Monday, 7 March 2016
Guide to trading 2016 markets
A simple guide to trading 2016 markets
- Pick a theme
- Trade to theme
- Re-peddle theme armed with price move to justify it.
- Algorithmic momentum trading models join in and the price accelerates.
- Assumption theme is correct because price is doing what would be expected if theme correct.
- Look for macro/stats/correlations/overlaying charts from history to support theme of theme.
- Pushes price further.
- Pick up ruler and pencil and extrapolate a line as to where price will go at this rate of change.
- Use ruler, price momentum, theme and theme of theme to rubber-stamp 100% validity of forecast.
- Use price extrapolation to show just how bad/good the theme will get, even though price is meant to follow theme, not the other way around.
- Price stops moving
- Price starts to reverse.
- It's just position covering don't worry.
- Momentum algos are tripped the other way and accelerate the reversal.
- Question validity of move and push short term positions to long term because the theme is not dead, it's only resting.
- Start to hear facts raised that have been there all along (but previously ignored) to question theme.
- See more algos reverse the price as momentum gains.
- Have your really, really certain position lose so much money you have to close it even though you know the theme is not dead.
- Try not to look at theme as you are out of your position and the world is nuts.
- Blame someone else.
- Find new theme and repeat.
- Original theme starts to do what you knew it would but you miss it.