Who am I?
By training, I'm a design engineer and specialize in the area of mixed-signal and analog circuits. I've worked with a variety of different companies in the semiconductor industry for the better part of 8 years, and am currently working in the Silicon Valley building system-on-chip (SOC) solutions for disk drive electronics.
What the heck does that have to do with trading?
Surprisingly, lots. I've had an interest in speculation since my younger days, but really got into derivatives trading about 4 years ago. One of the first things I noticed about investors, traders, and other market participants in general, is that the majority jump in the markets with no strategy or plan. For active traders in particular, this is a sure-fire way to lose money. There's an infamous statistic that suggests about 90% of traders lose money, and the majority of the remaining 10% do no better than break even.
Trying to make money in the markets without structured methods is like trying to win a golf tournament without anything but a sand iron in your bag. There are players out there that have the right tools, the right training, and the right experience to take money from people who simply don't know what they're doing. There's always someone who's better capitalized, better researched, who is always looking for ways to sharpen their trading methods and stay current with the market.
From the onset, I noticed that successful trading is about correctly reading market sentiment. The unfolding action of a market day reveals this sentiment, with price discovery occurring as participants buy and sell, pushing an instrument higher and lower in value. As an engineer, I feel that quantitative methods are powerful tools for capturing market sentiment. Price action by nature is quantitative, and mathematical modeling is a powerful tool for structuring buying and selling in the market.
Historically, futures trading has been a game akin to "the battle of the wits." Commodities traders duking it out in the pits of the Chicago Mercantile Exchange, many trading by gut feel and instinct. As the trade volume of the pits continues to dwindle, the electronic markets continue to surge to higher volumes with every passing month. The percentage of trade activity generated by "black box" systems used by both retail and institutional traders also continues to rise at a breathtaking rate. "Scalp trading", once possible only for the "locals" inside the pit, has been made accessible to "paper" retail traders due to the speed of execution afforded by efficient electronic order routing systems.
This evolution in trading has established two key trends. First, the complexity and variety of trading styles continues to grow as technology becomes more sophisticated. Second, a clear shift in perception about what successful trading is about is taking place. Beyond tradition, which suggests that human decision-making determines trading results, lies the notion that successful trading can be achieved by good engineering design. A sound trading method contains proper entry and exit technique, risk management, and capital allocation, all of which can be obtained by proper quantitative design.
My journey over the past 4 years has been about applying the principles of good engineering to the design of profitable trading strategies and methods. Through ups and downs, big wins and big losses, I have learned a great deal and continue to discover more surprising truths about profitable trading.
