Biggest Trading Technology Mistake

Check out the How To Trade It podcast with Casey Stubbs titled Preventing “Slippage.” Casey and EddieZ discuss what the biggest trading technology mistake is. Listen to this segment or read the transcript below.

Casey: 

And anyway, let’s get to some real value here that’s can help some traders. What’s one of the biggest mistakes that traders make now with their technology?  

EddieZ:

The biggest mistake for sure is traders not understanding how much data is coming through your internet connection. The sheer waterfall of data that’s coming in through your broadband connection. For example, if you are running Think or Swim or Ninja Trader, Trade Station, or any of the major platforms, and you have got a handful of symbols or maybe you have 50 symbols or a hundred symbols. I know I easily have a hundred symbols in my platform. You have tons and tons and tons of streaming data coming in when the market is open. You have all the tick data coming in for your symbols and then you have all of the volume data. You might have all of the time and sales data coming in. You might have a newsfeed coming in and then outside of your trading platform, maybe you’re running an online class for example on Zoom. Maybe you have a zoom room, one of these trading rooms open or you have a newsfeed coming in. 

You have so much data coming in and if your computer really isn’t up to speed, the data in your trading platform might be a fraction of a second to even like up to a second old and stale. So, what happens is when you enter an order to buy or sell a security-like stock, for example, let’s say you go to put in an order to buy Apple at $125 and 10 cents a share. That’s where you see it. You hit market but by the time you get filled, you get filled at like $126. You can see in front of you when you put it in. It wasn’t trading there, but then a few seconds later, all of a sudden, it’s trading there.

That’s because the data on your screen was like a microsecond to a second old and it was stale. That’s because your computer is literally a bottleneck for all that data coming in. Let me give you a couple of examples. It doesn’t seem like it’s so much of an issue on Netflix anymore, but you go to Netflix, you go to load a movie, it takes a second or two to get that movie started. In the background, that second and a half is buffering.  

Casey:

Yeah. There’s a little wheel that goes around sometimes. 

EddieZ:

YouTube. Here’s a better example. You turn on CNBC and they got a panel discussion going on and everyone’s located in their little home offices. Which I find very amusing these days, everybody’s with their rock band posters in the back or they all sitting in front of the bookshelf. These are all the books I read. I find that very amusing. Anyway, they’re all in a different location and have you ever notice that there’s like a little delay? Someone says something and then there’s a delay before the other person responds or sometimes, they start talking over each other.  

Casey:

Oh yeah. I notice that all the time.  

EddieZ:

That’s the internet. That’s like that little delay in the internet. Voice over IP or video over IP. That can happen if your computer isn’t up to speed or your internet is slow. These kinds of things can throw off your trading methodology and it can really cost you a fortune if you’re doing any type of program trading. If you’re sitting there and you put in an order to buy Apple like I said before, and the price you get filled at is not what you expected, it’s going to trigger you. It’s going to trigger your fight-or-flight response. You’re going to get pissed. And you know what? The next series of trades you make after that are not going to be good. You’re going to go into revenge trading. I know I’ve been there.  

Casey:

Then you do things, you don’t even know what you’re doing. You just do stupid stuff. It’s like, what was I thinking? Well, the problem is you’re not thinking. You’re just responding.  

Eddie Z:

Exactly. Your amygdala is doing the thinking for you. That never leads to good trades. People call us sometimes. I can’t even believe, you know, they’re trying to trade on a 12-year-old computer. Did they buy in the dream? They found some system they want to trade and they’re really trying to trade on old technology. It just doesn’t work. Your computer really needs to be up to modern speed. That’s the most important thing. Your processor, your graphics card, and then, after that, it’s your internet speed. Really important.  

TRADING COMPUTER KEY ELEMENTS

Casey:

You did it in threes. Number one is processor, number two is graphics card, and then the third is the internet speed. Those are the top three? 

EddieZ:

Yes. 

Casey:

Okay.  

EddieZ:

We can talk about that.

PROCESSOR

Casey:

Yeah, talk about the processor a little bit. Why is that so important and what does that do? 

EddieZ:

So the processor is the engine of the computer and you really need an eight-cylinder. Power muscle car.  

Casey:

Like my truck. 

