How simple are professional trader's strategies?

Extremely basic. They are focused on risk and typically, risk only.

 

I keep hearing risk, care to elaborate on it? Some details/examples/specifics?

 

Pay attention to what you can lose but when right, reap full maturity

 

That's not really true unless you are sitting on some captive flow and are trying retain your edge. For most people, the risk management is secondary to alpha generation - if you do not have alpha, you can't generate revenue no matter how well you manage risk.

A few comments:
1. Systematic strategies can be of the arbitrary complexity. You can run a complex factor-based strategy or you can run a farm multiple simple strategies. You sources of alpha and instruments will dictate the complexity of your strategies.
2. There are plenty of people who execute complex strategies manually, especially in the space where most products trade OTC (e.g. credit or mortgages).
3. I think the key difference between systematic and discretionary trader is a quantitative pipeline that turns a "market phenomena" into a "trading strategy". Every other aspect (automation, latency etc are secondary)

 

I don't see how that differs from retail?

 

Simple strategies but much better information and process to interpret that information.

 

You ask an excellent question. I like this question.
Many financial experts / writers failed to answer it properly.


To answer this question, we have to go deep into our susbconscious mind & our experience.
I will give example about day trading say S&P / ES where max loss per trade should be around 10 ticks.

generally, we can divide people mind into three categories.

1. Risk adverse mind
very afraid to take risk. Not willing to lose 10 ticks.
This person tends to tighten stop loss very very tightly.
His whole life full of negative emotion.
He can never ever earn money


2. Reckless mind
anyhow trade, anyhow enter, anyhow pull trigger.
He takes big position, big risk, big stop loss.
He is willing to lost > 10 ticks per trade.
He will never earn money from trading.


3. centred mind which is calm and alert.
his mind is not clouded, no angry, no elation, no nerveousness, no overjoy, but calm & alert.

he willingly lost 10 ticks per trade with no negative emotion.
he allows max loss per trade to be 10 ticks.

This type of people will earn tons of money.

 

So it is more of psychologically and mentally? Doesn't every single retail trader have to become number 3 to make money?

 

trading is basically about 3M (mind, method, money management).

To me, mind is extremely important.
It is a pre requisite.
As long as mind is not centred, we can never ever profit from trading.

 

depending on your definition of the professional trader,

if it means someone who trades for a living using his own money, then it is quite complicated

if its the guy in the wall street company executing the flow of client's or proprietary orders, then yes it is quite basic (although the algorithm that generates those orders, with which the trader rarely involved with, can be quite complicated)