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January 15, 2016

Time To Strike

Not surprisingly equities have painted yet another swing to the downside overnight. Which presents us with a very delicious short term entry opportunity right here and right now. Time to strike.

This is the play: Long here while yesterday’s lows at 1871 remain in place. Put your stop below 1868 and then wait for the open. IF stopped out we may have to assess the momentum on the Zero. Assuming there is bearish momentum we wait for a quick retest which would be our opportunity to dip into short positions.

Whether or not we would reload on the long side will depend on what we’re seeing the Zero Lite today (you are a sub, right?). Clearly attempts are [...]

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December 28, 2015

Loss Aversion

The tendency to treat money that has already been committed or spent as more valuable than money that may be spent or acquired.

Imagine two traders trading the very same stock. One one side we have Mr. Toro who buys 1000 shares of Evil Corp. (ELVC) and on the other side there’s Mr. Grizzle who decides to go short 1000 shares (perhaps he sells it to him). A week later the owner of the company (let’s call him Mole) has a few drinks to many, tweets something politically incorrect, and as a result EVLC drops 10 handles overnight.

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December 1, 2015

Recency Bias

Over the past two months we have been navigating some pretty volatile tape which in the process offered us several swing trading opportunities. As a result I have been pretty pleased with myself after serving up consecutive profitable entries near medium term inflection points. However upon a bit of meditation earlier today I realized that my own ego may be getting the better of me. For one it is very tempting to engage in calling turning points after successfully having done so in the recent past. That little psychological trap probably lies somewhere in the realms of illusion of control bias which is to believe that one can foresee or even influence future outcomes that one has no [...]

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November 18, 2015

Misses Mean Reversion 2015 Runner Ups

A few years back I wrote a post [1] in which I profiled one of the main deadly sins of retail trader ignominy – the ubiquitous and often almost fanatic anticipation of mean reversion. I am not going to regurgitate my point; if you are a culprit (and you know you are) then I strongly recommend you read my old post and perhaps also one of my more recent ones [2]. If you’re a noob here then you may also want to point your browser toward our all time favorites page [3]. The holidays are nigh and tis the season to debug your brain and start the new year fresh.

However book knowledge is one thing – seeing things play out in reality is quite another. Let me [...]

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Cognitive Bias Carousel
  • Loss AversionLoss Aversion
    The tendency to treat money that has already been committed or spent as more valuable than money that may be spent or acquired. Imagine two … more
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