I'll share some experience a friend had with this stuff. I don't have the low-level details, but this should be enough to make an informed decision.
He was working on what he termed "high speed automated trading" -- basically all in this realm of picking pennies up in front of bulldozers.
He's a very smart and talented guy -- Harvard Physics/Comp. Sci double major, etc. So we're not talking about an amateur throwing around some code.
He spent about 6 months and over $50k setting up his system -- he had developed some algorithms to trade spreads between different securites (on the CBOE, the NYSE, and NASDAQ). He built a relationship with a clearing agent, a direct broker, etc. He got machines in colo facilities as close to the exchanges as possible (one data center in Chicago, one in Jersey City, etc.) SLAs on low-latency DS3 lines, etc. The whole nine yards.
I'd call it a "pro-sumer" level setup -- everything done by one guy, but done basically as well as a bigger firm would set it all up.
Here's what he discovered after about a week of trading: He didn't have even remotely a shot at competing. Like, not even close. If he had 10ms pings to the exchanges, someone else had 5ms. If he got down to 2ms, someone else who was physically at the exchange itself had 1ms. He got killed with commissions -- even if he did make a few $$ on some trades, it vanished with commissions.
Why? Because he was competing against guys who paid NO commissions. The broker-dealers and clearing companies themselves had internal automated trading setups. They had deeper relationships and deals that traded commissions for a cut of the profits, etc.
In other words, he figured out pretty quickly that this is not an algorithm game or speed game - it, like many things on Wall Street - is a 'who you know' game. No matter how smart, how fast, how sophisticated you are as an outsider, the likelihood is that someone on the inside has a similar trade idea and can do it faster and cheaper than you.
Now, the corollary to that: My friend is smart, but he also tends to give up too easily ;) Clearly if you've got an idea for a better/smarter/more innovative trade, then you'll make money on it. But that's a trade idea, not a speed advantage.
So just recognize that there's potential to make money, but "same idea, just faster" won't cut it.
Yeah, he learned the hard way that you can't expect to compete in the pros without pro level access. The thing is though that the pros are dealing with ms or seconds when he should have been looking at things outside their range like minutes or hours or possibly even days.
The currency market is even more cut throat (hey, insider trading is encouraged! :) ), but I have a friend who works with a single other guy managing about 10M leveraged out close to 100M. All they do is trade currency. On a typical day they make 1-2 trades for their clients and the rest of the time play golf and hang out. Pretty much the ideal job :)
They got started years ago while in grad school by writing an algo to analyze currencies. After showing it worked they rounded up a bit of funding and have gone on from there. Ever since then they have just honed and tweaked the algorithm and both make a good living off the commissions from working a couple hours/day.
He was working on what he termed "high speed automated trading" -- basically all in this realm of picking pennies up in front of bulldozers.
He's a very smart and talented guy -- Harvard Physics/Comp. Sci double major, etc. So we're not talking about an amateur throwing around some code.
He spent about 6 months and over $50k setting up his system -- he had developed some algorithms to trade spreads between different securites (on the CBOE, the NYSE, and NASDAQ). He built a relationship with a clearing agent, a direct broker, etc. He got machines in colo facilities as close to the exchanges as possible (one data center in Chicago, one in Jersey City, etc.) SLAs on low-latency DS3 lines, etc. The whole nine yards.
I'd call it a "pro-sumer" level setup -- everything done by one guy, but done basically as well as a bigger firm would set it all up.
Here's what he discovered after about a week of trading: He didn't have even remotely a shot at competing. Like, not even close. If he had 10ms pings to the exchanges, someone else had 5ms. If he got down to 2ms, someone else who was physically at the exchange itself had 1ms. He got killed with commissions -- even if he did make a few $$ on some trades, it vanished with commissions.
Why? Because he was competing against guys who paid NO commissions. The broker-dealers and clearing companies themselves had internal automated trading setups. They had deeper relationships and deals that traded commissions for a cut of the profits, etc.
In other words, he figured out pretty quickly that this is not an algorithm game or speed game - it, like many things on Wall Street - is a 'who you know' game. No matter how smart, how fast, how sophisticated you are as an outsider, the likelihood is that someone on the inside has a similar trade idea and can do it faster and cheaper than you.
Now, the corollary to that: My friend is smart, but he also tends to give up too easily ;) Clearly if you've got an idea for a better/smarter/more innovative trade, then you'll make money on it. But that's a trade idea, not a speed advantage.
So just recognize that there's potential to make money, but "same idea, just faster" won't cut it.