From Zero to Stock Hero
In markets, you're not rewarded for knowing what's next - you're rewarded for surviving what's next.
Before we begin, here are the three simplest, yet most valuable tips I was ever given:
Hold a trade longer than you think you should.
Go with your gut.
Buy into strength.
Most fail because they do the opposite of them all. They cut winners early, or they overthink and override instinct. They second-guess themselves right out of good trades. The good trades don’t scream. They just start working and keep working, if you let them. Mastering these three won’t make you invincible, but they’ll keep you out of 90% of dumb mistakes.
Anyway… Shall we begin?
Stocks aren't just symbols flickering on a screen. They're belief systems, battlegrounds, and balance sheets all wrapped into one messy, beautiful yet infuriating package. If FX is the plumbing of the global financial system, then equities are its heartbeat - pumping with optimism, greed, fear, and raw human innovation in real time. Every earnings whisper, every CEO stumble, every Fed decision, it all flows through that endless digital tape, and somehow we're supposed to make sense of it all.
This is your map. Not a get-rich-quick brochure promising $10k days from your kitchen table. Not another "hot stock picks" newsletter, though I do provide that. This is just a map for navigating the equity landscape with a trader's eye and a macro lens, written by someone who's paid the tuition fees for these lessons the hard way (and trust me, I have).
If you've ever stared at a screaming green candle and felt that familiar tug - "should I chase it?", this one is for you. If you've watched Nvidia rip 8% and somehow your completely unrelated restaurant stock decided to join the party (or the selloff), and you had no idea why, this is for you. If you're tired of the Twitter gurus and YouTube charlatans promising easy money while you're still trying to figure out why your "sure thing" tech play is acting like a penny stock, and you get burned, this is for you.
Look, I've been that person. I've chased the momentum. I've misread the multiple expansion. I've held through many drawdowns. The market has a way of humbling you just when you think you've got it figured out. But somewhere between the losses and the lessons, patterns start to emerge. You begin to see the matrix behind the madness.
This post is designed to take you from confused spectator to informed participant , or if you're already trading, from messy participant to structured stock operator. We'll move through:
What stocks really are and why they actually move (spoiler: it's not always fundamentals)
How macro and micro forces collide in ways that make no sense until they suddenly do
The hidden psychology and structure of indices that drive more moves than you think
Earnings season landmines
The Mag7 effect
Flow dynamics, ETFs, and how passive money creates active opportunities
Why retail and institutional money behave like completely different species
Tools that actually help instead of just selling you hope in a subscription package
Believe it or not, you don't need to trade every day. Yep, the truth hurts, but you probably shouldn't. But if you're going to step onto this battlefield, you need to at least understand the terrain. There are few worse feelings than watching a position bleed while having no clue why the market suddenly decided your stock was guilty by association with something happening three sectors away.
The goal of this post isn't to make you rich - that's on you. My goal is to arm you with context so you can tell the difference between noise and narrative, narrative and actual signal. So when the next "surprise" earnings reaction happens, or when your safe dividend stock suddenly moves like a crypto coin, you'll have a framework for understanding why.
The market will still surprise you. It surprises everyone. But at least you won't be surprised by your own lack of understanding.
Let's get into it.
Risk disclaimer: This post may cause increased caffeine consumption. Proceed with some enthusiasm (and a healthy dose of caution). It’s long.
What Is a Stock?
A stock is more than a ticker symbol – it's a slice of a living, breathing business.
Let's cut through the jargon and start with what matters: when you buy a stock, you're literally buying a piece of a real company. Not a derivative, not a contract, not some abstract financial instrument, you’re getting actual ownership. Think of it like this: if Apple were a massive pizza (bear with me here), your single share would be one tiny slice of that pizza. If Apple grows and becomes more valuable, your slice grows with it. If Apple has a rough quarter, your slice shrinks accordingly.
But here's where it gets interesting, and where most people miss the point. You're not just buying a number that goes up and down. You're buying into the dreams, mistakes, innovations, and occasional disasters of real people running real businesses. Every earnings call, every product launch, every CEO tweet, it all flows through to your position because you literally own a piece of the action.
The Beautiful Risk of Ownership
As a shareholder, you get some pretty cool rights. You can vote on major company decisions (though unless you own millions of shares, your voice is more like a whisper in a stadium). You might get dividends if the company decides to share its profits. But here's the catch that keeps most people awake at night: you're dead last in line if things go sideways.
If a company goes bankrupt, everyone gets paid before you - employees, suppliers, the government, bondholders, even the guy who delivered the office coffee. You get whatever's left, which is often nothing. It's the ultimate high-risk, high-reward setup. Bondholders get their steady interest payments and sleep soundly. Stock owners get the sleepless nights and the occasional life-changing windfall.
The Magic of Limited Liability
Here's something that would blow the minds of merchants from centuries past: you can't lose more than you put in. Buy $1,000 worth of stock in a company that goes spectacularly bust? You lose your $1,000, period. The company's creditors can't come after your house, your car, or your remaining savings.
This might seem obvious now, but it wasn't always this way. Back in the day, business owners were personally liable for everything. The Dutch East India Company in the 1600s was revolutionary because it let regular people fund risky voyages without risking personal ruin. That simple concept, limited liability, is what made modern capitalism possible. It's what lets you take a flyer on that promising biotech stock without worrying about losing your shirt if their drug trials fail.
Understanding What You're Actually Buying
Not all stocks are created equal, and understanding the differences can save you from some painful surprises. Let me break down the menagerie:
Common vs. Preferred
Most of what you'll trade is common stock, you get voting rights and a seat at the table (however small). Preferred stock is like being aristocracy: you don't get to vote, but you get your dividends first and you're ahead of common shareholders if the company goes under. Think of preferred as the stock market's version of first-class passengers getting off the plane first.
Size Matters, fellas.
Market cap (total value of all shares) tells you what size company you're dealing with:
Large-caps are the aircraft carriers of the stock world - Apple, Microsoft, companies worth hundreds of billions (a few are worth trillions). They're stable, predictable, and about as exciting as watching paint dry (until they're not). But when you need something reliable in your portfolio, these are your anchors.
Small-caps are the speedboats - nimble, fast-moving, and occasionally prone to capsizing in rough seas. They can double on good news or get cut in half on bad earnings.
Penny stocks are the jet skis of the stock world - fun to watch, dangerous to ride, and most people who get on them end up in the water. The graveyard of blown-up trading accounts is littered with penny stock casualties. Not my cup of tea.
Growth vs. Value: The Tortoise and the Hare
Growth stocks are the companies everyone's talking about at dinner parties. They're usually reinvesting every penny back into the business, promising exponential expansion. Nvidia, Tesla, Netflix in its heyday, any biotech with a promising pipeline - these are growth plays. They trade on dreams and potential, which means they can soar on good news and puke when reality doesn't match expectations.
Value stocks are the wallflowers of the stock market, solid companies that nobody's paying attention to. Maybe they're in boring industries, maybe they had a rough patch, but they're trading cheap relative to their fundamentals. The catch? Sometimes stocks are cheap for good reason, and sometimes they stay cheap longer than your patience lasts.
