Context & No Such Thing As Simple Setups

A Video Primer.

PRIMER: Context Matters & There is No Such Thing As A Simple Setup

One of the biggest things you see from amateur trading (and it’s literally everywhere) is the idea of “simple setups” - people love to use things like:

• Cup and handle

• Double tops

• Bull flag/bear flag

• Wedge

• V shape pattern (whatever the F that even means)

And so on. All of it, most of the time, is without context. I know this to be the case from seeing it online because I’ve taught friends and mentored others that always talked about those as if they mattered.

As an example, in 2022 when I was shorting Carvana due to them literally (not subjective - the maths mathed) about to be out of money I would see charts of people using things like:

Rising wedge or RSI or MACD - literally no context to be found.

Do those patterns work? Of course they do - can you make a few bucks without knowing why or how, sure you can - until you end up like Uncle Mark on CNBC pretending your mic cut our because you have no clue what the company you’re allegedly trading does.

Context matters you see. It tells you why things are flowing the way they are from:

• Money flows into sectors

• To why trading 9:30-11:30 is ideal for order flow

• Why end of quarter you get ramps

• Why certain stocks are tied toward oil/natural gas

It’s the same reason since 2010 I’ve always looked for trades from 2-2:30 EST on Crude oil - because it’s the pit close and order flows pick up which means, to me, that if I have a level or any one of the guru patterns listed above, that the odds of said pattern work out further because there’s an additive: gas to the fire if you will.

It’s the same reason that this Summer when we talked about Market Inflection and Turning point that XHB 0.00%↑ was in play.

Not because of a fungulator indicator (though we love that at The LongVol) or RSI or head and shampoo patter or the fabled Pikachu clouds indicator….but because contextually we had a market view.

Of course a technical and market timing overlay helped, they always do and that’s a part of our Top Down analysis process we use to better time an idea but it’s the context that gives you reason to understand the whys.

You see, without context things like this are bound to happen 👇

And this plagues both novice traders and investors alike and it’s worth a discussion via a primer.

So, that being said - let’s dig in.