We have a natural tendency to overcomplicate just about everything in life, and in this business, there's an endless sea of hubris.
My second job was working under a guy on an FX desk for a major investment bank whose primary task was to grow the business by means of investments. He would shop around for hedge funds and other aligned businesses, then set up meetings as a potential investor with firms wanting IB money. Later, he would present them to his bosses, who ran the whole floor, and were of course, the final decision makers.
I'll save you some trouble and say that this was not an admired, or well-respected guy. He is the type that would show up in the morning, and you would say “good morning” 2 feet away from his face, and he would completely ignore you.
One time, I put together his pitch decks, which he would combine and put into one presentation. He had me get them printed, and pass them out to those he was pitching. For some reason, I held onto a copy of this thing. It's about 4-5cm thick.
When I gave it to the head of the floor, his only words to me were “what the f–k is this thing?”.
“It's from George,” I said.
“That makes sense,” he replied.
I'll save you the long, drawn out explanation, but none of those investments were made and George was fired about 9 months to a year later. Don't be like George.
The “profound” thing that occurred to me was the one-liner from the Senior Managing Director who ran the entire floor. Remember, I am young and impressionable at the time. He looked at this pitch deck of pitch decks as if it was completely useless (he was right). George probably spent 3 months putting that silly thing together, scheduling meeting as if it was the most important thing in the world, calling every contact known to man, etc. None of it mattered. The firms were mostly bad investments and half of them went out of business within a relatively short period of time.
As a manager (of people), I find my biggest job is to oftentimes untangle brains. The amount of information we consume these days, whether useful or useless, tends to have the shared result of confusion, whether we realize or not. Our actions are the result of our inputs, no matter how the message is received. And when the message is delivered 1,000 different ways, decision making becomes extremely difficult.
Today, I went on X, and willingly or unwillingly, interacted with probably 15-20 different strategies/methods for trading. Compound that over the years, and bottom line, I am tossed an absolutely absurd amount of information. And we're all the same.
When I'm speaking with other traders, I get excited by simplicity. Basic rules, patience, wins and losses treated like a business. It is not about having the “biggest set of balls” or any other nonsense used to get bait engagement. It's about knowing full well what you're doing and how you're going to do it. Being honest. Being firm. Being smart. Attaining result via rational decision-making.
Making a Decision
So when it comes to actually doing something, and putting the wheels in motion, we have to make a decision. These decisions usually boil down to basic, fundamental truths.
In any market, these exist. After all, these are just markets. But man, would people want you to think they are the most complicated things in the world. Well, they're not. People just do complicated things to them.
I use the word “foundation” a lot when I'm speaking to others. The foundation is the footing, the basis for the execution. Because for obvious reasons, a weak foundation will have a transaction crumbling away in front of you. A strong foundation is just that. A firm footing, a temporary stronghold, where the crowd shows up and shifts in the same direction…..
Unhedged, directional trading is one of the hardest things you can do. And I tell people all the time “it's just a market”. You're at a farmer's market and everyone is selling the same product. At some point, there's a floor on the price except for a couple desperate vendors. They create excess, but price moves back to the generally agreed upon rate of the sales crowd.
Sound familiar? It's quite literally all the same.
Foundations can be built out of a number of things, but for most markets, we keep going back to just generic volumes. I posted a short thread on X talking about a basic concept in identifying volumes, and what they do, as a basis for a foundation. It's here, for context: https://x.com/paracurve/status/1707470219692933155?s=20 Large volume areas (regardless of how or in which market they are identified) are foundations. What price does after these foundations are laid determines follow-through on price. And sometimes, it really is as simple as this.
But of course, old friend ego comes back to tell us: “that's not smart enough…this guy is using XYZ so I need to do the same in order to…..” you get the idea. But what is XYZ built upon? If it's like an imposed, manually calculated result void of foundation, it is likely to have a poor outcome. And this true from the elementary up to PhD levels in trading.
There is a tremendous amount of redundancy in different “things” we look at.
- A recent, more popular one is option gamma. In one use case, many, if not all, of the levels derived from heavy gamma also coincide with large past execution levels observed through generic volumes.
- Heavy support and resistance levels, aka areas where price has rejected over, and over, and over again. These are mostly low volume levels, visible in valleys / node edges on a volume profile.
- Any relative strength, exponential indicator which cycles fixed values. They may be all used the same way.
- Price patterns. There are hundreds of them, and most begin the same way. Years ago, I identified 6 different ways, and nothing has changed. And once again, not even knowing what they are, these coincide with generic volumes.
Behind some of these things are foundational elements. And only one need to be used to make an argument for a transaction. But yes, like all things, we want to put them all on our charts, introduce a macro outlook while we're at it, void of the timeframe we're trading, and move forward in this sense.
If there is even one variation between redundant items we immediately become confused. All the planning in the world does not void us of feelings of inadequacy.
And so again, we go back to a foundation. What's that starting point? Is it telling, or not?
What are you expecting to happen? Base your trade around this.
What are you not expecting to happen? Base your risk around this.
And work from there. Ultimately, the more paths for interpretation, the more paths for adverse effects to sneak in.
You can always tell those who execute well versus those who don't. Their process is simple, and they are not “experts” in everything. There is a core discipline. At least in my own experience, they don't talk a ton. They are not ultra-negative individuals. They know better than to trash talk other methodologies. So while I'll say don't be like George, please, yes, be like this guy.
In a society where we are constantly flooded with information, we seem to put people on a pedestal who appear to have the ability to dissect, and translate it all in short periods of time. But this quality is usually nothing more than an illusion, just like your favorite social media influencer. Understand that this is not something we are meant to do. At least in my own opinion, real strength lies on one's ability to focus on a single problem, and solve it.
So that's all for now. Hope you all are doing well, and will catch you next time.