[narrative analysis] is often about nailing down the one, most important story the market wants to trade and then tracking the evolution of that story.
It is very difficult for markets to hold two competing themes in its collective hivemind at once, and so the focus oscillates back and forth instead of going in two directions at once.
Just because a narrative is well-known, that does not mean it’s exhausted.
Tagged: trading.
Part of the reason a level might hold is that everyone believes it will hold—and so everyone puts their bids there. If you are using PhD quantum physics and homological mirror symmetry to find your tech levels, and nobody else in the known universe is, the levels you find just might not mean much in the market.
Volume spikes at a price extreme are super useful indicators that huge volume has gone through and the move was rejected or accepted by the market.
Tagged: trading.
People yelling “CORRELATION IS NOT CAUSATION!” in all caps are technically right but practically not very helpful. There often is no causation, but there is a ton of information contained in the correlation between assets.
If corn doubles in price, those who can switch to soy will do so, pushing the price of soy futures higher. If Doordash rips higher and now looks overvalued, investors looking for food delivery apps to invest in might buy GrubHub instead.
When a Canadian crude oil producer sells their crude, they receive USD. They need CAD to pay their employees and shareholders so after they sell their crude, they need to sell USDCAD to convert the proceeds. If the price of crude doubles, the crude producer will have twice as many USD to sell and this will weigh on USDCAD.
Tagged: trading.
If real rates [(yield minus inflation)] are falling and negative, that generally means that central banks are enacting extremely loose policy.
[Increasing US rates and real rates is generally bad for gold.]
Positioning Bull Market Bear Market Long and increasing Very Bullish Long and stable Bullish Long but falling BEARISH Short and stable Bearish Short and getting more short Very bearish Short but buying back BULLISH
When the market anticipates an upcoming event, it will tend to position in the direction of least regret.
[If XAUEUR isn't available on your platform sell XAUUSD and buy EURUSD.]
[If I make this 1% better each time, it will be 1.62x better after 49 times].
[A good rule of thumb for new traders is to set the stop loss an average day range away from the entry. If I know nothing else about a security, I do this. Anything smaller risks to be stopped out by noise.]
[Add 3 pips to stop loss for slippage.]
[Position size is the output, not input.]
Tagged: trading.
