Adam Carroll: When Money Isn’t Real, The $10000 Experiment

This is a good video that can help explaining why transition from sim trading to trading with real money takes some planning and efforts to smooth out the process. My advice – treat sim trading as seriously as you can similar to what pilots do while in training with their flight simulators. This will make sim trading working to your advantage instead of implanting bad trading habits.

Jonathan Bricker: The Secret to Self Control

Jonathan Bricker is a researcher on behavioural change. His work shows that discipline alone is not enough to induce changes on negative behaviours or habits. Instead, having a strategy based on acceptance and commitment allows for much better chance of success in permanent behavioural changes.

For traders who have impulsive behaviour like over trading and deviation from their trading plan during trading, it is a good introduction on what is necessary to correct the behaviour.

Jihan Bowes-Little: Trading as a Way of Life

A trader who works for GS giving a talk about being a trader.

Notice the whole talk sounds right because it is playing right into what people perceive to be the right way to trade but it is actually a formula for guarantee failure if you are trading your own money.

Do not get me wrong. The training of firm traders making them aggressive at times is actually the perfect way to optimize performance for the firms in aggregation. The risk control part is taken care of by the risk control officers. This is drastically different from individual traders trading their own money. Traders trading their own capital have to be responsible for their own risk control.

The main issue with the attitude of betting it big when you know you are right is that there is no such thing as you know you are right. It is just you think you are right. But this attitude is necessary for the firm traders to have conviction with their trading ideas. Big firms hire these traders to take risk, not being conservative. As long as they are betting within the sanctioned risk parameter, they are encouraged to be as aggressive as they can be.

For normal traders trading their own risk capital, the real edge is defensive money management. It is also the reason why many firm traders cannot make money on their own when they leave the big firms. Many of these firm traders have all the wrong things programmed into them that they are no longer capable of proper risk control.