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Alpha Trader

Alpha Trader Summary

Alpha Trader: The Mindset, Methodology, and Mathematics of Professional Trading Trading is a chaotic, complex, and loosely-structured game played by the smartest minds and most expensive computers in the world. It is the ultimate puzzle. Few can trade at an elite level for an extended period. The game is constantly changing and the rules, mechanics, and probabilities are difficult to observe and forever in flux. Just when you think you’ve got a plan: BAM

You get punched in the mouth.

Trading attracts intelligent, driven individuals who see enormous financial rewards and few barriers to entry. But no amount of intelligence or skill is enough if you are irrational, undisciplined, or overconfident. The best analysis is useless if you keep reaching for the self-destruct button. How do you survive and excel in this high-stakes competition? How do you become an Alpha Trader?

The answer is mindset, methodology, and math.

ALPHA TRADER is not a behavioral economics textbook and it is not a boring, theoretical deep dive into trading psychology. It’s a practical guide full of actionable information, exciting and relevant trading floor stories, concisely-distilled research, and real-life examples that explain and reinforce critical concepts. The book details the specific strategies, tactics, and habits that lead to professional trading success. It will help you become more self-aware, rational, and profitable.

This book will make you a better trader. It will help you unlock more edge and it will motivate you to become an expert in your market. It covers practical and essential topics like strategy vs. tactics, microstructure, market narrative, technical analysis, sentiment, positioning, and systematic risk management. It will explain the importance of adaptation, rational thinking, behavioral bias, and risk of ruin.

Brent Donnelly, the author of ALPHA TRADER, has been a professional trader for more than two decades and has been writing about macro and markets for more than 15 years. His writing style is engaging, approachable, and entertaining and he has the experience and knowledge of a veteran professional trader. His first book, The Art of Currency Trading is a bestseller and has received rave reviews.

Brent has worked as a senior FX dealer at some of the biggest banks in the world. He has traded global macro for a Connecticut hedge fund, and he has day traded equities with his own money. He loves trading and he loves writing about it.

ALPHA TRADER is for traders of every skill and experience level. Veterans and rookies alike will benefit as the book digs into topics like self-awareness, discipline, endurance, and grit. Learn the common traits of winning traders, the myriad sources of trader kryptonite, how to improve your decision-making, and how smart people do stupid things, all the time.Professional trading is a lifelong journey of self-improvement, struggle, adaptation, and success. This book will help you level up on that journey.

About the Author

Brent Donnelly has been trading currencies since 1995 and is currently a senior FX trader at HSBC New York. He is the author of The Art of Currency Trading (Wiley, 2019). He writes a widely-read and highly-respected macro and FX daily called AM/FX. Over the course of his career, he has been a market maker, trader, and senior manager at some of the top banks in foreign exchange.
He has extensive experience trading currencies, FX options, stock index futures, NASDAQ stocks, and commodities. Brent is a respected macro thinker with the unique perspective of a senior risk-taker. He has been featured by Epsilon Theory and Real Vision and quoted by The Economist the Wall Street Journal, Financial Times, Bloomberg, and CNBC.

Alpha Trader Introduction

Excerpt. © Reprinted by permission. All rights reserved.


MAY 6, 2010 | 4:55AM

The Connecticut air is cold and damp. The trader moves in silence. He steps quietly through the pitch-black darkness of his Colonial McMansion and toward the door. As he disarms the home security system, the BEEP BEEP BEEP of the keypad code he enters is impossibly loud in the quiet of the predawn morning. He steps out of the house, closes and locks the door, and hops into his car.

As he rolls down the driveway and into the foggy morning, he inserts a Deadmau5 CD and blasts it at high volume in an effort to wake up and get pumped for another day of trading. But this will not just be another day of trading. This will be one of the most insane trading days of his career.

It has been a frustrating year so far. The Eurozone Crisis has been smoldering for months but the trader’s attempts to sell the euro have been met with massive countertrend rallies as the Fed embarks on another round of USD-negative quantitative easing (QE). They call EURUSD a collision of two garbage trucks. The trader struggles to steer clear of the wreckage.

His strongest view recently has been lower USDJPY. There is risk aversion popping up all over the place as markets worry about a domino effect where Greece crashes out of the Eurozone, followed by Spain, Portugal, Ireland, and then finally Italy. Everyone is bearish stocks as the S&P 500 rally from 666 in March 2009 to 1050 now is seen as a mirage; the side effect of a money-printing magic trick performed by central bankers. Totally unsustainable.

