Today we continue with the 2nd in a 3-part series that draws the trendline on the art of trading itself.

Part 1 discussed why scalping, the way the veterans know it, is a tough business to maintain and even tougher to teach to another. Today we’ll describe how active/day trading with a positive, repeatable edge (as Dr. Brett Steenbarger likes to put it) leverages technology and accessible information to put the individual trader on the same footing as any hedge fund manager. The 3rd part of the series ties everything together with our idea for a future WallStrip segment – spoiler alert: the theme is ‘Heroes’.

Part 2: The 3 Ways to Measure A Trader’s Technology

First you should agree with the following 2-point premise:

1. The Right Technology Tools Are As Essential As a Trading Plan to Keep a Trader ‘On the Path’ and Maintain Discipline
2. Technology Represents One of the Biggest Arrows in a Trader’s Quiver Against Larger Market Participants

From that premise a trader’s technology is measured as ‘good’ by its ability to:

1. Make You Better at Trading and Managing Risk
2. Create a Level Playing Field
3. Promote Independent Thinking and Reward a Deeper Use of the Tool

When we came up with the idea to make Trade-Ideas we thought about how to expand the business past the savvy traders who would recognize the need for this type of tool – past the early adopters. We sought to make a product that could automate what I and my fellow traders spent years and years learning by hand; namely, pulling up stocks with the apporpriate set up, right at the most opportune time to pull the trigger. We launched the software in beta at the end of 2002 and knew we were on to something despite the low point that active trading was going through. Whenever large trading losses make the news, people will always criticize.

Today many professional day trading firms embrace our software and specifically what The Odds Maker brings to the table. As a result we feel strongly that active trading is turning a corner with more individuals acting like their own hedge fund and leveraging the right technology to even the playing field with larger, more capitalized institutions. I know it sounds like a big claim, but I see it first hand many times over: an office of traders, where instead of people sitting there (in 2 – 5 positons) looking to jump in and out of things, you have traders in 15 to 45 positions – all at the same time – managing these positions with better risk management. More of the traders’ faculties and concentration are spent on the trade management aspect of the trade with less energy spent on finding the opportunities and eyeballing the risk management techniques.

It is all happening even today as I write this blog on February 14th, I have a good friend of mine at this firm in 19 positions working the odds to his favor. We’ll talk more about the best practices we see in some of these firms in the near future. Until then use this 3-point test on your technology and score yourself. If you have an additional criteria to offer, please share.