A vital trading concept that is often overlooked but ties in w/accepting risk & uncertainty—as opposed to holding expectations—is that if a trader possesses good trade location, then that usually means they can effectively argue BOTH sides of the trade (long/short) at that spot. By definition, good trade location often means that the trader is unlikely to experience a lot of adverse heat (price) against their position. But by the same logic, the trader can also be wrong—precisely wrong—hence, such location becomes good for the other side of the trade...

[THREAD] Since we're at ATHi's in #ES_F, and $VIX has come in over the past month (as expected, tapping highs), below are some charts and analyses that might be of interest...

First, VIX over time incl. mean-reversion (though the mean has changed) along with descriptive stats... Second, it's anecdotally known that VIX—and implied volatility in general—tends to exhibit a negative correlation with price (-0.7) and a positive one w/volume. This attribute is why the media is fond of calling VIX "the fear index," despite vol being a non-directional measure...

Since it's a slow session in the markets as we await FOMC, let's talk about spreads. I think too many retail traders entirely ignore spreads in favor of directional speculation, despite the latter being more challenging, and the former often w/greater levels of predictability. So what "spreads" are we talking about? There are many ways to spread, including using outrights, options, calendar effects, etc. Still, the fundamental principle is that we are not wagering exclusively on the direction of an asset but the differential between a pair of assets.

Why do you keep losing?

A new post that fleshes out an approach to trading from first principles... [thread]
tendex.substack.com/p/firstprincip… Key highlights of the piece include a focus on six core planks that reside under the rubric of two overarching categories: quantitative (mathematical) factors & qualitative (psychological) factors. These planks are intimately related and support one another interchangeably...

Is gamma-hedging overhyped?

Personally, I think the consequences on price action is widely misunderstood and broadly misused... [thread]

bit.ly/2UW7xGJ At the very least, we should take into consideration a few limiting factors when trying to use estimates of gamma-hedging to predict or explain price action:

1) Implications of gamma-hedging are model estimates, rife w/assumptions; Precision needs to be treated w/skepticism.

I often get comments from traders along the lines of: "I'm making progress on my method/ability to read the mkt, but I keep losing focus/FOMO etc."

It's important to realize that this IS the problem. Rarely is it method; it's the inability to adapt psychologically to the method. Good analysts are a dime a dozen. For most the difficulty in trading stems from aligning one's method/analysis & timeframe w/their psychological propensities.

Are u aggressive enough, possess the risk tolerance for your style? Are u disciplined enough to stop doing stupid sh*t?

The alignment of one's mental processing predispositions AND emotional temperament (over different timeframes) is vitally important and dramatically underestimated by the vast majority of traders IMO. It's critical to whether one can succeed within a style or timeframe... (1/5) Just because one is struggling to find success w/in a particular timeframe doesn't mean they can't find it trading a different TF/style/product. Novice traders have a tendency to let "sunk costs" hold them back from making changes, trying different things. That's a mistake. (2/5)

Since it's a slow day, I'm going to give away the secret principles to success in this #trading game (for free!):

(1) Act consistently - take trades for the same reason(s), manage under a consistent rubric, trade the same times/product(s) etc. This is probably the most... (1/5) ...underrated, difficult, and yet invaluable skill; the often unsaid truth is that it doesn't so much matter what you do in trading (i.e. strategy/mgt/tools/etc) as long as you execute it consistently & maintain discipline, particularly when parts (2) and (3) are aligned... (2/5)

THREAD: One needs to think of "execution" in #trading as a holistic process. It involves "analysis", pre-planning, as well as the game time decisions. And in the end the score is what really matters...and not just for a single game, but for each game throughout the season. (1/5) Like a basketball game u need a gameplan, but that's not enough & meaningless on its own. Even if your analysis is perfect in mapping out opportunities to exploit in your competitor (mkt), it means nothing if u dont actually execute it during the game & put up a real score. (2/5)