Trading Buckets
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These are the buckets that matter 🪣
If your trading is not dropped into one of these buckets, you are probably going to struggle. Month after month, the money is made within these buckets. If you spend most of your time outside of these buckets, you probably aren't making much progress, getting lucky, or you have some structural edge such as a large following, a broker that provides you with the midpoint or better on the majority of your fills, or some dumbass CFD "broker" that allows you to hit the bid on stocks on SSR with unlimited size without impacting the market...
This is where the money is being made, this is where the focus ought to be. If you think you can reinvent the wheel or feel the need to do so, you are wasting your time.
The best trades and the best traders make the most within these buckets! There are good opps and there are great opps within these buckets. The more you focus on them, the better chance you have of great success;)
Overnight momentum trading - Stocks closing in the top 20% of their intraday range on elevated rvol for longs, or stocks closing in the bottom 20% of their range for shorts. Market conditions matter, context matters, and the stocks you choose matter. Names like TSLA, NVDA, PLTR that are highly "retail centric" tend to follow through incredibly well. Also, small caps that close in the top 20% of their intraday range on incredible volume such as ZAPP from 7/8/24 also create some incredible asymmetric risk/reward.
Imbalance trading - Opening and closing imbalances. Deals closing, S&P Index Rebalance, Russell Rebalance, Nasdaq Rebalance, Nasdaq Reconstructions, MSCI, end of the month, and op x are usually when you get some outlier opportunities. Need to subscribe to data and guess what, nobody is going to help you with this style of trading... sorry:(
Breaking news - So many options here, pick your poison. Not my game.
HTF over extension trades - Multiple legs up or down over a number of days/weeks with range expansion (good examples are the big dick red candle days on SMCI, MSTR, NVDA, GME, TSLA from this year - 2024)
LTF over extension trades - A great example is BA from 7/8/24 after we sped up to the downside. Also, some small cap shorting can fit into this bucket... Good luck with the latter!
Special situations - To me, these are often "one off" trades that just logically make sense. MARA back when it got added to the S&P 600 in a very short duration had its spread to its peers (RIOT) absolutely blow out. MARA was trading 20% higher than RIOT. After the index buying had concluded, capturing that quick reversion trade the next morning by being short the stock was a great trade!
Often, special situations are the trades that require research, a fundamental understanding of "how things work" and some logic! Also, special situations can be deals like Twitter, AVGO, etc...
Auction trading - Stuff such as reading the auction and trading IPO’s out of the gates or trading stocks into/out of limit ups/downs.
These are the buckets to focus on. This is where the majority of the money is being made in a short period of time (active traders). If you can figure out the trades, nuances, and different permutations with these buckets, there is a fighting chance.
And if you try to fight it and carve your own path, good luck!
*HTF = Higher Time Frame *LTF = Lower Time Frame
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