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.


Anonymous said...

Lolll epic post.

Nemo Incognito said...


1. Pick a theme.
2. Theme starts to work, yay! CTAs whir away and pick up the mo.
3. Theme gets picked up by sellside.
4. Theme is now on cover of bloomberg.
5. HF manager with terrible 5 year track make this his career trade.
6. [GTFO right here]
7. Theme stalls.
8. Hot hands panic, CTAs chase momentum.
9. Trade crashes.
10. Put theme back on.

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Anonymous said...

That describes perfectly everything I've done since Q3 2015. Just not sure who I can blame.