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

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To recap: wisdom of the crowds works when the crowd is diverse, unbiased and motivated by aligned incentives. Brent Donnelly has been trading currencies since 1995 and is currently a senior FX trader at HSBC New York. in a game where the odds are not known beforehand (only estimated), it is hard to achieve persistent success. Furthermore, the very fact that you caught the run-up trade means the security has moved a fair bit already into the event and thus it is probably getting crowded in that direction and offers asymmetric risk/reward (in a bad way). Blackwell Global Investments Limited is authorised and regulated by the Securities Commission of The Bahamas, certificate number SIA-F215.

For example, if you want to get in shape, don’t make yourself decide whether to work out or not each day. If you take the time to record these reassessment triggers, you should find very few occasions where you make on the fly decisions mid-trade. Block some time out in your calendar and finish this book in one/two sittings, you won't regret this. This fundamental property of random walks is described by a counterintuitive branch of probability known as Arcsine law.

He investigates, with reference both to his personal experiences and a study of the cognitive science literature, which psychological traits are most likely to lead to trading success – conscientiousness and rationality come out on top. For example, while it was obvious that bitcoin was a classic bubble by May/ June 2017, it did not crash until seven months later after rallying another 500%.

Part of the filtering process is to make sure that wherever your idea comes from originally, it is supported by the narrative, sentiment, positioning, technicals, correlated markets and seasonals. Often the real money is made by identifying a bubble and jumping on for the bullish Wave 5 insanity. Maybe you notice you never make money in USDJPY but then the reason is simply that it hasn’t moved in ages. Good traders study behavioural finance because humans, as a group, act in predictably irrational ways and this predictable irrationality can be exploited for profit.The information on this site is not directed at residents of the United States, Belgium, New Zealand, and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Don’t be one of those people with 1,431 unread messages who I have to contact three times before I get a reply.