So we continue with the accumulative knowledge of what makes an alpha trader, defined as speculative, short-term investors with a track record of outperforming the indices. Read Alpha Trader; Part 1 if you missed that read.
Many of these lessons are learned by making several costly mistakes and failing in traders’ early career. But you will have a head start if you can learn and implement these Alpha trader tips in your trading from the get-go.
Alpha trader has the right mix trading plan
Alpha trader has a plan sophisticated enough to give them a heads up but not too complex, which would hinder them from making snap decisions impossible.
Alpha trader is a quick thinker and short-term opportunists with a mindset to act on short-term market opportunities. Investors with a long investment timeline are more deep thinkers.
If your trading plan requires many subjective decisions, then that makes it difficult, if not impossible, to make a quick calculative decision under stress.
Alpha traders know that the market does not respect their time
A trader can spend their entire trading day making huge losses or making small fortunes in a few minutes.
Focus on your concentration when executing a market trade.
Knowing your limits, and concentration takes psychological energy, and mental energy and is a stress on your mental and physical health. A healthy lifestyle will help you build resistance to survive a stressful environment.
If you want to maintain your focus you need to be rested and relaxed.
Four hours of concentration, trading, or research is usually the limit for most people.
Alpha trader knows not to overdo it, more hours do not mean more profits
Value your time so you do not have to stay all day trading.
Trading takes years of experience, training, and learning to master. Don’t quit your day job to start trading. Many successful traders have full-time jobs.
Traders do not have the security of a regular income from a salary. The market doesn’t respect your time, nor does it owe you anything. Better to fear the market than see it as your friend, as it can hand you a golden goose, then take it all away, and your winning strategy could stop working.
Volatility is like electricity, it can be harnessed to provide comfort and great use, but it can also fry you.
So do not give up your primary source of income, which is your source of stability. Income stability will enable you to trade with less emotional detachment and build a risk muscle
Alpha trader doubts everything
These traders question everything they read or hear, irrespective if it is coming from a Fed head’s mouth or the CEO of an investment bank.
Alpha traders backtest their plan, they paper trade and test whether their trading plan is profitable for a specific market.
Alpha traders do not believe anything they read until they backtest it for themselves.