3 Levers For Your Trading Business

Expanding on edge

At the start of the month, I signed up for an intensive writing course called "Ship 30 for 30". I failed at the first step.

The initial goal was to write every day for one hour for 30 days. I wanted to improve my skills as a digital writer, learn about content structure, and ultimately build on the initial momentum generated with this Substack.

However, where I fell short was creating the time to write. The starting point was to construct a time and space when one can be:

-Most Productive

-Least Responsive

For me, that sweet spot is 8 am at my desk. The workout is done, the wife and kids have been kissed goodbye, and the caffeine is kicking in. I can go deep and block out distractions. However, this writing was eating into the preparation time for trading. There were days when I was scrambling and missed key routines such as completing planning spreadsheets and visualization work. As such, I didn't maximise a few trades and succumbed to that reactionary low-quality FOMO that plagues us all. This made me pause to think.

Performance is about executing simple things consistently. My foray into a new writing habit reinforced the most important levers for my trading business that I need to hit daily. These should be non-negotiable.

Here are some important areas that all traders should prioritise:

1. Preparation

This is the foundation from which everything flows.

The goal of preparation is to filter information to the specific strategy. For those focused on "stocks in play", a starting point is identifying the catalyst and potential magnitude. Some like to go deep whilst others prefer to avoid reading words (non-advisable people). Every situation has nuances and complexities, but the preparation filters all the relevant variables.

These variables should include:

• Where to enter;

• How much size;

• Where to stop;

• Where to exit.

It should be that simple. However, it is amazing how often we do not close this loop and scramble our way to the market open in a panicked burst.

The solution is to fully prioritise time and structure a clear process. Technology and filtering are key to this.

Tech:

For illustration purposes, I have a planning spreadsheet that is the focal point of my “tech stack”. It’s not high-level stuff but it does filter the most relevant information for each strategy into one centralised place for planning and execution. The variables are clearly defined. As an example:

• Entry is determined by a level at which you believe the catalyst has not been fully priced;

• Sizing is calculated by the grading of the setup and your perception of the EV based on the available price;

• Stop is premeditated where the idea is clearly wrong and where it will invariably move against you;

• Exit is planned by the rules set for that particular strategy e.g. a technical level, a change in tape, an extension, or a time of day.

Automation takes over.

This all builds a position of focus and confidence. With this all in place, it then becomes easy to execute in real time. When I have gone through my checks, it is almost like the results are inevitable. Where this gets left unchecked, a maze of reactionary overtrading often ensues.

Streamlined decisions. No immediate actions or reactions. A standard process.

Filtering:

Filtering is also about owning your time and cutting back on needless distractions. It is about culling information that the market just doesn’t care about.

What is most relevant in your information-gathering process? Can this be automated? Will the market care? Which colleagues offer unique insights? Where are you wasting energy and losing focus?

Stop and think about your routines next time you feel rushed and unprepared before the open.

Visualising:

Know what you want to see, where you want to see it, and when you want to see it.

To prime the mind for the patterns that are about to unfold, a visualisation routine can greatly help. As an example, how should my morning drive pattern look based on my idealised examples? I want to see them go from the start, volume getting done into the break with lighter volume on the pull-in. There is RVOL and the tape will scream strong. I don’t want sharp reversals and price holding below the open. I will buy X amount of shares and add Y if this happens.

Visualising these patterns enables superior execution in real-time.

An analogy is the routines of professional sports teams before a match. There is a physical warm-up, drills, soft skills, and tactical game planning back in the sheds. The process is structured to bring out the best self.

Trading is a performance domain and should be no different.

2. Refining and building strategies with edge

You can’t make it as a trader without edge.

If I could identify one area that gets routinely neglected, it is here. No doubt our primary job is to watch markets with purpose. However, hours can go by without any meaningful intent or any edge. This time could be so much better served by going deep on actual playbooks. Building and testing assumptions, forming rules, and updating tech to better capture the next opportunity. Own the strategy in its entirety. From here, with consistency, one can investigate and build out other plays. Earn the right to move up the chain.

