Can "Being an Expert Developer" be an edge?

Hi,

I have read many posts about having and edge and its importance.
Is "Being an expert developer" and having the ability to write advanced trading rules and systems, an edge or a trader?

Being an expert developer gives you an edge ... in systems development. Means you can make more money with it than your peers.

To be honest, most of the developers that I know that are traders can't trade worth a damn. And I"m saying that as a trader who became a developer.

I've noticed that developers have a certain black/white way of approaching problems. "IF THIS THEN THAT". Which might be fine for analysis but doesn't automatically equate to successful trading.

One of my buddies who is a developer guru and even went to work for one of the larger retail brokers has never really been successful trading. And he's a guy who's been paid to turn profitable trading ideas/systems in to automated systems.

Profitable trading is more about money management and trade management than it is about the system. Most of the automated systems I've seen are only profitable over the long haul in the back testing because of that fact. I guess ideally, you'd have different systems for different market conditions. Trending vs ranging vs volatile vs stagnant.

But if you're just talking discretionary trading vs automated trading, the best edge you can give yourself is limit the dependence on system accuracy through positive risk/reward ratio. It's a numbers game at that point. If you maintain 2:1 or better reward/risk ratio, the system only needs to be 40% accurate to make money in the long hall. At 40% minimum accuracy you could flip a coin and make money. I mean seriously, how hard would it be to come up with a system that is at least 60% accurate? The sky's the limit, really as long as you're disciplined about it.

Hmm, are you saying that being a computer geek is actually a drawback in the markets?

I thought it'd be no advantage, but to say it's a drawback, I'm not all sure. Or did I get ur post wrong?

I'm not saying it's a drawback.. I'm just saying it isn't the edge you'd think it would be. If it were, then you'd see more geeks hawking trading systems and education manuals.

Having said that, high frequency trading on Wall Street is the rage. But the geek element there is not geared towards system development as much as it is geared towards infrastructure and execution. Basically making my computer get in there faster than your computer and more often. profiting fractions of a penny millions of times a day.

That's close to what I thought, that is, being a geek can be an edge in that one could find the currently valid and exploitable correlations before others and be quicker to put that into working code. But in general, I don't think being bit-brained would be an advantage. In fact it's a huge disadvantage, those geek fellas in their e=mc2 t-shirts and latest gadgets and all that, can be such a mess everywhere in life ... no offense intended

Have to agre with JR, fully. Being a developer myself it was (and still is) hard to get away from the black/white mentality that comes with the abillity to be a good developer. I need structure, rules or logic but these kind of concepts are not found in the markets.

So being a developer I had to educate myself to be flexibile with market analysis and expectations. It is not an easy thing to do at all. Rigidity kills the discretionary trader.

On the other part the developers have an edge when designing & implementing a fully mechanical trading system, an automated system if you like. But as discretionary traders they have to work more on themselves then the next trader.

Hello JR,

I'd have to agree with you. Most of the time it's one or the other it seems and their thoughts always turn to what they do best. I see many good coders working on newbie systems. All of their energy goes to developing systems instead of learning how to trade. I will say that writing EA's did show me what worked and what didn't but not at first. It wasn't until I truly learned how to trade that I had any real success in writing a profitable EA.

No offense but your words still seem to me to be more of a coder than a trader.

Johnny

For the record, soso is an awesome developer. I still use a lot of his stuff that he did for me years ago on a daily basis. I've learned a lot about mql and mt4 development from his code.

No offense take because that's how I inherently think since it's what I do day in and day out at the job. It's taken a lot of work to get out of the systems development mind set. I"m completely the opposite now... all I do is look for a repeatable pattern and bet it using 2:1 r/r. Everything else takes care of itself. The developer in me is always looking for the right system or setup, though, but I keep that separate from my actual trading. I'd lose interest if it was just about trade execution. The money is nice, but I don't trade large enough to make a living yet. Not sure I should since that would be a difficult psychological barrier for me to overcome.

https://lh3.googleusercontent.com/-S..._500_large.jpg

This is semantics, but I would have said that trade management is part of a system. I see entries and exits as being of approximately equal importance.

I may be misreading you, but you seem to assume that it's just as easy to attain a 50% win rate even if you seek 2:1 and higher RR. If so, I disagree. Everything else being equal, the higher the RR, the lower the win rate. The nearer that price movement approaches a random walk, the nearer RR and win rate become exactly inversely proportional to each other.

On the thread topic, I find perfectionism, which I regard as being very important in my role as developer, my worst enemy as a trader. In my case Johnny is right; I enjoy the creativity and problem solving that programming offers, while I find watching price move, and my trades evolve, boring. Hence I've made a considerable effort to automate my exits.

I went through a phase where I spent a lot of time trying to turn my trading system into an automatic one that can be traded with an algorithm. An old video of it in action can still be found here: http://fx.nirgle.net/cgw/

However, these days, my main project is the development of a trade planning platform (from scratch, in C#, not in MT4). Instead of developing a system that takes trades for me, I am developing a system that will help me monitor for setups that I will end up executing myself. One of the final things holding me back from success in the forex market is my own self-sabotage. I am a very good analyst, good at predicting what price will do, as I have learned from people who have made their lives of it, and I trade consistently well when I'm trading according to that system. But here is the problem: I am a great analyst, but can be a really poor trader. The system requires a lot of analysis, a lot of time spent watching for price to do certain things at certain levels, and one of my weakness is and has always been impatience, getting in too soon or chasing price instead of waiting for an optimal entry point, etc. I am fantastically consistent during periods of patience and exactly the opposite when I am sitting around at charts, watching candles tick away, just looking for something "to get into." I'm sure this resounds on some level with every single trader here.

So here is how I'm turning my development experience (almost 20 years of it) into an edge. About a year ago I started development of my platform, which is a Windows program that lets me build bullish and bearish trade plans for all pairs and timeframes. It has all the standard analytical tools I am used to, like trendlines, fibs, pivots, etc. built in. But where it is critically different from other platforms is that it is not built for executing trades, but for building and monitoring the evolution of various trade PLANS. And lots of them, simultaneously. Since I have a day job and can't be staring at charts all the time, the idea is to spend some time every morning, before New York, marking up charts with sell zones, buy zones, trendlines, biases, and doing so for both bullish and bearish scenarios on all pairs I follow. Then... throughout the day I don't even see charts, just one dashboard with a listing of all my active trade plans and indicators for how close they are to being ready to execute. As soon as all of the criteria for entering a trade according to my trade plan are met, I get an audio alert, and *only then* open up a chart and put on a trade.

In a way, this doesn't answer your question, since I know that you meant development in terms of algo trading systems. But my goals are much more down to earth and practical: amplifying my strengths as a technical analyst, and mitigating my weaknesses as an impatient, impulsive trader. When this program is done and I'm using it full time, I expect to turn inconsistent consistency into consistent consistency. Full automation is one small step beyond that, and one giant leap.

I will end up starting a separate thread on this platform when it is closer to completion. There is still a lot of work ahead though.