Alpha Trader: The Mindset, Methodology and Mathematics of Professional Trading

This book has it all for trading beginners, and I’m sure its a good read for veterans as well. It touches on the traits that make good traders, the mindset required to succeed, trade idea generation, and the mechanics of risk management. There are plenty of illustrative examples including some of Brent’s real trades. I’m so glad I found this piece. It has already improved my trading.

Brent has outdone himself with this book. Alpha Trader is a deep read. Read this book and then re-read. If you just started trading after the Covid-induced lockdowns, you may think trading is easy and the “stonks” always go up. But market conditions keep on changing, and if you want to continue making money, you need to read this book.As someone, who has been an institutional trader for all his life, I have faced many challenges. Brent’s book addresses each of those challenges in detail. Mr. Donnelly is not just an astute observer of the market, but also a keen observer of human behaviour.Alpha Trader is not just another ebook on a moving average crossover strategy with the MACD filter. Rather, it’s a tome on trading - covering all its aspects such as psychology and building a trading idea from scratch. Some noob traders may find the book boring - but if they persist through the book, they will save themselves years of pain and many hundreds of thousand of dollars in costly mistakes.Trading is not a sprint - but a marathon - and this book provides you tools to survive and thrive in this marathon.I wish Brent was my mentor when I started trading. But having his book on my trading desk, is the next best thing!

I highly recommend Alpha Trader. This book will help you become a better trader (if you apply it). There are so many golden nuggets and hidden treasures in this book. The chapter on Smart people do stupid things will make you more than the cost of this book. Within that particular chapter the Grizzly bias will definitely open your eyes as it did mine. There are usually 2 types of trading books out there, 1, books that tell stories, which are fun to read, 2, books which are more technical/fundamental and are more like textbooks. The author, Brent Donnelly, is able to combine both styles to make this book fun and easy to read. If you are to purchase anything outside of data/software for trading, make this be that purchase!

