THIS Misconception Can Cost You Big Time
What’s up everybody? It’s Eddie Z here from EZ Trading Computers, and you’re watching Trading Computer Secrets.
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A lot of people ask me, Why can’t I just go down to Best Buy, or a Walmart, or some big box retailer, and just get the newest machine off the shelf? The main reason you can’t do this is because of what I call the big misconception.
What most traders don’t realize is the sheer volume of data we’re taking in through our Internet connection. Your computer has to take in a waterfall of data and turn it into quotes and charts and indicators all in real time.
It has to take that data and turn it into charts and quotes instantly. If there’s any delay in taking in that data stream and turning it into useful information for you to make real time decisions, then this can be a real problem.
So think about if you go to YouTube and you click on a video or you go to Netflix and you click on a video and you see the little spinning wheel, the little spinning dial, what your computer is doing is taking that huge data stream from that HD video signal, and it’s working to create that picture for you.
Now when it comes to trading, we can’t have this happen. It’s called buffering. And as traders we can’t have buffering, we can’t have any delay.
Your computer and your trading software are working very hard to take all of the streaming real time quotes and the historical data and then turn them into charts and indicators in milliseconds.
And the more securities you have up, the more symbols you have up, and the more charts and indicators that you have up, the harder your computer is working. So that is the biggest misconception.
Let me give you another example of what I mean.
Have you ever been to a sports bar with your buddies to watch a game? And some of these sports bars may have a variety of TVs. They might have a new 4K TV, a few of the older HDTVs, and they might even have some of those old-school fat-back TVs.
Have you ever noticed that some of the TVs are a second or two delayed from the others?
So look at this example. Look at the TV on the right. You see the guy on the right. He’s actually like jumping up to dunk the ball in a basketball game. And if you look at the TV on the left, this is the exact same game, but it’s like a second behind. Now imagine if your trading and your data’s coming in, and it’s a second or two behind. It’s going to throw off your entire trading methodology, your entire system.
And if you go to put in a market order to buy or sell, and the price you get filled at is different from what you expected, you’re going to experience something called slippage.
As traders, I think we’ve all experienced this at least once — you click the buy at the market, and there’s a tiny delay in getting filled. Or maybe you get filled instantly, and then you see the price you got filled at is totally different than what you expect. And you look at your screen and you’re like, What? That’s not right. How can that be?
It’s because your data is a half-a-second or a second stale. It’s a little bit old. And the older your machine is, and the lower-end your machine is, and the slower the processor is, the more delay there’s going to be.
And that’s really the biggest misconception that traders have, not realizing that this slippage thing can happen. And when it does, it’s infuriating.
Slippage is the biggest danger to traders.
And it costs traders thousands. And when you as a trader are in the mode of infuriation and anger, it triggers something called your fight-or-flight response. It’s a physiological response we have as humans.
And what happens is that our physiology, our bodies actually get ready to fight, and the blood moves away from our higher-thinking areas of the brain. And the bottom line is, we just make bad decisions when we’re pissed off.
So if you’ve ever been triggered by a bad execution, it leads to a whole cascade of bad decisions right after it. It can turn into a domino effect of bad decisions.
And that’s what I call the trader’s biggest misconception. Not realizing that an older, slower, or under-powered machine can cause something called slippage.
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My name’s Eddie Z. Thanks for watching, and I’ll see you in the next video.