EddieZ:

There you go. You got a Hemi in there.  

Casey:

Yeah, that’s exactly what I have.  

EddieZ:

You got a 392 Hemi Dodge Durango SRT? 

Casey:

I got a 1500 RAM. 

EddieZ:

There you go. You need a muscle car engine to be able to take in that waterfall data, turn it into all those charts. Number one: take in the data number, number two: turn it into the charts, and if you’re running different timeframes. I have like four different timeframes on Trade Station. Then if you have indicators, every single symbol is processing every indicator at the exact same time. Every indicator is essentially a little computer program, little algorithm running on every single symbol, possibly at multiple timeframes. You have a lot going on.  

And then if you have a Zoom class going on or maybe you have CNBC coming through the computer. Your computer is busy and you need the processing power to handle that. I like to talk about it in terms of horsepower or in the computer world, we call it your benchmark score. If you take your processor. If you were to take your car down to the dyno shop, the place where you modify your car to make horsepower. You would put it on something called a dynamometer. That’s where they measure the actual horsepower coming out of the back wheels. We do the same thing with computers. Your Dodge Ram 1500. What do you have like 475 horsepower?  

Casey:

You know, I don’t know. I’m not that much of a car nerd. 

EddieZ:

If you have the Hemi engine, you probably have at least 400 horsepower, which is plenty to get you to accelerate onto the highway. Easily get up to 80 or 90 miles an hour with no effort whatsoever. For computers, we have this thing called the benchmark. And the benchmark score we’re looking for these days, to keep up with the real-time data coming in, is 19,000. And you might be wondering, well, where do I go to measure my benchmark score? We’ve set up a special link that Casey will put in the show notes where you can go and test your computer’s benchmark score.  

Casey:

To get the benchmark, you just go to eztradingcomputers.net/cpu. When you get there, what will people find and how will that benefit them to check their benchmark?  

EddieZ:

When you get there, there is a video where I walk you through how to find out what CPU is in your computer. And again, CPU just means Central Processing Unit or processor. That’s what we’re talking about here. I’ll just walk you through that really fast. It’s really simple. If you are, this is for a Windows computer. I do know for a fact that at least 80-85% of people are trading on a Windows computer. We can talk about why that is afterward. Just click the start button and just start typing the word ‘system space information’. And it will auto-populate system information and just open that box up. Just click on that and open that box. On the right side of that window that opens about the 10th or 11th line down, you’ll see a line that says processor and it will tell you exactly what processor is in your computer.  

When you get to that page eztradingcomputers.net/cpu, I will walk you through this in the video, so don’t worry about that. What you’ll do is write down the processor that you have in your computer. When you get to the next page, you’re going to enter your computer’s processor. When you enter your processor, the processor you have and click submit. Eventually, it’s going to get to a page that shows you your benchmark score. There’s a set of videos that explain everything we’re talking about now on how to test your benchmark score. Basically, we want that benchmark score to be at least 19,000.

Casey:

I want to just direct people so if they’re listening in their car or on their phone, and they’re not in front of a computer, the link will be in the description. When you get in front of a computer, your trading computer, you want to make sure that you do this. You just find the link. But the reason they want to do it is, to see if they have enough performance to be trading efficiently.  

EddieZ:

Correct. They want to make sure their computer has enough horsepower that they’re not driving around on the internet with a four-cylinder FIAT, you know, trying to race people.  

Casey:

It’s like you’re trying to go up that hill man and you just don’t have the…they say there are no guts here. Which is not going to go.  

EddieZ:

Exactly, it’s not going to do it. You have got to remember; you’re competing against sometimes flash traders. These mega computers are trading against you. You want to make sure you have enough power to get it done. You want to make sure you never experience that thing we call slippage. Again, slippage is when you enter an order to buy or sell and the price you get filled at is really different than what you expected. You want to avoid that. That’s the key. That’s the biggest problem. Sometimes people are trading on their phones. I think that’s crazy. 

Casey:

Let’s talk about that just briefly because I won’t trade on my phone. I mean, every once in a while. The phone’s processes are pretty powerful now, but again, you’re going to get more slippage on a phone? 

