Alpha Trader: The Mindset, Methodology and Mathematics of Professional Trading

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In Chapter 3 you learned that superior performance on the Cognitive Reflection Test (CRT) predicts trading success. Positioning: Medium-term traders, investors and systematic strategies tend to reduce risk into major events. The next time you feel like you are just like that, or that you are really disorganized, remind yourself that being organized or on time or proactive is a choice. For example, highly intelligent people suffer more from confirmation bias than less intelligent people. There is the plain fool, who does the wrong thing at all times everywhere, but there is also the Wall Street fool, who thinks he must trade all the time.

Drop it on Twitter (if you are thick-skinned enough to withstand the corrosive “SOMEBODY IS WRONG ON THE INTERNET!The longshot mentality is bolstered by financial media features that shower adulation on tail risk managers in the rare moments their highly-levered insurance bets pay off. Produced more than 100 profitable traders who earn their livelihood from the markets today and counting. If something like that happened to me now I’d know that’s a regime change and update how and what I’m trading. The marginal utility of a large win is often higher than the marginal utility of a small win, even if the odds of the small win are near 100%.

Trading with our gut feel, intuition and similar soft skills is less important, and sometimes counterproductive. Important: An independent thinker is not someone who is contrarian all the time, disagrees with everyone, or loves playing devil’s advocate.As the Red Queen in Through the Looking-Glass (Lewis Carroll) says: Now, here, you see, it takes all the running you can do, to keep in the same place. I think to myself, well, okay but you should just trade this thing based on what you think they will do, not what they should do. Keep an open mind and analyze the evidence, then make a rational and unbiased short-term forecast of market direction. Similarly, there are micro patterns of seasonality and repetition that make sense and repeat for a reason. On the other hand, markets are generally very efficient; they are usually right, or correct themselves quickly.

Brent Donnelly, the author of ALPHA TRADER, has been a professional trader for more than two decades and has been writing about macro and markets for more than 15 years. in a game where the odds are not known beforehand (only estimated), it is hard to achieve persistent success. Market conditions should be the primary determinant of when and how much you trade, but a maximum trades figure anchors you around the appropriate level of activity. There are many other valuable ideas here, so valuable in fact that I don’t feel it is appropriate to discuss them further here.We help our traders gain accurate insights to achieve unparalleled performance with our ingenious dashboard. tactics, microstructure, market narrative, technical analysis, sentiment, positioning, and systematic risk management.