Hi Fed. I am experiencing a drawdown now. I was up for the year, great vol/return. I made one mistake with sizing and I erased all gains. I can’t feel more identified with many of the things you mention in the article. Thanks for writing this. It cannot be better explained
Fed, I’ve paid for a subscription but cannot access the paid subscription articles. I’ve emailed you several times. I’ve messaged you through X. I’ve sent payment proof.
This is excellent. I would have liked for you to relate it to your current positions written on discord, to see how you sized based on your rules. In particular, a couple of names likely have very strong factor correlation (MSFT, ORCL, META, to name a few with very high % allocation - which also have had prettu large drawdowns which could have hit stops at that weight in portfolio), so I wonder how you went about thinking about it. Also, the thought about cutting size (or adding hedges?) when vol regime change - how would that portfolio be cut if we break down this week on high vix, for example? Perhaps a "working example article" could be an interesting follow up. Thanks for the great write up and different way of looking at sizing
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)
Has anyone looked at Gold NDFs vs Deliverable contracts? Shit is wilde.
Hi Fed. I am experiencing a drawdown now. I was up for the year, great vol/return. I made one mistake with sizing and I erased all gains. I can’t feel more identified with many of the things you mention in the article. Thanks for writing this. It cannot be better explained
This pure gold .. if only traders know..
“The moment you go heavy, you hand the steering wheel to your blood pressure.”
Loved this one 😂. Really thoughtful and helpful post, thank you.
I boil your 4 rules down to: Am I parasympathetic dominant or sympathetic dominant?
A regular check in that helps me to size (or re-size) regularly
Fed, I’ve paid for a subscription but cannot access the paid subscription articles. I’ve emailed you several times. I’ve messaged you through X. I’ve sent payment proof.
Can you please help?
if you end up picking me and the paid content is as good as i hope, i'll be paying for year 2+ :)
pick me, pick me :)
Some people never learn this lesson. Applies to women and to markets gents, size matters
This is excellent. I would have liked for you to relate it to your current positions written on discord, to see how you sized based on your rules. In particular, a couple of names likely have very strong factor correlation (MSFT, ORCL, META, to name a few with very high % allocation - which also have had prettu large drawdowns which could have hit stops at that weight in portfolio), so I wonder how you went about thinking about it. Also, the thought about cutting size (or adding hedges?) when vol regime change - how would that portfolio be cut if we break down this week on high vix, for example? Perhaps a "working example article" could be an interesting follow up. Thanks for the great write up and different way of looking at sizing
Very well laid out about sizing not spoken often in the trading
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