Whether you’re a value bro doing DCF and looking for deals or a day trader trading order-flow on stock/options/futures trade execution matters, especially for short-term trading (defined as 1-30 days). Every investor has a thesis, trade idea or some type of information to buy or sell but the execution makes all the difference.
How many times have you seen someone put a trade on that turns into an investment?
How many times have you been right on the thesis but wrong on the timing? - And to be clear, being early is the same thing as being wrong (and I’ve been there which is why execution is a big part for my process).
Those all lead to questions you should be asking: when do I buy? Do you add to the trade (good or bad)? Do you trail stops?
The short answer is very simple: it’s subjective - it’s based on each particular individual.
It’s a really important part of trading & investing to codify. But, it’s not a sexy topic that is discussed much and it needs to be because your thesis and research depends on it and without it you’re another retail NPC throwing darts.
This is a nuanced discussion because those answers, in my view, vary based on the products you trade. I am going to break it down in an in-depth post for readers so you can start to take what I do and maybe incorporate it, throw it out, or just get you to start thinking so you can codify this part of the investing business to fit your portfolio.
Let me start off with a simple example to start:
When I trade equity options the execution changes based on:
Duration (is it a day trade or 6-12 month idea I am holding)
Is this a momentum/volatility based trade or a passive investment?
(let me be clear - this is an options example, I will dive into long and short stock and futures inside)
For example. I want to buy TSM 0.00%↑ for an intraday or 2 day trade at max. I see something that I know will drive price higher so that trade requires a bit of surgical execution.
But there’s a difference in intraday execution and core/swing execution and that’s what we’re going to get into in this piece.
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