EddieZ:

You’re going to get more slippage on a phone. Look, you have an alert go off and you have your computer talking to the phone. Like Trade Station and Think or Swim. You could send yourself an alert when something breaks out or something breaks down. You’re standing in the supermarket and you see a trade you really want to take and you want to do it on your phone. Absolutely. Go ahead. Just don’t expect to have the best possible execution you can. 

Casey:

In trading, you know this, every little edge will make a difference. This is a long-term game. Every time you get slipped, it adds up. You want to be thinking big picture. If you’re going to trade on your phone and you’re going to accept the fact that you’re going to get some slippage. That’s fine, but I won’t accept that because I don’t want to impact my performance in any way, shape, or form.  

EddieZ:

Right. There you go. Exactly.  

Casey:

Just out of curiosity, is there a benchmark for phones?  

EddieZ:

I haven’t tested this, but I believe if you take your processor on your phone and you plug it into that tool on my page, it will tell you the benchmark score. I’ve never tried it. I think it is on Android, I’m not an Apple guy.

Casey:

Don’t talk to me about Apple. 

EddieZ:

There’s a reason for that. Maybe it goes back to my childhood story.  

Casey:

For me it does, yeah. 

EddieZ:

Somewhere under system information or system on Android, under the settings, I think you can find your processor. I know if you take your exact phone model and you type it into Google and you ask it what processor. You should be able to figure out what processor you have and try it in my tool. I think it has phone processors in that database. 

Casey:

I might do that because I’m just curious. Another question about processors. 

EddieZ:

But there’s another issue there. And that is trading over the cellular network. 

Casey:

Is much slower. 

EddieZ:

Much slower. 

Casey:

Way slower.  

EddieZ:

Yeah.

Casey:

You’re automatically going to get worse speeds.

EddieZ:

You’re standing in the supermarket and either you’re on the cellular network or maybe you’re plugged into somehow, maybe one time you went in there and you set your free Publix or Albertson’s WiFi up. So maybe you’re connected to their internet at one megabit per second and that’s going to slow you down.

Casey:

The other thing, just for traders, just use limit orders and if you don’t get the fill, that’s okay. At least you get the price you want.

EddieZ:

There you go. Yeah, that works.

Casey:

I hate limit orders though.

EddieZ:

I do too. When I want something, I want it right now. 

Casey:

And there’s nothing worse than putting a limit order and watching the thing go away and you miss it.

EddieZ:

Ugh, the worst. You’re right. I don’t use them either.  

GRAPHIC CARDS 

Casey:

I want to get to the graphics card and the other thing, but I got one more processor question. I’ve got an AMD and my benchmark score is pretty good. Is there any noticeable difference between Intel and AMD processors? What is your take on that?

EddieZ:

It’s an excellent question. Up until 2019 we only recommended Intel, but AMD has really come through in the last three years and their high-end processors are very, very powerful. Not only that, they’re at a slightly better price point than Intel. They have kind of taken a lot of the high-end market away from Intel, which is one of the reasons that the price of the stock just went berserk last year. AMD while Intel actually went down. AMD went crazy.  

Casey:

Plus, AMD has got a massive graphics card market. That market has grown a lot. 

EddieZ:

Right. Exactly. Not as big as in video. It’s also their processors. I would say over 50% of the machines we sell have AMD processors. Their high-end stuff is really, really good. Powerful. 

Casey:

So, either way though, they’re both pretty good? 

EddieZ:

Yes. Some people are just intel and only Intel. I’ll only ever do Intel and that’s fine.

Casey:

I love Intel. My aunt worked there. I have a long history with Intel, but I have an AMD processor. 

EddieZ:

You’re in good shape. AMD does make good stuff. Just make sure it has a benchmark score over 19,000. Let’s say you bought a laptop in 2015. AMD had a lot of the low-end market for many, many years and that’s really where they focused. Just because we’re saying you have an AMD processor, you’re okay. That is not what we’re saying. We’re saying, make sure it has that benchmark score of at least 19,000 horsepower or you’re going to run into problems. You have thousands of thousands of low-end AMD processors out there that you’ll see a benchmark score of 2,500 and you just won’t have the horsepower.  

Casey:

Okay, now we’ll switch gears here and talk about the graphics cards. How do we know what we need for a graphics card? How many monitors do we need? And is there a benchmark for graphics?  

