Why do you need a trading computer setup vs. an off-the-shelf machine? People ask me all the time, Can I just go down to Best Buy or Costco and buy a computer off the shelf?
And that’s a good question. But really, what it boils down to is what I call the trader’s biggest misconception…the number one misconception.
What most traders don’t understand, is not realizing the sheer quantity of data that’s pouring into your trading computer all at the same time. It’s like a fire hose of real-time data.
As our Internet connections get faster, it literally is a continuous firehose of data when the market opens.
It’s not like when you go to a web page, you go to Amazon, and you pull up a product. That’s just a static page; there’s no continuous flow of data.
Real-Time Stream of Data Example
Let me give you an analogy so we can talk about this a little bit.
When you go to Netflix and you go to start a movie, have you ever seen this, the little circle or spinning wheel? This is something called buffering.
What your computer is actually doing as it connects to Netflix or YouTube or some other service… any website that sometimes when you have to log in, there’s a bit of a delay… what your computer is doing is it’s taking in a giant stream of real-time data.
So in the example of Netflix, it’s taking a giant, real-time stream of high-definition stream of data, and your computer’s processor is turning that data into the gorgeous high-definition picture we’re all now used to seeing.
The machine is actually gathering all this data, putting it all together into an image before it shows it to you. The machine wants to make sure it has enough data to show you a perfect picture. And that’s called buffering.
What Is Slippage?
Here’s where the problem comes when it comes to trading. We take in a very similar level of data, a continuous level of data, a firehose level of data, similar to a high-definition movie. But we do not have time to buffer that data.
Your computer has to turn all that data into charts and into indicators in spot-on real-time. Your prices have to be spot on to the nanosecond. The same with your charts and indicators. Because if your computer can’t handle all the data that’s coming in, a bottleneck will develop. And what’s displayed on your screen will be slightly stale, slightly old.
In other words, your pricing and your indicators could be a fraction of a second to even as much as several seconds old. So the prices you’re seeing on the screen and your indicators that you’re seeing on the screen are several seconds off.
And so when you put your orders in to buy and sell, you’re going to get order executions that don’t match up to what you expected. This is something called slippage.
It could be any security, but imagine you put a market order in to buy Apple at $358.20 cents, and you get filled at $358.72, because the price that you saw on your screen is not a perfect match to where the market really is. That is called slippage.
Internet Delay Issue
So, I’m sure you guys have been watching CNBC lately, and everyone’s working at home. So you see these folks here on CNBC, like a little panel of people, all working from home, right? We’ve all seen this. They’re all using the Internet.
And have you noticed when they have these panel discussions, there seems to be this little delay from when someone stops talking until the next guy starts talking? Sometimes they wind up talking on top of each other because they think it’s their turn to speak.
That’s because of that little Internet delay, the Voice Over IP delay. It’s a signal processing issue.
As traders, we cannot have any delay like that in our market data. This is the little time delay I’m talking about.
And that’s what can happen with your trading computer if it’s not fast enough and powerful enough to take on all that real-time data, turn it into your prices and your charts and your indicators in spot-on real-time.
And that’s the trader’s biggest misconception, not realizing they’re taking in so much data, this fire hose worth of data.
When you put that market order in and you get filled at a price that you didn’t expect, that is something called slippage. And it’s infuriating when it happens. Has that ever happened to you? It’s an awful feeling.
Trading Psychological Triggers
And if it’s happened to you, you’ve probably done what this guy’s doing. Have you ever yelled at your computer screen, maybe cursed at it? That’s what happens when your machine’s not powerful enough.
And you know what? I’ve been trading for over 30 years. If you get triggered psychologically while you’re trading because of bad execution, unfortunately, the truth is if you get triggered psychologically, when you’re trading, you tend to make a series of bad decisions, a series, a cascade that can get out of control.
The more pissed off you get, the worse your decision-making. This is called the fight or flight response.
So the last thing you need is your computer giving you a hard time. So, there are so many other things that you need to be thinking about when you’re trading. Your trading computer really needs to be spot on.
Trading Computer Help
We are here to help you build a trading computer specific to your needs. It doesn’t matter if you are a veteran or a new trader. Traders of all kinds seem to have the same questions when it comes to computer technology for trading. Call us at 800-387-5250 with any questions you might have or look through our Desktop Trading Computers or Laptop Trading Computers to see what we have available.
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