Last Updated on December 2, 2021 by Oddmund Groette
Why programmers and coders are bad traders
It boils down to one thing: they look at the market like science. But the market is completely different from math and other sciences. The market is non-stationary, non-binary, and evolves all the time. You need “alpha-skills”, not “coding skills”, to succeed in the markets.
We have been in contact with numerous traders over the years. Many of them have enormous technical skills far superior to our own. They start trading enthusiastically – often by making their own software and programs – but unfortunately, their optimism stops when they realize their technical skills don’t produce any profits.
Programmers and coders believe the market is binary
Programming is based on binary logic: 0 or 1 – true or false.
Unfortunately, you can’t transfer this logic to the financial markets. The market doesn’t operate like this. The markets are non-stationary, evolve, and change all the time. Moreover, prices are often set by irrational participants. It’s a chaotic place that overreacts frequently.
Markets are not based on logic – often news makes the price go completely counterintuitive ways.
We believe programmers/coders have it completely backward. You need to learn how to trade before you’ll ever have any use of any coding skills.
Trading knowledge trumps coding by a wide margin
We believe it boils down to this: Without the correct mindset and creativity, it doesn’t matter what technical skills you have. Knowledge about trading trumps coding by a mile. So-called “quants” are completely worthless without some street smartness.
For some reason, many programmers believe that their coding skills will make them successful in trading. But the world is full of quants, and just a small percentage are successful.
It takes time to build knowledge about trading. We are talking about years, even decades, while coding can be learned by logic in a much shorter period of time.
Traders better be long on experience and creativity
Youth doesn’t guarantee creativity, and coding knowledge doesn’t result in alpha or profits.
Trading requires an open mindset, creativity, and a huge degree of “street smartness”. Coding doesn’t hand you these assets. Passion beats expertise and complexity.
Free education is abundant, however, but the desire to learn might be scarce.
Coders and programmers waste time on programs and apps
One thing we have noted is that independent “coder traders” seem to have one thing in common: They spend a lot of time developing programs, apps, scanning functionality, etc.
They believe their skills in coding and logic will make them money.
Let’s give you one example: One programmer wanted to make his own trading platform and subsequently spent over a year coding a trading platform with an API bridge to his broker.
What is he trying to accomplish? For example, Amibroker and Tradestation, the programs we use for both backtesting and trading, is a cumulative package of over two decades of knowledge and feedback from thousands of traders. What these programs don’t offer compared to your own proprietary program is beyond us. The ready-made options in the market are almost endless. Why invest your time by reinventing the wheel?
Traders or programmers – who make the most money?
That being said, programmers, in general, probably make more money than traders. If you’re a good programmer you are more likely to be much better off by sticking to a regular job. Coders are in demand and salaries are good.
Programmers get paid a monthly salary while the great majority of traders only are prey for bigger traders further up in the food chain.
Trading and coding are professions that are completely different: it’s a choice between scalable vs non-scalable professions.
Trading is highly scalable, ie. if you are successful you can quickly scale it and make millions. The downside is that very few traders make it big.
To sum up: Why programmers and coders are bad traders
Do the best traders possess great technical skills or “alpha” skills”? By alpha skills we, of course, consider their trading skills and how to make money in the market.
“Alpha skills” are much more important than coding skills.