris.
Schwager, Jack D. 1989. Market Wizards: Interviews with Top Traders. New York: Harper Collins.
Schwager, Jack D. 1992. The New Market Wizards. New York: Harper Collins. Schwager lets the traders speak for themselves. Draw your own conclusions.