Cyclical vs. Defensive
Cyclical stocks are like your fair-weather friends. They're great company when times are good, but disappear when things get tough. Airlines, car manufacturers, and luxury goods, these stocks live and die by the economic cycle. Buy them at the right time in the cycle and you'll look like a genius. Buy them at the wrong time, and you'll wonder why your recovery play keeps going down.
Defensive stocks are the reliable friends who show up with drugs and broth when you're sick. Utilities, consumer staples, healthcare, tobacco - people need these regardless of whether the economy is booming or busting. They won't make you rich overnight, but they'll still be there when the market decides to have a meltdown.
In summary, stocks represent ownership and come in many varieties. Knowing what type of stock you’re dealing with (big or small, growth or value, cyclical or defensive, etc.) will help set expectations about its behaviour.
How Stock Prices Move: The Beautiful Chaos Behind the Numbers
If you've ever watched a chart for more than five minutes, you've probably had that moment of existential confusion: "Why the hell did it just do that?" One minute, your sure thing tech name is climbing steadily, the next it's puked 5% on news that seems completely unrelated.
Here's the thing nobody tells you upfront: stock prices move for dozens of reasons, and sometimes for no reason at all. But underneath the apparent chaos, there are patterns and forces you can learn to recognise. Think of it like weather, you can't predict exactly when it'll rain, but you can learn to read the clouds.
In the long run, and I'm talking years here, not days, stock prices tend to follow a company's ability to make money. I still think Benjamin Graham said it best: "In the short run, the market is a voting machine, but in the long run, it's a weighing machine." Short-term prices are like a popularity contest run by caffeinated teenagers. Long-term? That's when the adults finally show up to check the books. Or the other way round, who knows?
Earnings
At its core, a stock represents your slice of a company's future profits. When a company consistently grows its earnings, the stock usually follows… (eventually). The keyword there is "eventually." I've watched fantastic companies report blow-out quarters and seen their stocks drop 10% because the market was having a mood swing that day, and I have seen the same happen, smashing sell-side numbers but missing buy-side estimates.
Earnings per share (EPS) is the company's net profit divided by the number of shares outstanding. If a company makes $100 million and has 50 million shares outstanding, that's $2 per share. Simple math, but here's where it gets interesting: the market's reaction to that $2 can be anything from "meh" to "holy grail discovered." Earnings reactions can be for the a multitude of reasons, including EPS or maybe the CEO (not mentioning any names) has mentioned AI 483 times on the earnings call.
The P/E Ratio: What Will People Pay for a Dollar of Profit
This is where things get psychological. The price-to-earnings ratio tells you how much investors are willing to pay for each dollar of a company's annual profit. If a stock trades at $30 and earns $2 per share, that's a P/E of 15x. Meaning people are paying $15 for every $1 of annual earnings.
A high P/E (say 30x or 50x) usually means one of two things: either investors expect explosive growth, or they've lost their collective minds. Tesla traded at ridiculous multiples for years because people believed it would be the future of transportation. Some said it was justified as Tesla is a tech stock. Some say it wasn’t, as Tesla is an auto name… Sometimes they were right, sometimes... well, sometimes reality is a harsh teacher.
A low P/E often signals a value opportunity, sometimes a value trap. Maybe it's a solid company that Wall Street forgot about, or maybe it's cheap because the business is slowly dying. The art is figuring out which one you're looking at.
Sometimes, cheap is cheap for a reason. But saying that, I think the last time I bought a name and the P/E ratio was part of the thesis was here. Back when I bought META in the lows 90s at 8.5x trailing P/E. Believe it or not, META became a value name for a short period. (I still hold META till this day)
Other Valuation Metrics: The Extended Family
P/E ratios are just the beginning. Different industries worship different metrics, I am not going into each of them as I don’t want this post to end up being like a textbook:
PEG ratio tries to account for growth (because paying 30x earnings for 40% growth might make sense)
Price-to-sales matters for companies that aren't profitable yet
Price-to-book is big in banking and real estate
EV/EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortisation), yes, it's a mouthful, but it's useful for comparing companies with different capital structures. Lots argue it’s more important than P/E.
Instrinsic Value What a stock is really worth based on fundamentals. One way to estimate this is via the DCF model (discounted cash flow).
Different metrics matter in different contexts. Trying to value Netflix using bank metrics is like judging a fish by its ability to climb a tree.
Supply and Demand
Sometimes stocks move simply because more people want to buy than sell, or vice versa. Sometimes they move when there’s less buyers than sellers just because the buyers are buying a larger size. This sounds obvious, but the reasons behind the buying and selling can be wonderfully absurd.
The Liquidity Game
Big, famous stocks like Apple can absorb massive trades without flinching. You could buy $10 million worth and barely see a blip. Try that with a small-cap biotech, and you might single-handedly move the stock 5%, maybe even more. It's like the difference between throwing a pebble into the ocean versus a swimming pool.
I learned this lesson early on, watching a small-cap stock I owned gap up 15% on "no news." Turns out someone was rebalancing and needed to buy exactly what I owned. Sometimes you're skilled, sometimes you're lucky, and sometimes you can't tell the difference.
News
Stock prices move on news, they often move more on the perception of news than the news itself. I've seen companies report exactly what analysts expected and still get hammered because the market was hoping for a miracle.
Then there's the classic "buy the rumour, sell the news" phenomenon. A stock runs up for weeks on whispers, then promptly drops when the news is actually announced. Why? Because everyone who wanted to own it based on the rumour had already bought. When the news hit, they took profits.
It's like showing up to a party that everyone's been talking about, only to find out the best conversations happened before you arrived.
Sentiment
Here's where it gets really interesting (and frustrating). Stock prices are moved by humans (algos too, but those are made by humans, for now…), and humans are emotional creatures who occasionally make decisions based on logic. The classic line comes to mind - the market can stay irrational longer than you can stay solvent, and I've got some battle wounds to prove it.
Fear and Greed
When people are greedy, they'll pay ridiculous prices for mediocre companies with good stories. When they're fearful, they'll sell fantastic companies at bargain prices because they can't sleep at night. (Small tip, if you can’t sleep because a position is keeping you up - cut it - this should never happen).
The VIX is the fear gauge. When it spikes above 30, people are panicking. When it drops below 15, everyone's feeling invincible as its smooth sailing. Both extremes tend to create opportunities, though timing them is like trying to catch a falling knife while riding a unicycle.
Momentum - You Can Buy Strength, You Know
Rising stocks attract buyers (FOMO is indeed a real thing), which pushes them higher, which attracts more buyers. It's a beautiful feedback loop until it isn't. I've watched stocks double on no fundamental change whatsoever, just because everyone wanted to be part of the party.
The flip side is equally brutal. When selling starts, it can cascade as stops trigger, which triggers more selling, which triggers margin calls, which triggers more selling. It's like watching dominoes fall in slow motion, except each domino is a percentage point of your net worth.
Narratives
Sometimes, entire sectors move based on a compelling story that captures the market's imagination. The dot-com boom had "the internet changes everything." The 2020-2021 era had electric vehicles and clean energy. 2023 brought us the AI revolution.