EddieZ:

There is a benchmark for graphics, but I would say in general, as long as you have an external graphics card. Processors today, many of them will also handle graphics. We were talking about processors, many of them will handle graphics as well. You want to avoid doing that. You don’t want the main processor handling the graphics also. Because then you’re going to have shared resources and you don’t want to do that. 

If you are getting ready to purchase a new computer or your computer is a couple of years old and you have a separate graphics card, most likely, you’re in good shape. The graphics that are required for trading, the graphics cards, that they’ve come up in power by like a factor of a hundred way more than processors have. So as long as you have an external graphics card, I’m sure you’re in good shape.  

That’s also a key with laptops. Most laptops that you buy are using a shared processor. If you’re out to buy a new laptop, number one you want that CPU where the processor to have a benchmark score of 19,000. Then you also want it to have a discrete video card. 

Casey:

And that’s a big thing now is getting trading laptops as well. I’ve actually never had a trading laptop, but I know a lot of people are doing it. 

** ADVERTISEMENT **

EddieZ:

Yes. But it is the same rules basically. You want a CPU over 19,000 and you want to make sure you have a separate graphics card. As long as you do that, you’ll be fine.  

Casey:

Yeah, I don’t know a lot about graphic cards. I know that for my son, I just installed one on his computer for him and the thing was massive. It was so huge. It had like three fans. It had like 8 or 16 MB of RAM. I don’t even know if it had a processor on it. It was insane.  

EddieZ:

They have something called a GPU or Graphics Processing Unit. That for trading is overkill. You do not need that for trading. Maybe if you’re gaming. 

Casey:

If you’re a trader/gamer, which I’m not. 

EddieZ:

Well, you’ll be fine with one of those, but they’re very expensive. They’re like over, I bet you he paid $700 or $1,000 for that thing, and you don’t necessarily need that much power for trading. There are some good workstation cards that you can pick up for like a little over $200 that will run four 4K monitors and they definitely get it done for you. Those are the Quadro cards. They will get it done for you.  

MONITORS

EddieZ:

One question you mentioned is how many monitors. 

Casey:

Yeah.  

EddieZ:

It is an interesting question because I used to be a monitor addict. I’ve kind of learned as I’ve aged that multitasking is hard. We’re not really designed; our minds are not designed to multitask as much as we would like to. I’ve taken it down to six. 

Casey:

When was your max?  

EddieZ:

My max was eight. Then I have another computer to the side that I do my webinars on with just two. 

Casey:

I’m actually thinking of, I have six too, but I’m thinking of maybe doing like three.  

EddieZ:

It’s not a bad idea. 

Casey:

I’m thinking about, I have the six, but I’m thinking about maybe one really long one on top and then maybe three on the bottom, maybe four, trying something like. 

EddieZ:

Here’s my recommendation to people. I think four is probably the sweet spot. If you’re going to use multiple monitors, try to spread your trading program over as many of the monitors as possible. Only use one for email and other stuff. You don’t want to get too distracted if you have too many things open at the same time. And look, I’m running a business. I got Skype up, I have Slack, I have two different email accounts, I have an Excel spreadsheet, and then I have Trade Station. Once in a while, I’ll open Think or Swim as well. That’s because I’m running a business also. But if you are just trading, you want to just use those monitors for charts and stuff. That’s my opinion because I’m a multitasker, but again, I think sometimes we get too much into multitasking.  

Casey:

I think I’ve permanently done brain damage.  

EddieZ:

We all have ADD.

Casey:

I can’t focus on anything anymore. I used to be able to sit down and work on something. Now I’m like, okay, I’m looking here and the next thing, I’m looking at this. My attention span is like 10 seconds and I just, my brain is slow and I don’t think it’s because I’m old. I think it’s because this too many monitors have messed me up.  

EddieZ:

Yeah, and the phone. Then if your phone’s sitting there. Oh, there’s no doubt. I totally agree with you. I think we’ve all given ourselves brain damage from sitting in front of these machines for too long. That’s why I’ve taken the monitors down a little bit. I agree with you wholeheartedly. I mean, I don’t know. I’m married and I think my wife has also picked up the ADD as well. Hopefully, it doesn’t translate into conversations.