I have been following the models as introduced in Forecasting and Timing Markets: A Quantitative Approach for my investing/trading and achieved moderate success. Now after studying this book, I felt that I should be able to achieve even better performance with all good points I have learnt and carefully marked as shared below. This review should help not only other potential readers but also myself as I can easily come back here and warm myself up by going over those good points for more successful investing and trading decisions.I am really grateful for the author's generosity of sharing his thoughts and here we go:======#1 General formula for trading success#2 Nothing beats experience#3 Solving for how to generate alpha in highly-efficient markets is one of the toughest puzzles on earth.#4 System 1 executes quickly without much thought. System 2 requires conscious effort and thought and is less biased.#5 Alpha Trader = rational + intelligent + skilled + conscientious + calibrated confidence#6 There is no single x-factor in trading.#7 PLAY THE LONG GAME#8 Changing bet size is the way card counters beat the dealer in blackjack. They look for opportunities with abnormally good odds and then make large bets on those events.#9 There are specific bad habits, mistakes, unhealthy mindsets and persistent errors that lead traders to fail, ..., including over-reliance on simple indicators.#10 "I got absolutely crushed, losing 1/2 of my prior year's P&L in the first four weeks."#11 If you want to gamble, go to a casino.#12 Flat is good. A trader with no position has no bias.#13 Make fewer, higher quality decisions.#14 "One thing you learn after five years or so of working on Wall Street is that most "forecasts" you read are simply extrapolations of current trend" (or stretching of current trend - my own word).#15 Watch for changes in supply and demand in your market after large price changes.#16 "... generally you will see that when something is going up, it is forecast to go up more and when something is going down, forecasters expect it to keep going down."#17 "technically they are not forecasting, they are just nowcasting."#18 Trading mean reversion all the time can be like trying to catch falling piano.#19 Different styles work at different times.#20 No matter how unlikely an event might be, it's not worth taking the other side so that it can blow you up.$21 Humans are built to see patterns, even when none exist.#22 Most patterns in finance are random. You need to find evidence and use logic before accepting a pattern as meaningful.#23 "Turnaround Tuesday"#24 "Apple's gapping lower! Somebody must know something." Nope. No. No.#25 Alpha Traders have a strong basic understanding of numbers and statistics. You should constantly be working to improve your numeracy.#26 Where are we in the interest rate and economic cycles?#27 Bonds don't predict stocks.#28 Regularly predicting a crash is for people that want clicks and followers, not for people that want to make money.#29 You can't dabble in 14 products and expect to have an edge. Occasionally, traders can be experts in a particular strategy and apply that strategy across products, but in general most traders that succeed have knowledge that is narrow and deep, not shallow and wide.#30 When gap risk is extreme or hard to estimate, avoid it. The risk is not worth the reward. Avoid gap risk. Avoid gap risk. Avoid gap risk.#31 Excellent traders understand the importance of the story the market is telling and can see, hear and feel when that story is changing. They know what is common knowledge, and what is not.#32 Study the central banks. If you are a macro trader, this is obviously key.#33 Drivers and catalysts. Growth, inflation and global monetary policy are the main drivers you need to worry about.#34 You must be properly prepared, have an expert level knowledge, and understand the narrative. Then when important news comes out, you can react quickly and take massive, determined action.#35 September is historically the worst month for risk assets (weak seasonality).#36 Strategy means coming up with trade ideas and tactics means how you execute and implement those ideas.#37 "I have seen enough evidence to conclude that technical analysis is not a source of alpha or edge."#38 "I use technical analysis in my trading every day. I just don't use it to predict markets."#39 Good traders are quick to admit when they are wrong. They make leveraged, asymmetric bets. Technical analysis can help you do these things better and provide strong and clear signals of when it's time to give up on a bad idea or take profit on a good one."#40 Remember: alpha traders do not use technical analysis to predict the market, they use it to optimize execution and risk management.#41 Your success or failure in trading will not be determined by the technical indicators you choose, and it will most certainly not be determined by which parameters you choose for those indicators.#42 SENTIMENT AND POSITIONING. 80-90% of the time, sentiment and positioning just follow price so if you trade against sentiment and positioning you are often just fighting the trend.#43 If you can identify a palpable turn in sentiment via observation of behavior or via data analysis, you can position ahead of the crowd.#44 Some hedge funds make all their trading decisions using macro analysis but then simply filter every idea with one or two simple technical indicators. ....... This approach of trading macro with a technical filter is an excellent model.#45 You can do everything else right but if fail at risk management, you automatically fail at trading.#46 Risk management is the most important skill in trading.#47 Remember the Rule #1 of trading is: don't blow up.#48 Luck is a short-term thing. In the long run, skill prevails.#49 Type I: Run of the mill trade you would do on any given day. Type II: High conviction. This is a trade where something unique is going on, but not a watershed moment or extremely rare event. Type III: Outlier opportunity.#50 "Bulls make money, bears make money, and pigs get slaughtered."#51 "I think diversification and all the stuff they're teaching at business school today is probably the most misguided concept everywhere."#52 Fewer trades = better trading = lower transaction costs = easier risk management.#53 It feels SO GOOD when you sell the ding dong highs or buy the ding dong lows but it's not something that can be done on a regular basis.#54 In other words: be nimble. Good traders are flexible and are not biased toward a particular direction in any market.#55 Cut your losses, run your winners.#56 New narrative identified or existing narrative is stale or nearing exhaustion.#57 Perfect is the enemy of good.#58 It is easier to react to events than predict them.#59 The run-up trade is a phenomenon where prices move in a logical and predictable direction in the days leading up to a major event. These run-up trades are often easier to predict and monetize than the events that follow.#60 obvious trade versus lotto ticket trade.#61 The final major source of trading ideas (after narratives, news, and dislocations from fair value) is pattern recognition and indicator scanning.#62 Professionals who self-evaluate, set specific goals, and create clear action plans outperform those who don't.#63 Healthy body leads to healthy mindset.#64 Rely as little as possible on willpower and as much as possible on the power of habit.#65 A true professional works hard and does their best each day, even if they don't feel like it.#66 Everyone has a money vs. happiness curve.#67 Watch less TV. Or no TV.#68 If you have heartburn, don't take a pill to fix it, figure out what foods are causing it and stop eating them.#69 There is no single trading methodology that will work always and forever.#70 The idea is to know something before everyone else, and then get out once everyone knows it.#71 "My final P&L that day is +$48,500, the best day anyone had ever realized in that office to that point."#72 Indexes don't tell the full story.#73 "... but sometimes a good decision leads to a bad outcome ... or a bad decision is rescued by good luck."

I had several people recommend me this book. It's a cool book, but much like a lot of these trading books there is little technical charting information in it. I have read so many trading books they are all the same to me. I just want technicals. Not stories about your trading floor, the generic pyschology and money management chapters in every book. It gets old. The book is well done. I do like it a lot. Do I think it will help make the average retail trader money? not likely. Is it thoroughly interesting and great to read, yes. This would be an amazing book for someone who is getting started working as a trader for an institution. Thats likely 1% of the people who read it.

If you trade, this is a must read! I ordered the audio book and was blown away with how well structured the book was, I decided to buy the hard copy. I have read many books on trading and this is by far one of the most in depth books on being successful trader. I have been active in the markets for over 25 years and Brent Donnelly gives you an in depth look at what it takes from mindset to position sizing. He goes from before, during and after the trade. A very well written book!

This book is truly an insta-classic. Brent is exhaustive, witty and helpful in this well written but dense book about the overarching game of trading, and with good coverage of professional prop trading to boot.My only concern would be a new trader reading it and being discouraged by Brent's sometimes somber and honest tone, which is frankly great in its own regard.But this book lives up to its Five Stars and is terrifically informative. A thing or two will be learned! Enjoy