MarketLife Ep 21 - Pulling the trigger: where, how, and why?

A look at how to execute trades: where they set up, and how, when, where, and why to pull the trigger--to make the decision to get into or out of a trade. Here are the show notes:

• Key assumptions:
• Most of what we see is random.
• I will be wrong a lot.
  • So I can’t be emotional about being wrong
  • I can be “wrong” can be for many reasons, most of which are beyond my control and knowing.
  • Losing trades are a combination of "real" patterns failing and random garbage
• Application
  • Wait for a market to make a big move
    • Bands and averages
      • Tendencies around bands and averages
      • How to use
  • Decide mean reversion or momentum?
    • Does it matter?
      • Yes, but you could make a good argument that it doesn’t
      • Can make $$ being long or short at nearly any point (can also lose!)
  • Momentum
    • Sharp move usually leads to at least one more sharp move
    • A trending market is likely to continue
    • Momentum against the trend is a problem
    • Action following the move can help to separate
  • Mean reversion
    • Large moves are reversed
    • Spikes out of non-trending markets tend to fail (meaningless statement? No.)
    • Keep everything “smaller”
• The actual entry
  • Doesn’t matter as much as context
  • Many books with numbered bars, but is this the best way?
  • Identify context (potential) first.
  • How to get in?
    • Sorta doesn’t matter
    • Breakout of previous bar
    • Lower timeframe
    • Previous close
• What matters a lot more:
  • Correct risk
  • Getting out
  • Trade management decisions

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