Trading is not like shooting, or riding a bike, or other activity that requires a small initial learning period. Trading is more like a team sport or poker.
What is the basis of your trading strategy? What return are you trying to capture in that timeframe? What is your advantage over the aggregate market? Do you wonder if you’re confusing a system 2 activity with system 1?
Disagree. No kidding, right. Just about anything can be done after an initial learning period. But to do anything great requires a greater investment of time. Olympic Target Shooters & X-Game Bike Riders would beg to differ their sports are easy. + + + As for books outside the trading venue I prefer "How Not to Be Wrong - The Power of Mathematical Thinking" by Jordan Ellenberg - though Fast and Slow is a good one.
Identifying what appear to be low-risk entry points in possible directional movement. Nothing numeric. The idea is to get in where my assessment of the balance of probability (loose term) is that I will at least be able to exit without a loss, but with the hope/expectation that the market will continue beyond that point. Good question. It's a stupid answer, but the best I can say is that I developed the game that I play. (No need to criticize my response, I know how it sounds.) My entry points are entirely objective. If I gave you the criteria, your designated entry points would be identical. That's fairly system 2, but it is fairly basic and requires quick response. Adding to a position or reducing from it is a bit more system 1 than the original entry. Exits apart from protective stops have the largest subjective component once (if) they are "comfortably" away from the entry point in the direction of the trade. I don't know if that answers your question, but that's all I got. Your turn to answer your own questions... P.S. There is one exception to initial entries, which requires a bit of ~intuitive input I forgot to mention. If a setup emerges in otherwise chaotic, go-nowhere price action, I will almost certainly ignore it. So it is a go/no-go thing based on both a low-risk entry signal and the immediately preceding apparent directionality of the market. I have not quantified the "directionality" component. It's an eyeball thing.
How do you know you can identify such things and that those exist ex-ante? What if what you're seeing as trading opportunities don't really exist except in an ex-post world? Have you back tested your strategy? 1. There's a large and deep literature studying the impact of earnings on stock price performance (like this, this, and this). The basis is that most investors (money weighted, so think of the large funds and institutional investors) value stocks on a discounted cash flow basis, which relies heavily on estimates of future earnings. If the slope of the growth rate of those estimates shifts, it results in a substantial value gap that can persist over time. There are nearer term indicators of estimate surprises, called estimate revisions, which is where analysts update their quarterly or annual forecasts within the quarter. The direction of revisions is statistically significant to the direction of the stock price. 2. I focus on value gaps that emerge from two sources: (a) non-informational flow (such as liquidity or seasonality effects, such as a fund dumping shares to stay under a mandated max weight, etc.) and (b) information (such as a major product update or company announcement) that moves a stock price to a new level. I utilize financial models to assess how new information would impact the stock price, which gives me an estimate of the opportunity to trade (entry price being now, exit price being the fair value incorporating new information). I focus on stocks within TMT (think tech: semiconductors, software, energy). 3. The advantage I have over the market comes from structural and traditional edges, including the exploitation of certain flaws in how the market disseminates information. One example is that I, by understanding how street analysts will update their models, can replicate street views within a shorter time frame (in minutes) and can make a trade before they publish their notes. Using the replication, I can also determine if I agree or disagree with a group of analysts, and make a bet against them. Most of my trades have a time horizon of 0-7 days.
I didn't say their sport was easy, just that it's different. Holding a gun or riding a bike results in a large amount of tactile feedback. Also, when shooting or riding, your target is not incorporating your action and responding to it. The market does. Hence, poker or team sports, where other participants are adjusting/changing their strategies based upon everyone's interaction. "Winning" strategies tend to be assimilated quickly into the group, etc.
Because the setup has been determined over time based on fairly extensive observation, testing, and experience. The setup itself exists ex-ante, otherwise how could I trade it in real time? Whether a particular setup amounts to anything is determined ex-post. That’s what protective stops are for.
(SIVB) yuuuge drop today - nothing funnymental about that, for shareholders. -$663.22 a share on touching today's low of $100 even. Oh wait that is since hitting all time a few months ago. That's right it was down overall -$663.22 from its high of $763.22 back in November. Today's drop was "only" $166 of the total $663. drop. But hey it closed up $6 from the LOD. Likely only because some weak shorts got squeezed. Prolly more pain as soon as hmmm tomorrow. Scan those spreadchits some more, crank up those algos, disseminate that info - got weiners like this one to find.
Your level of sophistication far exceeds my simple “model,” I will grant you that. It is nothing short of impressive. But I have neither the acumen nor the resources to compete at that level. I completed my MBA in 1984, with most of the electives in finance. When I took investment finance courses at that time, they largely focused on CAPM (texts by Sharpe). I barely got through them with Bs, and determined then and there that a career in investments was not in the cards for me if that was how it got done. Your description brings those same feelings back home to me. What are your thoughts on Soros’ theory of reflexivity, and how does it factor into your trading, if at all?