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3/2/2025 – Fast replace re: correlation. I constructed a mannequin masking the final 5 years. The connection between correlation and ahead value change in SPX isn’t a easy one. When we now have a rising market and correlations are falling and turning into low, it is a signal that fewer shares are taking part within the power. That usually precedes a reversal of the strengths. When we now have a falling market and correlations are rising and turning into excessive, it is a signal of a broad selloff. That usually results in a continuation of the weak spot. In steady and average correlation regimes, quick time period returns have been most favorable. The takeaway is just like what we learn about breadth measures: the diploma of participation in a transfer is a crucial predictor of what’s more likely to occur subsequent. Merely taking a look at chart patterns misses this info.
3/2/2025 – I awakened final evening with a query in my head: Suppose we had been to have a look at the correlation of each single inventory’s motion with the motion of the general index (e.g., the correlation of every of the five hundred SPX shares with the SPX itself)…what would it not inform us if, throughout shares, we’re transferring from extra to much less correlation and vice versa? What would it not imply to remain at a really excessive or low correlation? What if it is the motion beneath the floor that accommodates an important buying and selling info? One of the best buying and selling observe is to be so immersed in asking questions and understanding markets that you’re going to generate recent views in your sleep. Creativity comes from immersion. Now for the onerous work of constructing correlation fashions for the market! 🙂
2/26/2025 – One other greatest observe: Replaying every commerce bar by bar. How may I’ve improved the entry? The including of danger when danger/reward improves? The taking of income on items of the commerce? The exit? Bar by bar replay your decision-making course of and overview how you’ll make incremental enhancements. Be aware that this accomplishes two issues: 1) it drastically expands your publicity to market patterns; and a couple of) it reinforces what you probably did nicely and pushes you to fine-tune your enhancements. One of the best reviewing of trades is re-viewing our trades.
2/25/2025 – Once we research our profitable trades–and particularly the processes which can be a part of our most profitable trading–we acquire perception into what we do nicely in markets. No quantity of labor on our feelings can floor us in our strengths. If we aren’t explicitly centered on our greatest practices, we can not probably commerce at our greatest.
On this put up and subsequent follow-ups, I will share just a few of my greatest buying and selling practices. Collectively, these type a template that not solely information my buying and selling, but additionally anchor my efforts to be my greatest self.
The primary greatest observe is to be extraordinarily specific with what’s going on out there throughout a number of time frames. I watch very short-term market habits and minute-to-minute indicators resembling NYSE TICK, and I watch what has been taking place via the day and previous few days, and I observe how the market has been buying and selling long run (modifications in quantity, breadth, and so on.) One of the best commerce concepts and trades come from seeing clearly throughout these time intervals. When what is going on shorter-term makes good sense with respect to what’s taking place medium-term, and when that’s making sense with the larger image, the result’s a way of readability. My greatest trades come from seeing clearly, having a state of affairs in thoughts, and knowing–explicitly–what I must see to validate or contradict what I am seeing.
That sturdy diploma of readability solely comes often throughout a day or week. The willingness to attend and wait and look forward to all the pieces to line up and all the pieces to make sense is probably the most effective observe of all. If I must commerce, I will commerce my wants, not the market.
Extra to come–
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