Alpha Trader; Part 1

An alpha trader has a trading track record where they outperform the indices trading instruments in a short time frame.

Here are some tips from someone who learned by experience, training, and education and finally achieved alpha trader level. 

Most new traders start with a random set of lagging indicators to make decisions. An alpha trader doesn’t make the mistake of believing he will stumble across some lagging indicators that they hope will make them wealthy. Making trading decisions on a few dots and lines, thinking it is time to sell and buy, is unlikely to provide you with a consistent track record of outperforming the indices. 

Relying 100% on lagging indicators without learning to read price action is a mistake; lesson one from an alpha trader

Alpha Trader - Part 1

Understand price action before applying any indicator to the chart. 

An alpha trader spends some time understanding price action since he knows it will help him in the long run. 

A trading strategy that includes price action and indicators works best.

Alpha traders use the sleep rule to size their risk profile  

A simple rule to apply is to think about your sleep.

If you can place a trade, set the appropriate stop losses, take profits orders in your platform, and then go to sleep, this is the trade risk size that best matches your profile.

Sign that you need to change your position size. 

Alternatively, if you place a trade and you find it difficult to sleep, you find that you are always worried about the trade, while away from your computer, and you feel the urge to check your smartphone constantly, then the trade is too big.

When people are new to trading, they feel pressure during the trading day, particularly when they have a trading position open.

Alpha trader takes an acceptable risk and has a peaceful state of mind 

Know your mental and emotional risk tolerance.

An alpha trader learns to ignore market noise

Evaluate a trend using different time frames. 

Always check whether your decisions are emotionally driven or backed by technical and fundamentals. 

Alpha trader applies the Kelly criterion to manage risk 

Kelly’s criterion calculates how much money you can risk on each new position based on how well you have done with similar trades in the past. 

Avoiding taking on more trades due to boredom, and lack of discipline is another lesson from an alpha trader.

Alpha trader has a trading plan. 

Plan every trade, so what will you do if the market goes against you, what is your stop loss, what will you do if the market doesn’t move and you are stuck in the trade, and what will you do when you are in profit?

Your trading plan should read like a road map of what you will do in every possible scenario.  

Alpha trader continues in Part 2   

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