1/ Trading. The siren song of capitalism. The purest form of money making. Buy something, and then sell it for a higher price shortly thereafter. It's hard to beat the rush of this kind of win.
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2/ Just as a casino draws you in with the promise of riches, and an occasional winning streak, trading can be hard to resist. But you've heard this spiel before. I’ll try to say more useful things.
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3/ Trading is not that special, in my experience. It's kind of like any other business. You can make some progress doing it as a hobby, but don't expect to reliably make it rich.
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4/ The catch with trading, which you don't typically see with other business, is you can get lucky and make a bunch of money upfront. This has no bearing on your ability to continue to make money.
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5/ The other catch is anyone can play. With most other businesses, there's enough barrier to entry that after spending a few days trying to figure it all out, you realize that it may not be as easy as you think. With trading, you can be up and running on Robinhood within an hour.
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6/ This ease of entry, along with the ease of scaling (you don't need more physical factories to trade bigger size), makes trading the most competitive business in the world. I think it's about as close to perfect competition as you can get.
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7/ There is very little easy money laying around. But there is some. The markets are efficient insofar as there is money to be made, you just have to earn it. And for some, there’s a lot of money to be made.https://twitter.com/garybasin/status/1193888150961168389 …
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8/ Afaik, there’s no magic here. A lot of hard work by motivated people, a few clever tricks, occasional skirting of legal gray areas (https://en.wikipedia.org/wiki/S.A.C._Capital_Advisors#Insider_trading_cases …), etc. So where to get started?
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9/ In fundamental investing, you get an edge by diving real deep. Not by looking at P/E ratios or whatever, but by speaking with employees and suppliers, decomposing earnings into product lines, and understanding how a company fits within an industry, country, world economy...
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10/ The same applies to trading. You're not going to get very far by zooming way out and looking for clever patterns. Instead, zoom in, roll up your sleeves, and build up little bits of knowledge from the bottom up.
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11/ Your propensity to dig into data (where does it come from, what is it really representing, what's being left out, etc.) is one of the primary determinants of success.
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12/ Dig into the data. This is a universal system for building understanding. It works in investing just as well as it works in understanding consumer behavior and building products (just listened to this today, they talk about it wrt building features for Instagram)https://twitter.com/garybasin/status/1211327585130631168 …
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13/ The gems are in the places that most people aren't talking about. Obviously, right? This means stuff doing boring things, Paul Graham’s shlep work. Look for markets that are hard to access, less popular, hard to obtain data for, etc.
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14/ Don't look for a universal set of trading rules or patterns, if they existed they'd already be identified and competed away by those more resourced than you.
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15/ Don't look for opportunity in the big liquid popular stuff -- the hot companies, the big liquid futures markets, etc. -- because those are the most competitive.
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16/ Cut your teeth on the stuff most people don't care about.
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17/ Study Turkey's equity index future (I'm assuming they have one), not ES (S&P 500).
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18/ Study some random illiquid preferred issued by Citigroup, not Citigroup common.
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19/ Study the rules of the exchange's matching engine, not moving averages.
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20/ Study what other markets are correlated with the one you're interested in, not candlesticks.
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21/ Study the seasonality of the market's participants (when is peak activity, when is it quiet, and why), not narratives around sentiment.
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22/ Study the order book: Are there large orders? Are there hidden orders? How do they impact price dynamics?
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23/ Study when large trades happen and when no trades happen, and how those impact price in different ways at different times, figure out why it happened that way at that time.
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24/ Study markets and products that are smaller, less popular, harder to access -- they are less efficient, with less activity they are easier to understand, and will have lower hanging fruit for capturing opportunities.
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25/ Study events, special situations, outliers, opens and closes, lunchtime.
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26/ What do you learn from looking at details? You start collecting robust patterns. You get confidence in their robustness from being able to predict what's going to happen -- lots of examples, and understanding their context.
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27/ You want to focus on patterns that have high predictive power when you're getting started. Think 75%+. Something that robust I would consider a true edge.
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28/ Some moving average or candle stick pattern won't give you that kind of robustness. Unless you've painted yourself into a corner of 4 examples or whatever, in which case that's not enough to work with.
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29/ When I was getting started, my first mentor introduced me to M&A trading. That's the domain of how company stocks move relative to each other when they're merging or being bought out. That's an example of a niche that's small enough to look for patterns in.
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30/ There were lots of robust patterns here. On announcement day, there were a few factors that reliably led to over or under-reaction.
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