I looked up mosaic trading. My simple version is that you dig deeper into information that the public has access to and find stuff that the public may not be aware of yet that will move the stock price. You use that information to your advantage. Your research allows you to uncover insider information without being an insider. I can see where this gives you an edge. How do you exploit your edge? How often are you able to find “material non-public information”? Are your trades long or short term? (more or less than a couple weeks) What % of your capital would you commit to the position? How do you control your risk? Make sure to dumb down your answers so I can understand them.
Mosaic theory is really just a research process. My analytical edge comes from pairing that with macro factors and research. I trade catalysts or thematic trends— from 2 days to a few quarters; possible to hold a company long term if the macro regime supports it. I do occasionally make intraday trades, but it’s tied to some catalyst. Max position size is 8.5% of portfolio. I usually start a conviction bet at 1-2% and add to it/reduce it to mimic convexity. Risk management is 1) through sizing bets appropriately, 2) reducing portfolio beta by having shorts, and 3) reducing covariance of thematic ideas. I reduce position size if a trade is working against me while my thesis holds (e.g. stock is moving down, so I cut position by half; again, goal is to mimic convexity). If my thesis changes, I exit. I have a good track record and my goal is to probably raise capital in the next 2-3 years. But this approach is not easy, won’t lead to overnight riches, and I spend $7k+/mo on research and data. My primary edge is not easily replicated, and I seek edges across each step in the process to further improve the process.
Do you know enough about econ to make that claim lol? Also, not sure if you understood what I said. Strong form efficient market hypothesis: all information is baked into the price. There is no advantage in any analysis, stock prices move in random walks. Semi-strong efficient market: most information is baked into the price. There is an advantage for experts. Stocks mainly move randomly. Weak form efficient market: price is not efficient, analysis is highly advantageous. If you think all info is in the price then you can’t trade based upon price.
Wow I'm interested to know what stock is that? Just one will do so I can check it's maximum drawdown.
All the info is always in the price, and you can clearly trade based upon price. The info is what you need to trade, not the info that the market sees. Info that the markets see is most of the time in overbought or oversold area. Markets are almost never rational.
So what’s your edge then? If price was all you needed, why is al brooks trying to sell books instead of being a famous hedge fund manager?