EURUSD opened the year at 1.4500 and now trades sub-1.25 so the short trade is hard to stomach. Even when you know it’s the right thing to do, it takes a lot of courage to sell something down >15%. So the trader has shifted his attention to USDJPY and he expects it to go substantially lower as global risk aversion remains elevated and safe-haven currencies like the yen should find demand.

USDJPY has been inexplicably well-bid given recent risk aversion and the Fed’s “money printing”. It just rallied from 90 to 94 on-air over the last two weeks. Meanwhile, the best leading indicator for USDJPY is always US bond yields and they have been plummeting for a month. USDJPY looks completely wrong.

The trader stares at Figure 0.1, which shows US 10-year bond yields and

Alpha Trader PDF Free Download

The chart covers the period up to May 5. This story takes place on May 6. Chart courtesy of Refinitiv

USDJPY. The black bars are USDJPY and the dotted line shows US bond yields. Note they usually follow in lockstep. The divergence is a strong signal to the trader that he should be short USDJPY.

If you look in the top right corner, you can see that USDJPY is a bit off the highs, but not much. Two days in a row, the high has been 94.99 and USDJPY is now bouncing aimlessly around 93.80 as he rolls into the hedge fund parking lot. It is still early so there are only three Porsche 911s in the lot right now. More will arrive later.

This USDJPY trade has been tiring and painful as the trader got short at 94.00 with a stop loss at 95.05 and those two daily highs mean he has come within a hair (6 pips, or 0.064%) of getting stopped out, two days in a row. Holding on to a trade like this is exhausting as his fight-or-flight stress system remains activated for long stretches. Cortisol overload.

Now, he can relax a bit and let things play out. His target is 91.00. The average daily range has been about 1 yen (100 pips) lately so he figures we might get there in the next week or so.

10:45 AM

It has been a boring morning with USDJPY in a tight range. The sun comes out and it’s almost shorts weather outside so the trader decides to go for a run before lunch. Less than a mile into his run, he gets his first indication that this is not a random, ordinary day. His Blackberry rings. Bank sales are on the line to tell him that USDJPY has just dumped 100 points in 15 minutes. Trading 92.80 now… Odd. He turns around and sprints back to the office, Spidey-sense tingling.

By the time he grabs a quick shower and returns to the desk, USDJPY is 91.50. He is short $100 million USDJPY so that puts his profit (aka P&L or profit and loss) around +$2.8 million on the day. That’s more P&L than this trader typically makes in an excellent month. A huge haul. He scans the headlines and Bloomberg chats and finds no good explanation for what is going on. The stock market is down, but not enough to explain the move in USDJPY. This makes no sense. When trade shows a big profit that makes no sense, he likes to cover it and move on.

The trader buys 100 million USDJPY at 91.50. He is back to flat with no position and nearly 3 bucks of P&L in the bank.

He sits there calmly and processes what has happened. He allows himself to feel happy, just for a second. He stuck to his plan and had the patience to sit in a decent-sized position for three days. He relaxes and basks in the satisfaction of a job well done.

Then… Some dumb voice in his brain says:

2.8 million dollars is an amazing day. But… Maybe I can make 5 million today?

And his hands, as if possessed by some mischievous or evil force, move slowly toward the BUY and SELL buttons. For no reason. And like a moron… He goes long USDJPY.

First, he buys $50 million at 91.50 and then another $50 million at 91.25. These are impulsive trades with no rationale. His planned stop loss is 90.85 but before he has time to input a stop loss order, he notices S&Ps lurch lower on a huge volume surge. He puts on his headset and fires up the S&P squawk to see what’s going on.

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Alpha Trader

Alpha Trader PDF

Product details:

EditionInternational Edition
ISBN1736739816, 978-1736739815
Posted onMay 22, 2021
Page Count514 pages
AuthorBrent Donnelly

Alpha Trader By Brent Donnelly PDF Free Download - Epicpdf

Alpha Trader: The Mindset, Methodology, and Mathematics of Professional Trading Trading is a chaotic, complex, and loosely-structured game played by the smartest minds and most expensive computers in the world. It is the ultimate puzzle. Few can trade at an elite level for an extended period. The game is constantly changing and the rules, mechanics, and probabilities are difficult to observe and forever in flux. Just when you think you’ve got a plan: BAM


Author: Brent Donnelly

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