These narratives can become self-fulfilling prophecies. If enough people believe AI will transform the world, they'll bid up AI stocks, which validates the narrative, which attracts more buyers. Nvidia went from a gaming chip company to the poster child of the AI revolution, and its stock price followed accordingly.
But narratives eventually have expiration dates (not it applies to NVDA). When reality doesn't match the hype, or when the next shiny narrative comes along, yesterday's darlings become today's casualties. You saw this play out with cannabis stocks a few years back.
The trick isn't avoiding narratives, they're incredibly powerful when they're building. The trick is recognising when you're riding a wave versus getting caught in a tsunami. I did do a write up on narratives which I have attached below.
The Uncomfortable Truth
Here's what they don't teach you in books: sometimes stocks move for no good reason at all. Algorithms trading against other algorithms, creating feedback loops that have nothing to do with the underlying business. A typo in an earnings release that gets corrected an hour later, but not before the damage is done.
Markets are the most efficient information-processing machine ever created and a chaotic mess of human emotions amplified by technology. Your job isn't to make sense of every move, it's to understand the forces at play well enough to position yourself intelligently. When you finally realise that it’s not your job to make sense of every move, you will succeed.
Sometimes you'll buy a stock based on solid fundamentals and watch it go nowhere for months while some meme stock doubles for no reason. Sometimes you'll nail a sentiment trade perfectly and feel like a genius, then get humbled the next week when you try to repeat it.
The market will humble you. The key is learning from the humbling instead of being destroyed by it.
That's the game we're all playing, trying to find signal in the noise.. Sometimes the fundamentals win, sometimes sentiment rules, and sometimes you just get pure lucky.
Sector Rotation + Fund Flows
Here's something that'll mess with your head: sometimes your individual name moves not because of anything the company did, but because a pension fund in Ohio decided to rotate from growth to value.
Believe it or not, big institutional investors, pension funds, sovereign wealth funds, massive hedge funds, move money around like you and I. When they decide it’s risk-on, money floods into tech and growth stocks. When they get spooked and it’s risk-off that same money rushes into more defensive names - utilities and consumer staples like people fleeing to the basement during a tornado.
Your stock can be caught in someone else's portfolio rebalance, and there's not a damn thing the company can do about it.
ETFs make this even more pronounced. When money flows into the "Technology Select Sector SPDR Fund," that fund has to buy every tech stock in its index, regardless of whether those individual companies deserve it. Sometimes you're riding the wave, sometimes you're getting dragged along by it.
Technical Analysis
Now, I know some of you are rolling your eyes at the mention of technical analysis , drawing lines on charts and finding patterns in squiggly lines. But here's the thing… I was that guy once, convinced it was all astrology for retail traders, but enough people believe in it as the years have gone on that it actually matters a LOT!
When a stock breaks below a widely-watched support level, a thousand algorithms and technical traders all hit sell at the same time. Their selling pushes the stock lower, which triggers more technical selling, which validates the original technical signal. I guess you could say it’s like a financial Ouija board that works because everyone's pushing the planchette in the same direction. Likewise, a breakout above a resistance level might attract buying. Technical trading can create self-reinforcing moves in the short term.
Additionally, there are stop-loss orders clustered around certain prices – if those trigger, they can accelerate a move further.
We have all seen fundamentally solid companies get absolutely destroyed because they hit some technical level that the chart-watchers didn't like. Is it rational? Not really. Does it move stock prices? Absolutely.
The algorithms make it even crazier. Some machines are scanning thousands of stocks every millisecond, looking for momentum shifts, technical breakouts, or patterns that worked in the past. Sometimes they create feedback loops that turn a small move into a big one, just because the machines are all following similar logic.
I guess the lesson for technical analysis is this… You don’t need to believe in it if what you’re doing is working, but you best respect it. Ignoring these levels can be like ignoring traffic lights.
A Real-World Example - When Everything Goes Wrong (And Right)
Let me paint you a picture with a hypothetical scenario that'll feel painfully familiar:
Company XYZ is trading at $100, earning $2 per share (P/E of 50x, yeah, it's pricey, but it's a growth darling). Earnings day arrives. The company beats expectations with $2.10 per share and raises guidance. Fundamentally, this is good news.
But during the call, the CEO mentions "some uncertainty" in the next quarter's pipeline. Meanwhile, the Fed just hinted at rate hikes, which makes those high P/E multiples look less attractive. And separately, a few funds decide this is a good time to take profits and reduce their positions.
Result? Despite beating earnings, XYZ drops 5% to $95 over the next few days.
Sound familiar? I've lived through this exact scenario more times than I care to count. You do all your homework, the company executes perfectly, and the stock still gets punished because the market was in a mood.
But here's the rest of the story: a month later, the Fed softens its tone, market sentiment improves, and suddenly everyone remembers that XYZ is working on AI chips (or whatever the hot narrative is that week). Money flows back into tech, analysts start talking it up on CNBC, and boom XYZ not only sees $100 but shoots to $110.
Why the higher price? Maybe investors are now willing to pay 35x forward earnings instead of 33x because rates aren't going up as fast. Maybe earnings estimates crept up to $3.20. Maybe it's just that the market's mood improved and people remember why they liked the stock in the first place.
This back-and-forth happens constantly. Short-term, anything can move a stock: a tweet, a sector rotation, a technical breakdown, or news that has nothing to do with the actual business. But if XYZ truly grows earnings from $2 to $5 over a few years, the stock will likely be much higher than $100, regardless of all the noise in between.
The art is learning to separate signal from noise. The signal is the fundamental trajectory - is this company getting stronger or weaker? The noise is everything else.
The Fed - The Ultimate Market Puppet Master
Before we wrap up, let's talk about the 800-pound gorilla in every room: the Federal Reserve. When people say "Don't fight the Fed," they're not being dramatic. It’s a tale as old as time! They're acknowledging that the world's most powerful central bank has more influence over stock prices than any single company's earnings report.
When the Fed cuts rates or pumps money into the system through quantitative easing, some of that cash finds its way into stocks. The 2010s and especially 2020-2021 showed us what happens when the money printer goes brrrr, stocks float higher on a sea of liquidity, sometimes regardless of fundamentals.
There's a concept called the Fed Put, the belief that if stocks drop too hard, the Fed will step in to save the day by cutting rates or providing more stimulus. It's not an official policy, but investors have seen it play out enough times (1987, 1998, 2008, 2018, 2020) that they've started to count on it.
This creates a dangerous psychological dynamic where people "buy the dip" not because stocks are cheap, but because they expect the Fed to ride to the rescue. Basically, it works until it doesn't.
2022 was a brutal reminder of what happens when the Fed takes away the punchbowl. As rates went up to fight inflation, all those high-flying growth stocks that were floating on cheap money suddenly found themselves without life jackets. Some were cut in half, some even more.
The lesson? Liquidity is like the tide, it lifts all boats when it comes in and exposes who's swimming naked when it goes out. Your job is to make sure you're not the one without shorts when the water recedes.
