Computer-Assisted Trading by Tushar S. Chande, Ph.D.
You can't be a good trader without being a good analyst. But the two are not synonymous: Just because you're a good analyst doesn't guarantee you'll be a good trader. To the accomplished analyst, trading is a mental game 80% of the time, but one for which he or she is poorly prepared. Here's how you can hasten the transition from analyst to trader.
Trading is analysis in action. You have to convert all of your analysis into a simple, executable decision - buy so much of this, or sell some of that. Analysis is reactive, since you analyze price action after the event. Trading, on the other hand, is proactive, since you may have to anticipate market events. In any case, trading requires decision making in the face of uncertainty, with the added knowledge that some of the consequences may be unpleasant. This is not a simple task, because the fear of unpleasant consequences can trigger various degrees of the "fight-or-flight" survival instinct, biasing traders' actions.
Besides, the market provides random gratification: The same actions can be profitable or not, with outcomes
occurring randomly. This leads to unprofitable trading habits. For example, you may deviate from your system, only to be rewarded by the market. When this happens, it only reinforces your tendency to second-guess the model and deviate from it. Deviating from your model is not bad in itself, but it does negate all the historical testing you may have done. Since you cannot test your system deviations on historical data, in essence, you end up trading an untested system.
As a result, trading requires a whole new set of skills, different from those required to be a good analyst. Since there is no good way to practice these skills before one starts trading, many a venture into trading ends in disaster.