finding your sweetspot

16

Finding Your Sweetspot

Self

System

Market

Self

System

Market

Get aligned

Stay aligned

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Market condition

Bull

Sideways

Bear

QuietNormalVolatile

Top down or Bottoms up?

Top down• Deductive approach…• If….Then Hypothesis:

– Swing trade patterns alert you to short term favorable conditions

• Higher probability of a directional move?• Higher probability of an outsized move

compared to normal?• Both?• When the move begins to happen as

templated intraday…• When the price triggers the entry as the

“official” mechanical entry• When price is moving towards the trigger

and all other signs point to “Yes”…

Bottoms-up• Inductive approach• Evidence-based rulemaking

– Price behavior “demands” an explanation; people seek patterns to make sense of the world

• Momentum in one time frame is a signal in other time frames

• Reinforcing feedback loops can generate more stories/narratives

• This looks like it could be a …, in which case• The intraday trade grows into a swing trade a

day at a time• Skill: trade framing, reward:risk management• Question: does it HAVE to make sense to you in

the moment, or is price action sufficient?

Criteria are met on the set-up day

Initial stop (iStop)

entry

Reasonable price target if the hypothesis of the swing-trade turns out to be “true”

stalking

Perfectly efficient line if we get the hypothetical return over the average number of days in the trade

If the trade outperforms and we get our gains faster than average

Is there some time by which the trade “should” start working if it’s going to work?

Long term average return of buy and hold

The system’s

edge

Good enough to stay in

Top-down trade framing

Day 1 Day 2 Day 3

Swing systems

Day 5Day 4

Remember the market…

The market, in all its complexity, which influences our swing trades, and which can change faster than, and independent of the forces moving our swing-trade…

Stalking… Stalking…

What’s the relationship between your trade and the market condition?

Frog opportunities

RLCO opportunities

Patterns beginning to emerge that carry over the next day?

An active swing trade (swing trade exit signal hasn’t fired yet)… Core position

Intraday “Turbo” position, based on intraday trade logic

Intraday “Turbo” position, based on intraday trade logic

+ -Intraday “Turbo”

position, based on intraday trade logic

+

Bottoms-up trade framing

Independent, intraday trades, no continuations …