The Bottom Line
Stock price movement is equal parts science and art, logic and madness. You need to understand the fundamental climate patterns, earnings growth, valuation metrics, and industry trends. But you also need to read the daily weather and ride the waves of sentiment as they come.
Sometimes you'll nail the fundamentals perfectly and still get crushed by a sentiment shift. Sometimes you'll catch a momentum wave and feel like a genius, only to get humbled the next week when you try to repeat it.
Markets will teach you humility, patience, and the difference between being right and making money. As I said before, your job isn't to predict every move; it's to position yourself intelligently for the long-term direction while managing the short-term chaos.
Because at the end of the day, stocks are just pieces of businesses run by humans, traded by other humans, all trying to figure out what comes next. Sometimes it's rational, sometimes it's not, but it's always human.
And I think that's both the challenge and the opportunity.
Macro to Micro: When the Big Picture Crushes Your Perfect Stock Pick
Here's a painful truth I learned the hard way: you can pick the perfect company with flawless execution, growing earnings, and a brilliant management team, and still watch your investment get destroyed because the Federal Reserve decided to hike interest rates.
Stocks don't exist in a bubble. Even Apple can get crushed if the macro environment turns hostile.
Understanding macro isn't just helpful, it's survival. Because when the economic tide turns, it doesn't ask if your company deserves to get swept away.
Interest Rates: The Invisible Hand
Think of interest rates as gravity for the financial universe. When rates are low, everything floats higher. When they rise, gravity gets stronger, and things start falling back to earth.
Here's why this matters to your stock portfolio: interest rates represent the "risk-free" return you can get. If you can earn 5% in a Treasury bond with zero risk, suddenly that growth stock trading at 30x earnings needs to work a lot harder to justify its existence.
The 2020-2022 Whiplash: A Masterclass in Rate Impact
Let me paint you a picture of what this looks like in real life. In 2020, the Fed slashed rates to basically zero and fired up the money printer. Suddenly, your savings account was paying 0.1%, and a 10-year Treasury was yielding maybe 1%.
Investors looked around and said, "Well, there is no alternative" (they literally called it TINA). Growth stocks trading at 40x earnings didn't seem so crazy when the alternative was earning essentially nothing in bonds. Tesla could trade at ridiculous valuations because when you discount future profits at near-zero rates, those far-off earnings look pretty valuable today.
People quit their jobs to day-trade because "stocks only go up." Every dip got bought. Every growth story got bid to the moon. It felt like financial gravity had been suspended.
Then 2022 happened.
Inflation spiked to levels we hadn't seen since the 1980s, and the Fed performed the great hiking crusade where rates went from zero to five per cent in what felt like a weekend. Suddenly, that same Treasury bond was yielding 5%, real money, with no risk.
The growth stocks that looked reasonable at 0% rates suddenly looked insane at 5% rates. Why own a speculative biotech when you could get 5%? The gravity came back with a vengeance. Some growth stocks fell 70-80%. Companies with no profits got obliterated. Even profitable companies saw their valuations compress as investors rotated into value stocks and bonds.
The macro tide had turned, and it didn't care about your fundamental analysis.
Different Sectors, Different Reactions
Interest rates don't affect all stocks equally, which is where it gets interesting:
Banks generally like moderate rate increases because they can charge more for loans. But if rates go too high too fast, loan defaults can spike and banks get hurt anyway. It's a Goldilocks situation; they want rates not too hot, not too cold.
Real estate companies and REITs hate rising rates because their business models depend on cheap financing. When mortgage rates jump from 3% to 7%, suddenly fewer people can afford houses, and real estate stocks get crushed.
Utilities are the weird ones. They're often bought for their dividends, so when Treasury yields shoot up, investors think "why own a utility paying 4% when I can get 5% risk-free?" But in a recession, they're also seen as safe havens. It's complicated.
The Yield Curve
Here's a nerdy concept that actually matters (sometimes): the yield curve. Normally, long-term bonds pay higher rates than short-term ones (because you're tying up your money longer). When this flips, when short-term rates are higher than long-term rates, it's called an inversion.
Inverted yield curves have predicted almost every recession since World War II. It's like the bond market saying, "Things are so bad right now that we think rates will have to come down in the future." And when recessions hit, corporate profits usually fall, which means stock prices fall.
In 2022-2023, the yield curve inverted deeply. Short-term rates hit 5%+ while 10-year bonds stayed around 4%. The bond market was essentially screaming "recession incoming," and many were watching nervously for it to materialise. Still to this day, it remains the most speculated recession ever - it still hasn’t happened.
Inflation
Inflation might be the most misunderstood force in markets. Everyone talks about it, but most people don't really grasp how it ripples through to stock prices.
Here's the simple version, inflation is when stuff gets more expensive. But the devil's in the details.
The 2022 Inflation Shock: When Everything Went Wrong
We lived through the inflation spike of 2022, and it was educational in the worst possible way. CPI hit levels we hadn't seen since the early 1980s, over 9% at the peak. Oil prices went crazy (this was also partly due to Russia Ukraine) and groceries became a luxury.
Consumers started cutting a little on everything that wasn't essential. Companies began reporting that customers were trading down to cheaper options or simply buying less. Walmart and Target both mentioned customers skipping purchases. Even Apple warned about currency headwinds and economic uncertainty. This situation was slightly different to the 80s as the consumer remained surprisingly strong despite inflation and they still remain strong till this day.
But here's what really mattered for stocks: inflation forced the Fed's hand. They had to raise rates aggressively to fight it, which brought us back to the interest rate problem I just discussed.
The Good, the Bad, and the Ugly of Inflation
Not all inflation affects all companies equally:
The Winners: Companies with pricing power did fine. If you're Coca-Cola and everyone's costs are going up, you just raise the price of Coke and consumers grumble but still buy it. Energy companies did really well in 2022 because oil and gas prices soared.
The Losers: Companies with long-term contracts or those in hyper-competitive industries got squeezed. If you're locked into selling your product at 2021 prices but your costs have doubled, you're in a bit of trouble.
The Complicated: Some companies could pass on costs but with a lag, so their margins got squeezed temporarily. Others found that while they could raise prices, volumes fell enough to hurt profits.
Moderate Inflation vs. the Scary Kind
Here's something that surprises people: a little inflation (2-3%) is healthy. It usually means the economy is growing, and companies can gradually raise prices. The Fed targets 2% inflation for a reason.
The scary inflation is the unexpected kind. If it suddenly jumps to 6%, that's when markets panic. Not because 6% inflation is necessarily catastrophic, but because it means all the assumptions about Fed policy, corporate costs, and (normally) consumer behaviour just went out the window.
Deflation: The Opposite Problem
While high inflation is bad, deflation (falling prices) can be worse. Japan spent decades dealing with deflation, and its stock market went nowhere for ages. When prices are falling, simply put, consumers delay purchases ("why buy now when it'll be cheaper next month?"), which creates a vicious cycle of falling demand.
Why This All Matters
Macro doesn't just influence your stocks; it often overwhelms everything else. I've seen companies beat earnings estimates by 20% and still fall because the macro environment was hostile at that point. I've also seen mediocre companies get lifted by macro tailwinds they did nothing to deserve.
