I learned early on in my trading career that to stay competitive and relevant in modern electronic markets, most large and small options trading firms regularly seek to upgrade, modify, supplement and/or fortify their existing trading systems. This includes the software they utilize, the hardware it operates on and the network through which vitally important data flows. Retail traders should take note and seek to emulate these professionals. They know what they’re doing.

Institutional Traders Optimize in a Big Way

Sophisticated trading firms feel staying on the cutting edge is so important that they have created a trading technology arms race, so to speak. Futures market prices sent to New York’s equities markets from Chicago used to be measured in dozens of milliseconds. As the technology improved over the years, copper wires were replaced by fiber-optic cable. Eventually, microwave towers, lasers and satellite uplink transmissions made data latency practically nonexistent. I read recently that artificial intelligence and machine learning algorithms have advanced to the point that supercomputers in New York reliably predict the next tick in the futures market milliseconds before it trades. This prescient condition has created a “positive latency” that many high-speed algorithmic trading firms find profitably tradeable.

Retail Traders Should Optimize Too

These improvements consistently raise the bar in the industry, which has spilled over to the retail trading sector. There are a number of technology-related topics retail traders should at least be aware of that can directly impact their bottom line. Those who neglect consideration choose a suboptimal path and subsequently risk a decrease of their win rate, often caused by an increase in technology-related errors (forced and unforced). Let’s take a look at some things you can do to improve your competitiveness.

Optimize Trading Hardware and Network Data Feed

Let’s start with hardware. First thing I’ll share is that I have one machine that I ported specifically through the router that I designate 100% to trading. I learned to do this the hard way after I started trading cryptos and was hacked. I use a separate computer for internet/email, chat/messenger, etc. By insulating my trading machine and limiting it to trading-related tasks only, I effectively reduce the ability for a hacker to gain access to my trading account, should I get phished, spoofed or whatever it is they do.

I streamlined the operating system of my trading machine by deleting all the unimportant fluff Microsoft stuffs into Windows 10. This made a marked improvement in the speed and reliability of performance. There are dozens of videos and articles available online that can help you with this process. If you’re not comfortable or technically inclined, it might be worth it to pay a couple of bucks to an IT expert. It will most likely be money well spent.

When I began trading from home, I discovered a surprisingly high correlation I had not anticipated. I realized that the time when I needed to unwind a spread was uncannily the same time that an afternoon thundershower would knock out the power in my neighborhood. I recommend getting a battery backup system. The one I purchased was less than $100 and also provides surge protection for my ethernet cable, as well as the power cables to my computer and monitors. You will pay for it with one trade, which you may have otherwise missed.

Make sure your ISP is a reliable connection and that you have adequate bandwidth coming through the pipes. I like to recollect the story of the day the price quotes coming into my trading software suddenly became so sluggish it became impossible to trade. Despite calls to my ISP, rebooting the router, etc., I could not figure out the problem until the final bell had rung. It turned out my son had invited some friends over to the house after school. Each of the four teenagers lounging in my family room were streaming their own movie on their phone through my Wi-Fi network. Live and learn...

I would never trade via Wi-Fi if I had an ethernet connection available. The difference in speed and reliability is quite noticeable. Make sure you know how to turn your mobile phone into a 4G or 5G cellular Wi-Fi hotspot in case your ethernet connection goes down or if your router starts puking. They do that occasionally and require a reboot, I’ve found.

I use a dual-monitor setup for my email/internet/messenger computer, plus a quad-monitor arrangement on my trading computer so I can view multiple things simultaneously. This requires an advanced graphics card, which I happily upgraded. Run the cooling fan on high to keep the temperature of the chip as cool as possible. Cooler chip = faster performance.

I keep several charts, the options board, an execution page, my watchlist and a news ticker running live. Since technology is always evolving, it’s important to maintain a trading computer with enough memory and a fast enough processor chip that it isn’t constantly locking up or bogging down. I’ve learned the hard way how frustrating it is to not be able to get my price on a spread because I had to reboot. Seek to upgrade your RAM if possible. The minimum recommended varies due to demand, but I’ve heard 8 GB is preferable. I have my trading software already installed on a laptop just in case my computer blows up during trading hours. You never know...

Optimize Trading Software

As far as software is concerned, each additional open tile, window, program, watchlist, technical study, etc., uses processor and system memory resources. Be aware that there is a limit to the number of charts, studies, watchlists, etc., your machine can handle. Identify and don’t violate that limit. Seek to reduce the number of processes running in the foreground and the background. Eliminate technical studies and scanners you no longer use. Delete ticker symbols on your watchlist you no longer care about. Each of these things slightly reduces the demand on your computer and makes it ultimately run smoother.

Depending on the trading software vendor, you may be able to adjust a couple of other settings that will optimize your experience and reduce or eliminate delayed quotes and sluggish overall performance. One thing to consider is changing the RAM setting within the software’s global settings to the most efficient parameters. The higher the value of the optimization criteria, the better the result will be for your trading experience.

The second suggestion I would make is to confirm you are not trading with limited quoting capacity or delayed quotes. Sometimes, the default settings do not provide for the most thru-put, causing slow updates. Some software allows you to turn off quotes for specific options series like LEAPS, for instance. This is useful if you only trade weeklies, or near-term options series. Limiting quote updates to the months you don’t trade saves valuable resources and increases performance of your machine.

Thirdly, there are default settings specific to the theoretical options price calculation that can be tweaked. These include the manner and method of updating the number of iterations your software utilizes. More iterations equals more drag on your resources, while less iterations equals less accurate theoretical value calculations. You have to strike a good balance. A quick call to the help desk and you can find out what is recommended that will best match your hardware. I cannot stress enough how important it is to make any changes to your trading software after the market is closed for the day, but before the help desk staff has gone home. I learned this the hard way over 10 years ago, but that’s a story for another day.

Final Thoughts

Being considerate of the technological demands made on today’s retail traders will surely benefit you. You could see an improvement in the performance of your machine that will yield positive results immediately. Or maybe you’ll have to wait until the next time one of those violent summer thunderstorms decides to pop up in your neighborhood with 30 minutes left in the trading day.

Joe Leska, Market Taker Mentoring