2.9 Market Plan
There’s not much to say on the S&P500 other than what has been said and instead of writing paragraphs on it like most of the trading charlatans this business we’re going to leave it there.
It made new highs, who cares. Plenty of other stocks and sectors have been on fire and if you’re focused on the market at large you’re just another Retail Trader punting around aimlessly.
What I am going to focus on a bit in this free-preview is how a Professional top-down analysis approach works. AKA - how do you develop a trade idea then structure it.
We just did this in the DeltaOne Thursday trader development call a bit so going to share some of that here.
First, it starts with a macro/economics view of the market and/or sectors. Once you understand what is driving a sector or money flows you can then start diving into individual stocks in that sector - long or short
The strategy I ran as a PM and still run is long/short equity meaning long and short trade ideas to generate returns - not just looking for stocks to blast off and try to catch it and “retire” - that’s the standard Retail Trading approach. A Professional approach takes the perspective of Absolute Returns that are risk adjusted.
Long or short, multiple asset classes and multiple strategies to make money!
Second. Once you have the stock(s) in that sector picked out then comes standard fundamental analysis.
Did they guide positive on forward earnings?
Is there an active share buyback?
Are they run by competent management?
And so forth…I can’t give it all away to you but you begin screening down the ideas to the best ones in that sector.
Third. Technical & market timing. Most Retail Traders live and die by this because that’s all you see from these charlatans - it’s the reason TradingView and StockTwits was created in the first place! To monetize people wanted to share their charts which, in their world, equates to analysis! If you don’t know why a stock is moving in the first place you cannot:
Size it with confidence
Structure it to maximize the gains
And what that leads to for Retail Trader is them either day trading or sizing to big and hoping it works.
Fourth & Final. Once the technical make sense then the structure of the trade. Full risk/half risk - shares, DITM options, short-term options? That’s all up to each Trader.
But, that in short - is a process to developing an idea.
That process allowed some in DeltaOne to structure a trade across equity and options across various strikes on TSM 0.00%↑ which hit final targets today and paid out big time!
In the Premium Video tonight I am going to cover:
S&P500/Nasdaq/Crude
A breakdown of VLO 0.00%↑ long and a top-down approach
A few thoughts on oil from this week