Your job as an investor isn't to predict macro (good luck with that), but to understand how different macro environments affect different types of stocks:
Rising rate environment? Favour value over growth, banks over REITs, profitable companies over the stories.
High inflation? Look for companies with pricing power, avoid those with fixed contracts, consider energy and materials.
Recession fears? Defensive stocks, consumer staples, companies with strong balance sheets.
The best companies can navigate any macro environment, but even they'll see their stock prices reflect the broader tide. Understanding that the tide doesn't guarantee success, but ignoring it almost guarantees failure.
Remember, you might be right about the company and still lose money because you were wrong about the context. The macro environment is the stage on which your individual stock picks perform, and sometimes the stage itself becomes the story.
The Market’s Scoreboards
An index is like checking the scoreboard during a football match. But if you don't know who scored, how, and when, you’re not actually watching the game.
When someone asks, "How's the market today?" what they usually mean is: "What's the S&P doing?" Or the Nasdaq. Or the Dow. They're not asking about your meme stock or the regional banks you’re nervously bag-holding. They’re asking about indices, the broad, often oversimplified scoreboards that compress hundreds of stories into a single number.
Indices matter. But if you don’t know how they’re built, you’ll misread the story they’re telling. So let’s humanise these benchmarks, strip away the mythology and get real about how they work, how they skew, and why the index print doesn’t always match what’s happening in your portfolio.
S&P 500
The S&P 500 is the index. The heavyweight. The benchmark fund managers are judged against, and the one everyone refers to at the pub when they say “the market’s up.” It tracks 500 of the largest public companies in the U.S. across all major sectors. but don’t let the round number fool you. It’s not “equal slices of 500 stocks.”
The S&P is market-cap weighted, meaning the bigger the company, the more influence it has. Apple isn’t just in the S&P, it is the S&P on some days. In recent years, Apple and Microsoft alone have accounted for over 10% of the index. The top 10 names? Over 30%.
So when the S&P rallies, it doesn’t necessarily mean the whole market is healthy. Sometimes, it's just the big boys, aka the Magnificent 7/MAG7 (Microsoft, Apple, Amazon, Google, Nvidia, Tesla & Meta) pulling the sled while the rest of the team is face down in the snow.
Here’s where it gets tricky: in 2023, the S&P looked strong on paper. But under the hood, most stocks weren’t keeping up. The index’s gains were driven overwhelmingly by the Magnificent 7. Three-quarters of the performance came from less than 2% of the names. So if you were diversified, ironically, if you were doing it right, you might’ve been losing money while “the market” looked like it was ripping.
And that disconnect? That’s the cost of not understanding index construction. It’s also why traders started tracking equal-weight versions of the index more closely then, we’ll get to that shortly.
Nasdaq 100
The Nasdaq 100 is basically the growth-stock index. It’s 100 of the biggest non-financial companies listed on the Nasdaq exchange, but in practice, it’s just tech and tech-adjacent juggernauts with a couple of outliers for flavour.
This is the index you trade if you believe in software margins, AI narratives, or cult CEOs with rockets and flame-throwers. Apple, Microsoft, Google, Amazon, Meta, Nvidia, Tesla - the usual suspects. When tech leads, Nasdaq outperforms. When tech gets punched in the mouth, Nasdaq bleeds more than the others.
It’s also cap-weighted, so the same story applies: a handful of names do most of the work. In 2023, it got so concentrated that the Nasdaq committee did a one-off rebalance to stop the top 7 from exceeding 50% of the index. That’s how top-heavy it had become.
If you trade QQQ (the ETF that tracks this index), just know: you’re not trading a balanced tech basket. You’re buying a leveraged opinion on whether the Mag7 keeps winning.
Dow Jones - Grandpa’s Gauge
The Dow is the most iconic index and arguably the least useful. It tracks just 30 stocks. Not the biggest 30, not the fastest growing 30, just 30 blue-chip names across different sectors.
Worse, it’s price-weighted, which means it gives more weight to higher share prices, not larger market caps. A $300 stock moves the Dow 10 times more than a $30 stock, regardless of the companies’ actual value. In 2024, a single down day in Goldman Sachs could drag the Dow more than the entire utilities sector imploding.
That said, the Dow still moves headlines. If it drops 500 points, CNBC will flash red banners “markets in turmoil” and your dad will text you asking if he should sell everything. As a trader, it’s background noise, but as a sentiment gauge for the public, it still matters.
Russell 2000 - The Crap
The Russell 2000 tracks 2000 smaller U.S. companies. It’s market-cap weighted too, but the weights are much flatter, and the companies are more domestically focused and economically sensitive.
When the Russell is outperforming, it usually signals a risk-on environment: people are willing to own scrappier, more volatile stocks. When it lags, it often reflects caution - higher rates, tighter liquidity, a flight to safety.
In 2024, while the S&P and Nasdaq soared, the Russell lagged badly. Why? The Magnificent 7 don’t live here. Smaller companies couldn’t access cheap capital. Many had weaker balance sheets. So while big tech rode the AI wave, the little guys were paddling upstream. That divergence tells you a lot about where the liquidity is flowing and who it’s skipping.
Equal Weight vs Cap Weight: The Breadth Truth Serum
Want to know how healthy the market really is? Compare the cap-weighted S&P 500 to its equal-weight sibling. In the equal-weight version, each of the 500 stocks gets the same allocation. So Apple and AutoZone have the same impact.
In 2023, the cap-weighted S&P did +21%. Equal weight? Around +14%. That gap is your warning light. It tells you the rally isn’t broad, it’s being dragged higher by a few monster names. That doesn’t invalidate the rally, but it changes how you position. If you’re long “the market” but underweight the monsters, you’ll underperform. If you’re long equal-weight and thinking you’re tracking the index, you're not.
Why Index Construction Actually Matters
Index construction affects:
Your ETF performance
How passive flows distort price action
Which companies benefit from forced buying
What happens on rebalancing dates
If you don’t understand this, you’ll misread macro moves, get chopped up in rotations, or wonder why your portfolio’s flat while the S&P’s at all-time highs.
Tesla’s inclusion in the S&P 500 in December 2020 caused a buying frenzy. Why? Passive funds needed to own it. That’s not narrative or valuation, that’s mechanical flow. The same goes for removals, sector reclassifications, and special rebalances.
This game is about knowing what’s really moving, and why. Not just reading the scoreboard.
The Mechanics of Earnings Season
Earnings season is where your thesis meets the truth.
Every quarter, the curtain lifts. Companies reveal what’s really been going on behind the scenes - the revenue, the profits, the guidance, the tone. And the market? It reacts instantly, brutally or euphorically. That’s a lie, sometimes flat.
This is earnings season. It comes four times a year - like a quarterly report card for Wall Street. And just like in school, some names pass the test with flying colours, some scrape by, and some fail spectacularly.
When It All Kicks Off
Earnings season usually begins a few weeks after the quarter ends. Think: mid-Jan, mid-April, mid-July, mid-October. Traditionally, it kicked off with Alcoa, the aluminium giant. These days, it’s more often JPMorgan, Goldman, and the rest of the financials setting the tone. Then come the tech titans. Retail and stragglers show up last (some of them run funky fiscal calendars).
