Friday Feature: The Story of Alpha (Part 3): How to keep Alpha?
September 6, 2019
Achieving alpha is the bare minimum standard for a trader.
Mark Justice —
The world is ever-changing and the markets are indefinitely unique everyday. When you are trading for the long haul to build your legacy, how do you make sure you can keep alpha?
Even with the ever-changing trends, geopolitical uncertainties and “Trump tweets”, there are simple truths that every trader can develop to stay in the game and prosper for life.
Recently, I sat down with Mark Justice, one of the coaches and Halftime show host at Tackle Trading to get his take on how to achieve long-term success in the market.
Pearl: What does Alpha mean to a trader? (Knowing this term is confusing for many)
Mark: Alpha for trading is different than for investors. When you are stock picking as an investor, if the market is performing at 9% a year and you did 12% a year, then you have alpha. The view of “buy and hold” on something to achieve alpha simply doesn’t apply to traders. This is not a high probability scenarios and it’s way too hard to do. However, for a trader, a simple covered call strategy will outperform the market. In fact, as a trader, if you can’t outperform the basic market index, there is something wrong with your portfolio. Achieving alpha is the bare minimum standard for a trader.
Pearl: A lot of people think, alpha is not achievable long term. So how do you think about the sustained performance of a trader? How would you give advice on how to maintain and keep alpha?
Mark: Advice is simple, start with basic cash flow principles. It should not only be sustainable; it should be a given. It should be standard. If you know how to do OTM covered calls (not during earnings) with proper management then alpha is sustainable.
Pearl: Overtime, how would you describe your portfolio structure, your trading personality developments?
Mark: The older I get, the boring I am in trading. I have competence in directional trading with commodities, forex…etc., however, I am now implementing more cashflow strategies to build long term passive income. I believe in diversification of the portfolio where you are in total control risk. No single trade or event can deter the overall growth of your portfolio. There is no exposure to risk with any type of strategy.
Pearl: In the course of the years you actively traded, I’m sure there are times where there were challenges to meet your own expectation in performance. How did you deal with this?
Mark: There is always a learning curve. You are not going to be good at this on day 1. You are expected to make all the mistakes that you should make before you find your flow and rhythm. It’s important that you enjoy doing this for the long haul and that’s how you get through various stages and succeed for the long term.
Pearl: What do you think of the major trends between long term buy and hold investor, AI programmatic trading and human trading?
Mark: I don’t think the buy and hold type of investor can make money long term in this market. I’m a believer that the market is becoming more and more irrational. You just trade with the trend and the trend is getting stronger due to programmatic and AI environments. Traders are great to piggyback on AI for a more definable trend and more consistent recognition of the trend. Both uptrend and downtrend are getting more powerful. I want more AI because it makes well-educated traders wealthy.
I don’t think the buy and hold type of investor can make money long term in this market. I’m a believer that the market is becoming more and more irrational.
Mark Justice —
Want more perspectives on Alpha? See previous episodes:
- Part 1: Does Alpha really exist?
- Part 2.1: The Story of Alpha with Noah Davidson
- Part 2.2: The Story of Alpha with Christian Sisson
Pearl Li. The Theta Finder. In the Making.
Pearl Li previously has been a product management professional for more than 10 years working at well-known companies such as Amazon and Nielsen Company. She took the leap in 2016 with Elite Legacy Education to learn about building long term wealth through financial market trading/investing. In 2018, Pearl happily left her job to pursue investing/trading fulltime producing theta style trading that generates monthly cashflow. She is thrilled to be a voice on the Tackle Trading platform to share her transformation as she goes through various phases of her growing experience.
Financial freedom is a journey
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