Trade_the_Matrix Profile picture
Dec 11, 2022 9 tweets 2 min read Read on X
If you are short every single day, every ticker and sized you will need to develop good read on cycle flows to avoid heavy losses when strong cycle swipes in. Watching many traders over years this is pattern that happens due to over-exposure:

#smallcaps #trading
Thread:
1.
If you find reason to be short on everything, it means you will also be then short things that will squeeze heavy. Lack of selectivity and over-engagement math dictates this will happen. This is where volatility comes into play and does the damage.

2.
As you get winners in weak cycles those are X amount of R units. When volatility expands in strong cycle and you stack just few surprising big losses it eats up entire weak cycle gains because you underestimated how volatility and non-vol adjusted sizing will impact you.

3.
Being short everything in low range means you also will be short on things that squeeze from tight range into massive expansion (PHVS 4s to all of sudden 12). It's that volatility expansion that brings biggest surprise factor.

4.
Have mentioned that in one blog article this low vol to high vol expansion in mid day on first few days of strong cycles is the real damage to short sellers, especially those who are short everything without specific setup identifiers. Up 50%? Good enough setup, short.

5.
You have to understand you are opening Pandora's box by being engaged on every ticker. The more engagement you have the higher your skill and read of market should be. This is almost a law not an opinion. Walk before run and no underestimation.

6.
This means if you do decide to have high engagement (and early) you need to understand your probability to walk into black swan is very high. So what are you doing ahead before it happens, are you really managing risk on every ticker as if it could be next black swan?

7.
You almost have to. This is why having exact setups, and always adjusting size and stop losses based on setups and having selective engagement decreases chances of shorting everything early and then hoping you aren't gonna get black swan-Ed.

8.
Very high engagement ratio without proper setups or solid market read always leads this route. Have seen this happening in FX markets, crypto, equities, it's the same. Been there done that, changed approaches, why? Because otherwise you have no control, it's tough to sleep.

9.

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More from @TradetheMatrix1

May 1, 2023
Every setup/patterns performance is quite different in weak or strong cycle. Different enough that it impacts edge to high degree.
#smallcaps #trading

Thread:
1.
For example parabolic squeezes they just don't happen in weak cycles. In strong cycles you will have few of them and one of those will be picture perfect one. Significant "show up" rate difference for pattern between the cycles.

2.
Type1s in weak cycles don't squeeze past HOD much usually. Even if they do the price returns to prior HOD level soon. In strong cycles they often squeeze way past. To think this doesn't affect your risk management on short trades is mistake.

3.
Read 7 tweets
Apr 23, 2023
Tracking cycles is the most helpful method in any market including #smallcaps. No indicator or single point reason will ever provide as much clues as cycles recognition can. Here are some tips on daily routines for tracking:

#trading
1.
Start tracking tickers performances.
-EOD close green or red
-intraday range % max

Note down are closes and ranges expanding/improving or decreasing for tickers on the day.

2.
Every strong cycle begins the same way. There is uptick for three days on stronger green closes (vs where gapping tickers open), ranges expand by 30-50%.

Tracking uptick/downticks in cycle flows every 3 days (if significant) can provide insight before things explode.

3.
Read 17 tweets
Apr 18, 2023
Behavior of #smallcaps is significantly different between strong and weak cycles. One has to track the cycles accurately because expectations can shift so much that any mistake made in strong cycle can get multiplied many times if risk is not respected which is common.

1.
For example there are no strong AH runners in most of times except in strong cycles where big % AH runs are common. You only have to make one mistake of being sloppy on swing shorts without being aware of how cycles impact you and it can be enough to give back plenty gains.

2.
There are no type4 patterns or fake breakouts reclaims to high degree in most cycles except in strong cycles. Which means that one has to be extra careful shorting breakdowns or rejects above HOD there.

3.
Read 6 tweets
Apr 2, 2023
In small European country you are being told that "Americans" are nothing special. You are being told there is no answer to why the US supremacy exits.
But over time one collects some answers. As objective person who never kisses anyones behind:

1.
Specialization. Tip of the spear. Looking at the (US) nation or individuals on average there isnt that significant difference (if at all), but there is far higher amount of knowledgeable and innovation/specialization focused individuals in US than what you notice localy.

2.
In modern economy, being first is very big advantage. Biggest markets are all about being first recently. Specialization+exploration which is much more expressive with US comes clearly through and the advantage it delivers. If you lack exploration you cant be first.

3.
Read 8 tweets
Mar 21, 2023
Here is why you should learn about functionality of risk-ON/risk-OFF in #markets no matter what asset class you decide to #trade:

1.
It gives you foundations to good expectations. There is one pool of global capital that moves in and out of the risk offense or risk defense mode. You should know in what mode market is today to begin with and how it impacts your selected ticker of the day in focus.

2.
For example, if you decide to long equity ticker under severe selling pressure like $FRC the risk-ON flows have to cooperate, else your chances of longs working are going to be by default much smaller. The riskier the asset and the more liquid the more you need risk-ON mode.

3.
Read 11 tweets
Feb 4, 2023
The game of extracting cents and why behavioral analysis matters:

#smallcaps #trading

Thread
1.
Because the ranges are often limited the RR is tied and limited too. The weaker the cent range the less RR by default. If you try to place two, three, four+ trades on single ticker that impacts you. If you take only single big swing trade it doesn't.

2.
Many traders try to extract multiple separate trades from the movements of single ticker. This exposes you to behaviors. The weaker your read is the more you are impacted over long run negatively. Low RR trades and weak read leads to difficulty.

3.
Read 13 tweets

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