What to Look For in a Report
Here’s what actually moves stocks:
EPS (Earnings Per Share): The bottom line. Net profit divided by the number of shares. If the number beats expectations, the market cheers. If it misses? Expect a slap.
Revenue: For high-growth companies, especially, this can matter more than EPS. If your story is “we’re taking over the world,” but your top line is flat, investors start to question the plot.
Guidance: This is the big one. The company can beat last quarter but guide lower, and the stock tanks. Why? Because forward expectations reset the narrative. One cautious comment from a CFO can knock 15% off a stock.
Margins: Improving margins means pricing power or efficiency. Falling margins might signal inflation, cost issues, or competitive pressure. Don’t ignore them.
Key Metrics: Every industry has its own pulse. For a social platform, it might be daily active users (DAUs). For a retailer, same-store sales. For a SaaS firm, the net retention rate. Read between the lines and see what management’s highlighting, and what they’re quietly burying.
The Call: Where the Real Drama Happens
Earnings press releases are scripted. But the conference call? That’s where the gloves come off. Analysts get to question management. Executives try to spin the quarter. Sometimes they do a great job. Other times, they slip, and that’s when the stock can swing wildly.
A good call can turn a neutral report into a +6% move. A bad one can turn a beat into a -10% puke. Traders listen for tone, confidence, or any sign that management is rattled.
The Whiplash: After-Hours vs The Next Day
Often, the report drops after the market closes. Stocks will shoot up or down instantly. But the real move sometimes comes the next morning, once the call is digested, the analyst notes are out, and liquidity returns.
You might see:
+5% on the headline beat
Then, 7% during the call
Then flat the next morning
It’s messy. Which is why many traders avoid holding positions into earnings or hedge unless they have conviction, or an edge (questionable to have an edge with earnings though really…).
Why It Sets the Tone
One company’s report can influence an entire sector. If Delta says travel demand is surging, airline stocks across the board might rally. If FedEx misses and blames soft shipping volumes, retail and logistics names might get dragged.
Sometimes the first few reporters of the season set the tone for sentiment. Strong numbers early? People extrapolate strength. Early weakness? Caution spreads.
Post-Earnings Drift
There’s a weird phenomenon: when a company delivers a big surprise, up or down, the stock often keeps drifting in that direction for days or weeks after. This is called post-earnings announcement drift (PEAD). It’s like the market slowly recalibrates. Some funds take time to reposition. Others want confirmation. Either way, if you miss the initial pop, the move isn’t always over.
The Opportunity (and the risks)
Earnings season brings volatility. Implied volatility rises. And for some, this is prime hunting ground, trading around reactions, momentum, or the overreactions that inevitably come.
But it cuts both ways. If you’re wrong, you can be really wrong. Some traders only play post-earnings, after the dust settles, when sentiment extremes are clearer.
For long-term holders, this is when you recheck your thesis. Did the company do what you expected? Did anything change that warrants exiting or sizing up?
A Simple Anatomy of a Print
Let’s say Fed Inc reports:
EPS = $3.00 (vs $2.50 expected)
Revenue = $10B (vs $9.5B expected)
Raises full-year guidance by 5%
Stock jumps +8% in after-hours. On the call, the CFO mentions margin headwinds next quarter due to raw material costs. Stock trims gains to +5%. The next day it opens +6%, holds most of it. Over the next two weeks, it drifts up another +4% as analysts upgrade and institutions rotate in. Textbook strength.
Now imagine the opposite: they miss on both top and bottom lines, and guidance is cautious. The stock drops -12% after hours. On the call, tone is defensive. Next morning, it gaps down -15% and closes down -18%. Volume triples. Analysts start downgrading. Catching that bounce? Might be weeks away. The “value” buyers step in later… if it holds.
Watch for Buybacks and Dividends
Sometimes companies sweeten the pot with buyback announcements. “We’re authorising $10B in share repurchases.” That can lift a stock even if the quarter was just okay; it’s a signal of confidence. Buybacks are management’s way of saying: ‘We like this price more than your next idea.’ Sometimes they mean it. Sometimes they’re just out of ideas.
The same goes for dividend hikes. If a company increases its payout, it often signals stability and strength. Conversely, cutting a dividend is a red flag; market usually punishes that fast.
Why It Matters
During earnings, stocks trade more on their own stories and less on macro. Correlations drop. It’s a stock picker’s market during earnings season. If you’re good at reading individual setups, this is your time. If you’re not, sit back and learn.
The rest of the year, narratives and sectors tend to trade together. But earnings season? That’s where you see what’s real. And what was just a chart with hope baked in.
The Magnificent 7
The Mag7 don’t just move the market. Some days, they are the market.
In the last few years, a strange gravity has taken hold of U.S. equities. A handful of tech giants, seven, to be exact, have grown so large, so dominant, that they’ve become more than just companies. They’ve become the market’s pulse.
We call them Mag7 as I mentioned earlier: Apple, Microsoft, Amazon, Alphabet (Google), Meta (Facebook), Tesla, and Nvidia. They’ve each built empires in their own lane, phones, cloud, e-commerce, search, social, EVs, semis, but together, they’ve reshaped indices, flows, and the entire equity narrative.
The Stats That Make You Blink
By 2025, these seven alone made up more than 30% of the S&P 500. That means one out of every three dollars in the index is riding on a handful of names. In some months, over 70% of the index’s gains were attributable to this crew. Most would argue that’s not a market. That’s a monarchy.
And it’s not just size, it’s performance. From 2023 through 2024, while most of the S&P 500 was grinding sideways, the Mag7 were putting up double and triple digit gains. Nvidia’s AI rally alone looked like something out of the dot-com era. Microsoft and Apple were printing cash. Meta staged a huge massive comeback (thank you Zuck). Amazon kept pushing margins in AWS. Alphabet weathered the search wars. Even Tesla, for all its drama, kept finding narrative lifelines.
Why They’re So Powerful,
There are a few core drivers:
They’re still growing. These aren’t old blue chips with 2% topline growth. Many are still putting up 15-30% revenue growth, depending on the segment.
They have moats. Apple’s ecosystem. Microsoft’s enterprise lock-in. Nvidia’s chip dominance. Meta’s social reach. These are not easily disrupted.
They’re cash machines. These companies throw off billions in free cash flow. That fuels buybacks, (now for some) dividends, M&A, and moonshot R&D, which keeps the flywheel spinning.
They’re narrative stocks. AI, AR, clean energy, cloud, ads. They’re plugged into every popular secular growth theme on the board.
They’re liquidity vacuums. Because they’re so heavily weighted in indices, when passive money flows in, it flows into them. When retail wants exposure to tech, it’s often via QQQ or SPY, which means more of the same.
When They Go Up, Everything Usually Follows
When Nvidia has a monster earnings beat, you often see semis rip across the board. If Apple or Amazon rallies post-earnings, it lifts sentiment for consumer and tech broadly (with the AI theme - higher capex from Mag-7 ex NVDA = NVDA higher). They’re not just leaders, they’re bellwethers. If they’re green, the market breathes a little easier. If they’re red, the defensives even start sweating.
