No fancy tool. I just run through my book mentally and ask what the common driver is. If three names all need rates lower or the dollar weaker or AI capex to keep growing, that’s one bet in three disguises. You don’t need software for that. GICS is a starting point for sector overlap but factor exposure goes deeper than sector labels. Three names in three different sectors can all be the same rates trade.
I just ask myself - if X happens, how many of my positions get hit?
One of the best Substack articles on investing I've ever read. Funny that I was writing about this in my investing diary last night:
"Large positions can create inertia because they amplify loss aversion. When you’re holding an outsized position that’s down on paper, trimming or exiting becomes psychologically harder. Conviction needs to be stress-tested, strengthened, reaffirmed… or abandoned."
Very well written wisdom. I knew some of the points, but it was great to see a confirmation how a good trader sizes. I don't quite understand the mechanics of "pressing" here - increasing the position size and/or leveraging up? Does that include moving the stop higher (for longs)? What else?
(BTW I am still waiting for the sub gift from 1/26)
Great piece. Lots to think about and incorporate into my process. Biggest issue I have is trading too large after a good run. Only to give back some profits from trading average ideas in large size! 🤦🏻♂️
If you choose me, then this subscription will get more commitment than my gym membership ever did 💪😀
Lot gets written about buying right but very little about sizing. Excellent writeup.Thanks.
What an amazing write up, Fed. Happy Valentine’s Day! 🥰
Sir - beyond mentally gauging - do you have tool for measuring factor exposure?
No fancy tool. I just run through my book mentally and ask what the common driver is. If three names all need rates lower or the dollar weaker or AI capex to keep growing, that’s one bet in three disguises. You don’t need software for that. GICS is a starting point for sector overlap but factor exposure goes deeper than sector labels. Three names in three different sectors can all be the same rates trade.
I just ask myself - if X happens, how many of my positions get hit?
Baskets are a different topic.
👌👌👌
One of the best Substack articles on investing I've ever read. Funny that I was writing about this in my investing diary last night:
"Large positions can create inertia because they amplify loss aversion. When you’re holding an outsized position that’s down on paper, trimming or exiting becomes psychologically harder. Conviction needs to be stress-tested, strengthened, reaffirmed… or abandoned."
Thank you!
"Don’t add to anything when you’re in a drawdown. Drawdowns get fixed with less risk, not more."
Do you mean by that if there is a broad market drawdown, don't add to your positions?
A drawdown in your book.
Very well written wisdom. I knew some of the points, but it was great to see a confirmation how a good trader sizes. I don't quite understand the mechanics of "pressing" here - increasing the position size and/or leveraging up? Does that include moving the stop higher (for longs)? What else?
(BTW I am still waiting for the sub gift from 1/26)
Will sort that
This is a clinic and really resonates with my own experience trading. Will keep coming back to this post regularly
Thank you for this. Painful to see myself pretty well represented here, but it’s also nice to read how I can fix it. 🙏
You are a speedy reader! The fact you can see it is the first step to fixing it.
cheers
Great piece. Lots to think about and incorporate into my process. Biggest issue I have is trading too large after a good run. Only to give back some profits from trading average ideas in large size! 🤦🏻♂️