Pay attention when the 3rd bird sings


Day Trader | Investor | Quant
3rdbird at proton

Day Trading

Is the easiest hard way (or the hardest easy way) to make money (or not): see, e.g., Zarattini and Aziz (2023) and Chague, De-Losso, and Giovannetti (2020).

Intermediate Traders

There is no substitute for chart time. Pick the most liquid markets (e.g., eurodollar) and trade in their most liquid times (e.g., London-New York overlap) with a system you have devised and backtested that makes money within your particular constraints. Benchmark/backtest your system weekly to: (a) ensure its edge and (b) calibrate your live trading. Follow your system religiously, and do not hesitate. Keep doing this over and over again. And over and over again. And over and over again. If you haven't realized it yet, the final boss is not the system, or the market, or the PnL: it is yourself that you will have to conquer to be successful.


If you are not afraid of a lot of work and serious and sometimes painful self-discovery that may or may never make you a dime, then a great starting point for readers would be Brent Donnelly's The Art of Currency Trading, followed by his Alpha Trader. A great starting point for YouTubers would be Trader Mike's Playlists, although Trader Mike concentrates on a specific system. If his system works for you, great. If not, you will start exploring charts and looking for your own patterns based on what order books are doing, and where liquidity lies.

TwiXer, despite the general toxicity of socials, is a great trading and investing resource, but it is also full of garbage. If anyone promises you the holy grail of trading for a fee, it's usually a giant scam. Look for accounts that show charts and trades, so you can look at them and see if your trade setup/system lies within, and how the trade (if you took it) would turn out similarly, or different. Good accounts will post this stuff often, and not ask for anything in return (see, for example, Nebraskangooner, and the accounts they interact with on a regular basis).

It usually takes years of work to trade well in a day, which is why most people can't do it. If you think you've got it, go for it. It's a long and hard journey, but if you are successful, it's worth it.


Intermediate Traders

There is no substitute for chart time. Pick something that's decently liquid and cheap at a moment when you see inflow volume to its market; use history to decide on a reasonable exit trigger; and exit at that trigger without question. Repeat.


The trading books in the Day Trading section will help you with this, as investing is a long time horizon trade. In trading and investing, you aren't concerned with picking a bottom price to buy at, or a top price to sell at, but instead capturing some part of the move. Over lots of moves. And lots of time.


In General

You can day trade and invest without a lot of math. But if you want to delve into the workings behind the screen, and check out the details, you need to develop your quantitative skills. Learn linear algebra, probability/statistics, calculus, and coding in Python. If you want to see them all rolled together, or to see how familiar you are or need to be with them, check out the Quant Bible. Keep Taleb in mind through it all. If you are curious, you will work through the math on things, independently of what others have done, and then see how well mathematical models apply to the world of finance. Often, it's not so well.


My recent fun as a quant has been with Kelly bet sizing for trades; I discovered a chart trader's Kelly criterion that maximizes trading account growth in a way that traders understand, instead of the full or partial Kelly criterion, with its uncomfortable sizing and drawdowns. It coincides (not surprisingly) with canonical bet sizes that every veteran trader knows, but does it better. And gives me a theoretical reason why those canonical values exist. But to do things like this, or understand and criticize modern finance theory, you need to learn the math. When you've learned it, you can also have fun reading things like Nassim Taleb's Technical Incerto or Edward Thorp's The Kelly Criterion in Blackjack, Sports Betting, and the Stock Market by one of the original users of the criterion, and probably one of those who wielded it best.

Based on studying Nassim Taleb's body of work, the appearance of standard deviations and the products thereof (e.g., Sharpe ratios) in any text causes me to revisit the text's conclusions to see if they are valid without them (including the works cited in the Day Trading section above), and to be aware of normal assumptions in my own work.