But this much concentration does come with risk.
Markets love leaders, until they don’t. And when the top becomes too narrow, it starts to wobble. If Apple disappoints, it doesn’t just drag Apple, it drags the S&P. When the Mag7 underperform, the whole “market” can look broken.
And the flip side of size is expectation. When you trade at 28x forward earnings, the bar is high. A small miss or soft guide can shave $100 billion off a market cap in a session. These names aren’t invincible, just really, really good at managing expectations (most of the time).
Not All 7 Are Created Equal
They’re not a monolith. Consider:
Apple and Microsoft: The grown-ups. Consistent cash flow, dividends, huge buybacks. Viewed as the safest of the bunch.
Nvidia and Tesla: The wildcards. Higher beta, high multiples, high narrative. Prone to monster rallies,and fast drawdowns.
Amazon and Alphabet: Execution-sensitive. Cloud and ad revenue can be lumpy. Margins and cost control matter here.
Meta: The comeback kid. Written off in 2022, rebounded hard by focusing on efficiency and riding the AI coattails.
So while they trade together in the eyes of passive flows, their individual drivers vary. One can stumble while another soars.
Trading Around the Mag7
Here’s the playbook:
Earnings = Events. These aren’t earnings calls, they’re market-moving catalysts. One print from Microsoft or Nvidia can set the tone for the week.
Gamma is relevant. Tesla, Meta and Nvidia are option-flow battlegrounds.
Sentiment gets crowded. When everyone is overweight the same 7 names, the risk isn’t just drawdown, it’s underperformance if the rest of the market finally rotates.
Breadth check: If these names are green but everything else is red, that’s not strength.. Watch equal-weight indices and breath metrics. Narrow leadership rallies don’t last forever.
Are They Too Big to Fail?
They dominate sectors and indices. They dominate mindshare. But that also makes them political targets. Regulators are always sniffing and antitrust cases are building. Eventually, someone might try to clip their wings.
In the meantime, they are the engine and the potential ice on the road.
As a trader or investor, you don’t have to love them. But you have to watch them. They set the tone. They swing the flows. And for now, they are the market.
Institutional vs Retail: Who’s Actually Moving the Market?
Retail traders bring passion and memes; institutions bring billions and risk models and both shape the tape.
If the market is a battleground, institutions are the tanks, and retail is the infantry. One has firepower and structure; the other has speed, unpredictability, and sometimes a flamethrower disguised as a meme.
Understanding who’s on the other side of your trade, and how they think, is a cheat code most ignore. So let’s break it down.
Institutions
These are your pension funds, hedge funds, mutual funds, insurance companies, and sovereign wealth funds. Some of them are running billions. Others are trading faster than your screen can update. Either way, they’re the ones with the flow that moves markets, especially in large-cap names.
They move size. A $100 million position isn’t placed with a market order. They use algos, dark pools, and sometimes take days to fill it without causing slippage.
They have tools. Bloomberg terminals. Endless research. Satellite data. Management access. When they say “we met with the CFO last week,” they have.
They have constraints. Mandates, compliance, benchmark pressure, risk teams. If a position gets too big, they’re often forced to trim even if they love it.
They influence the narrative. When the “smart money” rotates from growth to value, or when prime brokerage desks leak positioning data, the rest of the market often follows.
But they also crowd trades. When everyone is long the same names and the tide turns, it turns fast. And because they’re managing outside money, underperformance can get them fired. That means they often can’t be patient.
Retail
Retail is everyone else, from the guy buying 5 shares of Apple on Robinhood to the woman trading biotech breakouts from her kitchen table. One trade is small. But the collective weight? It can move mountains in the right names.
Where They Clash
Retail gets mocked for being “dumb money.” But they were early on the 2020 rebound while many pros were still in fetal position. Meme stocks? Wild, yes, but GameStop’s short interest was insane. The crowd saw it first. So far this year, retail have been the smart money - institutions remain underweight tech!
Institutions have more structure, but also more baggage. Risk models, redemptions, career risk. Sometimes the pro move is not making the obvious trade, because it would look bad on a slide deck.
Sentiment Matters
Retail sentiment is often visible on social media, YouTube, Reddit, or in options flow. Institutional sentiment is more subtle. you watch futures positioning, fund flows, prime brokerage data (options too).
But both swing. Retail flips from euphoria to despair like clockwork. Institutions do too, just with more jargon and longer meetings.
Your Edge as Retail
You’re nimble. You can exit or enter with zero slippage.
You’re patient. No quarterly review means you can ride conviction for years, if you’re right. But hey, you probably should do a quarterly review.
You don’t have to impress anyone. That’s a superpower. But it also means no risk manager gives you a tap on the shoulder to stop you from doing something dumb.
If you combine common sense with a clear process, you can exploit inefficiencies institutions have to ignore. Especially in small- and mid-cap names, or during narrative overreactions.
The Rise of Passive Investing
Over the last couple of decades, and especially since the 2010s, there’s been a massive shift from active stock-picking funds to passive index funds. Instead of paying a manager to select stocks (active mutual fund or hedge fund), many investors opt to just buy an index fund that tracks something like the S&P 500 or Nasdaq. The logic: many active managers underperform their benchmarks over time (after fees), so why not just get the benchmark return cheaply?
This led to huge inflows into index mutual funds and ETFs like Vanguard index funds, BlackRock iShares, State Street SPDRs (like SPY), etc. For instance, the SPDR S&P 500 ETF (SPY) is one of the largest ETFs and trades heavily every day. When you buy SPY, you’re effectively buying tiny pieces of all 500 S&P stocks in one go.
The effect: Passive buying lifts all stocks in the index, regardless of individual merit. Similarly, passive selling (when people redeem or sell index funds) hurts all constituents. This is why sometimes you see stocks moving together in a way that might seem unjustified by their individual news – it might be because of fund flows.
There’s a term “the ETF-isation of the market” – meaning so much money is tied up in ETFs now that often sectors or baskets of stocks move in unison as those ETFs trade. For example, if a lot of people buy a tech sector ETF, the fund has to go buy all the tech stocks in its basket, boosting them all a bit.
Passive vs Active ownership: In the U.S., passive funds now own a significant chunk of total stock market capitalisation. Passive doesn’t mean “no action”, it means following a rule (like track the index). But passive funds do trade, especially when indices rebalance or when money flows in/out.
Final Word
You don’t have to choose sides. Watch both. Institutions set the tone. Retail adds noise, and sometimes reveals early truths. Price reacts to both - retail become increasingly more important each year.
A good trader listens to the crowd, respects the elephants, and knows when to fade them both.
Common Downfalls in Equity Trading
In markets, pain is inevitable, but stupidity is optional.
Every blown-up account has a story. And if you trade long enough, you might have a few of your own. But there’s a difference between lessons and landmines; the former teach, the latter wipe you out.
This is the section that could save you more money than any stock tip ever will.
1. Buying Stories Instead of Businesses
You heard it’s “the next Tesla.” It’s got AI in the name. It’s up 40% this week. You’re in.
