Trading or trading porn?

..if $SPY was up 3 days in a row into a FOMC day, it was also up that day 15/15 times.

This is a tweet that was all over my timeline yesterday.  I don’t know the intention of the tweet nor the context.   I didn’t reach out to the guy to find out.  But it is not important either.

Action vs Information

Information is everywhere but as a trader or investor it is your job to find what you can act on.  It goes back to the two types of people.  Those that want to read about trading and those that want to trade.  It appears on the surface that one transitions into the other but it does not always work out that way.  Understand why you are seeking out the information you are seeking out and if it gets you closer to your goals.

Second trade first

If you spent any time around a trading floor you will hear this said very often.  It means know where you are getting out before you are getting in. So no matter what, if I cannot identify my outs I can’t take a trade.  If you do not know where you are going to get out are always going to get out on the worse tick.  Open profit and risking more than you should do not show up in a subset column of your P/L but that is where most traders lose their money. Mostly because they run out of money before they know it exists.

The tweet does not provide a target.

What is most important

Traders are always trying to understand what is most important.  If you take that tweet literally, I do not think it was intended in that way, but what it means is that the most important thing to the market is the FED meeting.  Without going back it is hard to tell if that is true but it could very well be true.  What if we are just in rally mode and no matter what happened we rally on Wednesdays?  There is always a huge gap in trading between causation and correlation.

Luck or lower standards

To achieve a perfect game (baseball) requires some luck.  A few balls bounce the wrong way, the umpire blows a call, the outfielder losses the ball in the sun and the perfect game is over.  As a pitcher and a trader we have to have some luck.  The times where you were in a nice position and there was a move your way because of the news.  Or your stop was in the perfect place.  All you can do is put yourself in a position to be lucky but never rely on it.

The other way to be “perfect” is to have lower standards. How much is the $SPY up on those days?  Is it .01% or 5%?  Did the market rally or hold overnight gains?  When was the HOD achieved?  All of these things are important and obviously cannot be conveyed in 140 characters.

Timing

Execution is all that matters in trading.  You can short a rally all day and have your best day. You can be long a rally all day and have your worst day.  It does not matter what the market does it is about how you execute it.  The tweet does not tell me if I should be big, or small, or not trade it all.  I do not know if I should wait till the 16th day or the 20th day.  All of these things make it hard to execute on that information alone.

Conclusion

That tweet is great information but it is hard to make a trade from it.  I completely understand that was not the intention of the tweet.  There is no way to know where it is wrong, where the target is, if it is causation or correlation, or when it is most likely to continue or most likely to stop.  Once again, it is hard to convey anything in 140 characters.  The market junkie inside of me finds it interesting but the trader inside of me could let it go.

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5 Responses to Trading or trading porn?

  1. […] A lot of what we see is not really actionable or “trader porn.”  (Trader Habits) […]

  2. Benko says:

    Context > Stats. 

  3. derekhernquist says:

    good stuff, guilty at times myself

  4. […] here, in fact without a consistent method of application we turn this information into useless chart porn that distracts from our true strategy. It’s my feeling that, while any one snapshot can lead […]

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