Tales From The Trading Desk

TL;DR

Having a clear game plan based on a story or theme is crucial in trading to avoid reactive decision-making and increase conviction.

Transcript

you know if you show up every day with your game plan like like you did with your charts and i always think that you always have to come in with some sort of a story or a theme as to hey if this happens i'm bearish or if this happens i'm bullish or if this happens i'm doing nothing because other than that you come in as a rudderless ship and you're... Read More

Key Insights

• 👾 Having a game plan with a clear story or theme is crucial in trading to avoid reactive decision-making and increase conviction.
• 🥺 The tick size in futures trading, particularly NASDAQ futures, has remained small over time, leading to increased volatility and difficulty in trading.
• 💄 Decimalization in stocks reduced spreads and increased algorithmic trading, making it harder to sustain profitable trades.

Questions & Answers

Q: Why is it important to have a story or theme in trading?

Having a story or theme in trading provides a clear game plan, allowing traders to anticipate and react to price action instead of chasing it. It increases conviction and helps traders avoid being swayed by market volatility.

Q: How has the tick size for futures trading affected the market?

The small tick size in futures trading, especially NASDAQ futures, has led to increased volatility and difficulty in sustaining moves. It reduces incentives for market makers to display liquidity and has negatively impacted trading strategies.

Q: How has decimalization affected trading in stocks?

Decimalization, which reduced the tick size in stocks, made trading more challenging. It resulted in smaller spreads, increased algorithmic trading, and constant back-and-forth price movements, making it harder to sustain profitable trades.

Q: How does focusing on a few specific instruments benefit traders?

Focusing on a few specific instruments allows traders to become specialists in those areas. They gain a deeper understanding of the price action and can make more informed decisions based on their expertise.

Summary & Key Takeaways

• It is important to come to trading with a game plan that includes a story or theme, such as being bullish or bearish based on certain support and resistance levels.

• Having a story or theme anchors traders and increases their conviction, which helps them avoid being shaken out of positions by market volatility.

• The tick size for futures trading, particularly NASDAQ futures, has not been reduced over time, leading to increased volatility and difficulty in trading.