Narratives are so seductive and outright dangerous when unchallenged.
A stock with a great story can still be a terrible investment. Always zoom out: is this hype, or is this real? Has this business actually proven anything? Does the valuation reflect perfection in a market that rarely gives it?
Ask: What has to go right for this to make sense? And if your answer is “everything,” it’s probably not the one for you.
2. Chasing Green Candles
You watch a stock fly 20% in two days. You hesitate. It keeps going. FOMO kicks in. You buy the top. It retraces 10%, and you panic-sell.
Buying strength is not the same as chasing momentum blindly. One is tactical. The other is emotional. If a stock has run 80% in two weeks and you're just now getting interested, stop and ask why. You’re most likely late.
The market punishes those who act out of envy. Let the move go. Wait for the next.
3. Turning Trades Into Investments
You wanted it for a few days, buut it dipped. You didn’t cut. Now you’re down 30% and telling yourself you’ve got long-term conviction.
Discipline is knowing what type of trade you’re in before you enter. If your thesis was invalidated and you're still holding, you're not being patient, you’re being stubborn.
Having an exit plan is vital.
4. Revenge Trading
You took a hit. You’re angry. You double your next position trying to make it back. You lose again. Now you’re on tilt.
Markets don’t care about your need to be even. Revenge trading is how small losses become career-threatening ones. Step away. Reset. Trade when you're calm, not when you're bleeding ego.
I wrote two educational posts on psychology this year that I have attached below.
5. Ignoring Position Sizing
“I really believed in it.” Great. But why was it 25% of your portfolio?
Sizing isn’t just risk management it’s emotional management. When a trade is too big, you just can’t think straight. You check the chart every five minutes. You struggle to sleep. That’s not edge, that’s fragility.
If you can’t sleep, you’re too big. If you size small and it works, you can always add. But if you're oversized and wrong, you can't think.
6. Misunderstanding Valuation
Just because it’s down 70% doesn’t mean it’s cheap. And just because it trades at 50x earnings doesn’t mean it’s expensive.
Context matters. Growth. Margin profile. Market conditions. Interest rates. Compare apples to apples, and don't forget that the market often pays up for the future, not the now.
Valuation isn’t about numbers. it’s about expectations. Price is what you pay. Narrative is what you get.
7. Overtrading and Burnout
You’re in five trades within an hour of the trading day. You’ve checked your P&L 47 times. You’re not trading, you’re gambling. Sorry not sorry.
You don’t need to trade every day. Most gains come from waiting. The rest is noise. Save your energy for when it matters.
Boredom is not a valid reason to trade. I repeat, boredom is not a valid reason to trade.
8. Holding Losers, Selling Winners
It’s a classic: You cut your winner to lock in a gain and let the loser hang around because it’ll bounce.
You’ll be rewarded for patience on winners and discipline on losers. Flip your script. And as I said at the start of the post, let your winners run. Cut the ones that no longer justify your capital.
9. Listening to the Wrong People
Everyone’s an expert on social media. Most of them haven’t seen a full cycle or managed real risk. That influencer in Bali with 12 monitors? He’s probably broke.
Filter your inputs. Ask: Does this person have skin in the game? Do they talk risk as much as reward?
Use advice as data, not gospel. Then do your own work.
10. Forgetting This Is a Game of Probabilities
You followed your process. You managed risk. And you still lost. Welcome to trading.
A good process can have bad outcomes. But a bad process with a lucky outcome? That’s a trap, not a win.
Zoom out. Take notes. Review your trades like a pro athlete watching themselves back on a screen. The market will always humble you; the key is to let it refine you instead of wreck you.
No one avoids every mistake. You will chase, baghold and misread. But you don’t have to repeat them.
Mistakes are tuition and stupidity is taking the same class twice.
If you learn, adapt, and survive, you’ll be around long enough to win.
Tools & Resources
1. Charting & Price Action
TradingView (better charts than the terminal) Web-based, sleek, and ridiculously flexible. You can chart anything, from SPX to your favourite small-cap biotech, and overlay indicators like RSI, moving averages, VWAP, or custom scripts.
2. Fundamental Data & Valuation
Bloomberg - if you can afford it.
Koyfin -Think of it as a poor man’s Bloomberg. Clean visuals, macro overlays, valuation charts, earnings history, sector dashboards, all in one place.
Finviz - Use the screener to filter by fundamentals or technicals. Also handy for heatmaps.
3. Options & Flow Intelligence
SpotGamma - If you trade names with active options markets (think: Nvidia, Tesla, SPX), understanding gamma exposure is essential. SpotGamma breaks down how dealer hedging might affect intraday movement, especially around key expiry dates. It's not gospel, but it helps explain why price sticks to a certain level.
TradeAlert - Non-stop option flow. Great for sniffing out unusual activity.
5. News & Sentiment
Twitter/X - Still a goldmine to fade + follow. Follow people who talk risk, not just reward. FinTwit has some brilliant minds. and some absolute grifters. Learn to tell the difference.
Bloomberg Terminal (if you have access/can afford it), king for global news flow, macro data, and so on. Overkill for most, but game-changing if you’re serious and can get on a desk with one.
6. Execution & Broker Platforms
Take the IBKR pill.
7. Books
I will do a post on this at some point. Happy to give book recs here and there via DM.
8. Education Resources
The tools don’t do the work for you, but they make it possible to do the work better.
Simplicity is underrated and precision is earned.
You don’t need 20 indicators, 5 news feeds, and 8 watchlists. Nor do you need to pick X broker because it has neater UI than Y.
Cheats, Shortcuts & Shit That Actually Helps
When options go nuts, stocks usually follow
Gap Up + No Fade = Buy Strength
Macro matters less... Until it doesn’t
Try not to open new positions a day before FOMC
The best trades work instantly
Build a Do Not Touch list
Your edge fades the moment you trade for dopamine instead of outcome
If you made it this far, thank you and well done.
There’s no shortage of trading content out there these days, and 90% of it is either sanitised for mass appeal or dressed up to sell you something. That wasn’t the goal here.
This series is written for the person sitting at their screen after getting stopped out for the third time this week… for the person wondering why when the market’s up 2% their portfolio isn’t… for the one who's read the threads and books, bought the courses, taken the trades, and still feels like they’re missing something.
I’m not here to tell you this game is easy. It’s not. But it is learnable, if you’re willing to stay in the fight long enough, and honest enough, to keep refining.
You don’t need to catch every move. You don’t need to win every trade.
You just need to survive long enough for your process to do its job.
That’s the work. That’s the edge.
This is just Part 1. Zero to Stock Hero: Part 2 will drop soon. It’ll go deeper into setups, systems, positioning, more in-depth into different participants and the unteachable stuff most traders only learn through pain. If this first post helped at all, I promise the next one will go even further.
And if you liked this, literally and figuratively, like and restack the post. I’ll pick one of you at random to get a free annual subscription in a week.
Now, go do less dumb stuff than you did last month. That’s the only comp that matters.
Chat soon,
Fed
Thank you. Incredible read.
World class. Your authorship is amazing. Very few with the technical expertise are equally good writing about it.