Want to see two absolutely crazy, shady, frustrating charts? (warning: they're confusing, I'll explain)

These charts, which show stock price, volume, short interest, and short volume, tell the story of what happened over the past few days.

Left: $AMC, Right: $GME

1/x Vanna is back & ready to turn back on the charm! Overnight the market hit our weeklong target of **3705 and pulled back... We were able to take profits & play for a bit of morning digestion. It’s been a nice +3.5% in a week w/a few extra scalps along the way...But the best

2/x part has been the gift of Vol compression, which along w/ short Vol profits, has given us significant calendar expansion & dispersion opps, as predicted. I expect this to continue this week as well, as Ivol oversupply should continue to be the dominant force until 12/11.This,

3/x paired w/ the significantly increasing Vanna & Charm flows, will make it hard for any decline until 12/14 to catch meaningful momentum. This said, the narrowing of 20 day RVol as well as the 2 stddev of the 20 day just overhead should cap any rallies, given the dramatically

4/x overextended retail (8-day SMA of P/C equity is the lowest in 20 years) & institutional positioning. This push/pull, should ultimately keep the market fairly pinned this week...Jan 8th call’s on back are incredibly cheap w/ a GA runoff event straddle of only $55, which given

5/x the potential macro-cyclical consequences of the next 2 years of fiscal stimulus seems absurd...& In terms of a more short term trade,Tesla Vol is either too high or 12/18 on back calendar spreads in the SPX are too low, as there’s no premium being priced in for the inclusion

"A trend once established, is more likely to continue than it is to reverse"

A thread on Trend (Market structure)-

A trend is a path of least resistance, basically the side where the smart money is betting upon.

And our work is to be on their side, to make some money.

Why do we use trend?

In an uptrend, the sum of the rallies will always be greater than the sum of the declines.

In a downtrend, the sum of the declines will always be greater than the sum of the rallies.

How to Find the trend?

There are 3 methods which one can use-

1. Swing points method.
2. Moving averages.
3. Trend lines, channels.

1. Trend identification by using swing points-

• UPTREND in simple words - Higher highs, higher lows

• DOWNTREND in simple words - lower lows, lower highs.

• Flat trend - The price stays in a range

Thread on 'no stop loss', 'adjustments' and 'Risk'
----------------------------------------------------

Wanted to share my thoughts on this topic for a long time but this email sent by someone yday woke me up from slumber

Pls read the email 1st before delving into thread

(1/n)

In the past 1-2 years, there has been a sudden surge of traders who just talk about theta decay, option selling, adjustments and stuff like that..

It is all fair as long as the trader knows what he's doing. But the reality is far from what we see/perceive...

(2/n)

Many of these folks were told that one can 'adjust' their way out of any situation. Any sane options trader know that you cannot come out of any situation by adjustment

One of my friend used to do that(he is famous in options selling desi fintwit) for a long time until..

(3/n)

..he realized that one cannot possibly do that and its gonna burn him one day. He's pretty smart and hence, he put a portfolio level SL & when that hits, he will stop dancing, gets out and calls it a day

So, risk is managed at account level and he is quite clear about it

(4/n)

Unfortunately, 1000s of traders who does option selling(with adjustment) dont have this risk mgmt in place.

They think (i dont know if i had to call it false confidence or ignorance) their skills in 'adjusting' will take them ashore 😅

(5/n)

"90% of the traders lose money, But do they lose it all the time?"

Most of them do make money, its just that they give it all back.

Lets analyze why and how a trader makes and loses money
[Thread]:

Below is the equity curve which is most traders dream.

This is equity curve of an average trader:

Most traders do make money, but they give it back to the markets .

Because of trading errors.

What are trading errors?

Trading errors are those errors which happen because of wrong Position sizing, Leverage , etc.

I am not making this up, check your P&L, 90 % of your losses would have come from less then 10% trades.

Most of these happen because of No knowledge, No plan, bad position sizing .

Now, we know what's the problem, lets talk about the solution.

1. Learn the Basics first-

If you don’t get the basics clear then how can you make money?

Learn How to use Support and resistances
Learn How to use trend lines
Learn about trend, it will solve 90% of your problem

How position sizing can affect your trading performance-

Assuming that you are trading a Trend-following system with Big RR and low win-rate.

For example, assume that you risk one percent per trade on a 100,000 account
and you have 20 straight losses.

That one percent is of your remaining equity and at the end of 20 losses, you would be down to 81,790.60.

Now if you got a 30R winner and you are risking one percent of your balance of 81,790.60, your new equity would be 106,327.9,

You’ve had 20 losses and one winner though you are still up 10Rplus your equity is up by 6.3R percent.

Now, let’s say you risk five percent per trade on your balance. At the end of 20 straight losses, you would be down to 35,772.89 or down 64 percent.

If you risk five percent on this amount and get a 30R winner, you would be up to 89,621.48. You are up 10R, but because of your position sizing, your equity is still down over 10 percent.

#positionsizing
#Trading
#nifty50

This is why position sizing is the most important factor in trading if you get it right and you have an edge, you will do good.

Thanks for reading till here.
@AnandableAnand @jitendrajain @quatltd @sohamtweet