An acronym for edge I routinely refer to is called “ASIA”. This concept was introduced to me by a colleague and is a great framework to reverse engineer edge within your playbook. To expand with examples:

Access: access to short borrow that is not widely available; access to an ADR or market that others cannot trade; access to a cap raise; access to algos; access to technology.

Speed: speed to execute orders to front run flow; speed to process a headline.

Information: information sourced outside the ASX that is not widely accessible; information from a specialist such as a research analyst; information about a catalyst.

Analytics: analytics from data or a back-tested strategy; analytical interpretation of a news event from experience and pattern recognition; analytical deep-dive on a company like Cettire from “just a blogger”.

The more of these factors, potentially the more powerful the trade.

Reflecting on some of my recent losing trades, I am struck by the lack of these variables and the consensus nature. Examples include GNC, NUF or BAP shorts. The news was widely available, there was plenty of time for the market to digest, and a big gap on open reflected a more efficient market pricing. Furthermore, short setups like this have just not been working in this market for a long while according to my data.

Here are some examples from the month that encapsulate the ASIA concept more deeply.

JMS:

Access to underlying commodity information from non-traditional sources.

FBU:

Speed to process a headline

I can run losing trades through the same checks.

NUF:

The information was widely available to the market with plenty of time to process; borrow was widely available leading to a potential squeeze if traders were trapped; a significant gap offered less EV; analytically trading a discretionary chart-based setup without any proof these work e.g. around vwap. Sure the tape changed here but the broader variables and intra-uptrend made this a weak play.

CTT 6th March on AFR:

The article is widely circulated and the stock gaps down 18.5%. I have no access or speed edge as I miss the open. Analytically I have no idea the real magnitude of this news. I succumb to chart-based trading around Vwap in the middle of the range despite the news being in the market all morning. Sure enough, a halt ensues to respond and I compound the loss.

Playbooks are the foundation of Edge. Using the ASIA acronym can add a further layer to more fully understand the most powerful trades and where one can better allocate resources.

Whatever your style or timeframe, always be asking, where do I have an edge?

3. Review and Practice

Reflection is a form of deliberate practice.

Writing via a report card increases self-awareness and the ability to adapt faster in the following sessions to the market conditions or our problem patterns. It is a structured medium to target a specific goal and determine how well we are tracking. Furthermore, completing a review each day builds real momentum and heightened focus that compounds. I have written extensively about this.

Other potential practice routines include:

• Re-watching tape and key inflections in a stock;

• Building a database of screen recordings;

• Writing up detailed trade reviews;

• Testing exit and stop loss rules;

• Mocking up charts on multi-time frames;

• Breathing in states of stress;

• Visualisation to hit a certain size or take a set dollar loss at a price point.

The science is overwhelming that deliberate practice is a key input to achieving excellence. Of course, this is domain-specific and needs to be targeted correctly. Given this, the central area for me in day trading is re-watching tape.

Reading the tape allows you to see what is actually going on in a stock. It is implicit learning. It comes through hours of screen time and immersion.

It is difficult to describe but it is so clear in the moment that you can scream it out loud. It is not just one moment but a sequence of events. Through watching, you can identify patterns and tipping points on the tape that offer the very best risk/reward opportunity. It is here when you can truly swing for it with tight risk to enhance the edge.

The order book also tells you when NOT to trade because there is nothing clear. If it feels like there is no action, then the market doesn't care about your catalyst...yet.

Conclusion:

Excellence is about defining the skills and processes needed to perform at the highest level and then executing them. My attempt at building a new writing habit conflicted with the most important levers for my trading, which is my primary job. The experience reinforced best practices.

Too often we can get caught up in watching the markets without context. Always be asking, what is my edge here? The ASIA acronym is a great framework for doing so.