Inversion Trading
In the morning I wrote the following:
Find what is objectively good. In the realm of trading and investing, how do we determine what is objectively good?
It’s simple: observe what objectively works and its inverse. Take your long strategy and consider its inverse—does it equate to a short strategy?
If yes, you have a high probability of success.
If no, your methods have a low probability of success.
The probability of success reflects your approach’s effectiveness and can be further tested by examining randomness or statistical significance. While this might sound simple to a layperson, a seasoned pro will recognize the depth of this insight.
For instance, understanding why it’s vital to invert your long parameters for a compelling short reveals your ability to navigate both with and against the current.
I had attached the following simulation behind the paywall:
I proceed to overall get stop out right after the the first hour of the open.
Then it dawned on me that we picked the wrong side for today. Yet, we still got some upside action, and if we had picked short, we would have had almost the identical projection to the downside.
So we sent to everyone this inversion of the relationships in the morning to fit the short basis.
We than proceed to break the final hour into 2 parts.
With a short and a long.
The understanding of bullish pressure lead to a surprise pop of +20 pts on the futures only to fade out at the close.
We wrote the following:
I’m breaking the final hour into two 30-minute intervals.
There is potential for two trades here: shorting now and then finding a short-term low before the close to go long.
More tech earnings could dampen the bulls after hours.
The short now seems fine due to all the relationships with the bear’s dominating.
Overall, a very sophisticated session that required a lot of thinking on one’s feet.