Thread by @HangukQuant

There are different levels of trading in all kinds of trading techniques, and alot of people overestimate themselves/do not understand the intensity of competition in markets until it is too late.
The beginner level is for people who slap techniques from random sources

haphazardly, thinking that there is an "alpha leak" everywhere. Alpha leaks do exist, but at this stage it is difficult to tell legitimate alpha from marketing scams. These (not always but often) tend to be Youtube videos and Market Gurus, as well as amateur blogs written by

college students pursuing a side hobby. Don't get me wrong, some of them are awesome, but on aggregate finding reliable, legitimate sources of alpha/trading advice is almost equivalently difficult as finding the alpha itself. Trading attracts primarily 2 types at these stage,

finance students and engineering students. The finance students have had a taste of valuation/accounting methods and have some financial lingo to peruse through classics like Security Analysis, and they take their shot at markets. Engineering students on the other hand gravitate

to technical anaylsis, as well as rule-based/systematic trading. Biggest problem at this stage is blatant data snooping bias of online sources of alpha, and many trust the technical indicators are some magic indication of future prices. To make matters worse, there is absolutely

no conviction at this stage since there is a lack of indication of credibility of the source. Therefore even if the alpha is valid/profitable, random noise/statistical variance and downwards volatility feels extremely painful and is likely to make him/her give up even

if it works. To get to the next stage, a hands on approach is needed. Verify statistics and performance of alpha, backtest them on your own scripts and run them on demo/mini accounts. This process gives the trader a better feel of what "might" work, and obtaining information

and learning becomes adapted to more structural and disciplined analysis as opposed to a haphazard fashion.

The next stage of traders has discovered a touch of skepticism to their approach; both discretionary and quant trading is met with healthy critical dose of dissent. At this point trader needs to be aware of common pitfalls, and is aware of broad topics of risk management,

diversifications, asset allocation and signal generation. A good amount of theoretical knowledge is useful, for which many finance problems lend themselves to analysis of multivariate theory and mathematical statistics. Furthermore, calculus and applied mathematical frameworks

are considered, if not understood. Optimization problems such as Markowitz/Efficient Frontier will have come in view, which can be understood using Bachelor's material for any engineering/science course. Critical thinking and understanding of assumptions in which these models

exist is necessary, for these mathematical solutions, while elegant, do not present ideal solutions in trading due to correlations and high noise to signal ratio. For example, Bayesian classification methods assume that training inputs are IID, while in finance temporal

correlation is frequent. Efficient frontier gives us optimal weights at target variance subject to weights being a probability vector; but higher sharpe can be obtained with equal vol using leverage to scale the tangency portfolio allocations. Optimization algorithms track

static optima, but in finance most peaks are dynamic and stochastic. Mental models, mathematical models are built in preparation to bring you to the next stage.

Next level of traders have a "process". They know alpha and edge decays, and know when their edge exists. They

strive to exploit this edge as much as possible, and understand that not all conditions are favorable to them. Many traders at this stage have phenomenal risk management skills, and it goes from maintaining strategies to protecting their system and intellectual alpha.

Some have deep theoretical knowledge in a narrow domain trading particular products while othere have spread out knowledge at substantial levels (including derivative pricing, interest rate models as well as tools (Calc, StochCalc, Stat, Math, CS) to digest more advanced

publications. Many are successful professionals at this point. The upper echelon of these are distinguished thought leaders, and some of have uniqur schools of thoughts and mental models of the market.
Last, but not least, are the legends of the field. Stan, Simons, Thorp.

These are geniuses of the field, characterized by astonishing intellect, primal instinct or infallible tranquility on the "floor"/"desk" and revolutionize market philosophy.
Fin. Know your competition and climb the hill.