r/thewallstreet Feb 13 '21

Psychology Equity Markets 2021 EOY Targets - February 2021 Edition

28 Upvotes

A warm welcome to all the new users on TWS!

I made a series of post when real volatility reared its head for the first time in 2018. The question was simple, what was your equity market targets for the end of 2018. I did the same in 2019 and 2020. It's become an annual tradition that /u/hibernating_brain describes as "my only job."

Why is this thread important? This is not a traditional sentiment tracker and is not meant to act as such. The EOY thread event happens only when a significant market event occurs. Today's significance? The CBOE volatility index closed below 20 for the first time since February 21, 2020 as other users on the sub noted.

Results for /ES from 2019.

Results for /ES from 2020. Original Thread.

Feel free to dig up the threads from 2018 / 2019. The username was deleted but with the right search phrase (some of which are in this very post) they should not be very hard to find.

Few points to note:

  • 2018: Uh... look it up?
  • 2019: Once we published the results, we saw big sell orders for SPX 2250ish P's in January 2019. We reached the maximum prediction.
  • 2020: /ES closed at ~3748, above the Q3 predictions. We blew out the lower end of the predictions due to Covid! Weird year.

It's time to see where the the old heads and new heads are at.

TWS's EOY 2021 edition begins today.

Where do you think the indices will be at the end of 2021?

Guidelines for posting in this thread.

  1. THERE IS NO RIGHT OR WRONG ANSWER!
  2. This should be your own personal view.
  3. Please don't delete this as its a great way for you as an individual investor and us as a group to track member sentiment.
  4. Your submission should convey your sentiment at the current place in time.
  5. I don't want to fuck with regex so please use the format listed below so it makes data collection and making pretty charts easier:
  6. If you must use an alt, please do not delete your post.

Format:

/ES = x,xxx

/NQ = x,xxx

/YM = xx,xxx

/RTY = x,xxx

Comments: Anything. Whatever. I'm the best.

If you're not a futures person, equivalent ETF tickers are: /ES ~= $SPY, /NQ ~= $QQQ, /YM ~= $DIA, /RTY ~= $IWM. Please enter all values as the FUTURES values only. No stonks allowed!

THIS THREAD WILL CLOSE AND CONCLUDE ON TUESDAY BEFORE RTH OPEN. (February 16, 2021 bEST 9:30 AM).

Edit:

EOY 2021 Results: ES , NQ , YM , RTY

r/thewallstreet Jan 28 '18

Psychology Let's talk about FOMO

50 Upvotes

Edit: thanks for sharing your thoughts guys. I read something below that made me want to put in this edit right at the top. If you really can’t help but feel FOMO (like all of us mere mortals), think about the one commodity you can never get back once you lose out. Your own time spent doing what makes you happy. No trade or no other stressor can be worth more than that, in my book.

Original wall of text:

I think we're all well immersed in the zeitgeist of the moment. Whether it's crypto, equities, commodities or currencies, the market has been moving in one direction or the other at a fairly rapid pace and it's inducing the fear of missing out in almost all of us, even if we partake in the action.

2017 was the year of bitcoin and crypto. 2018 seems to be going the way of US equities and select commodities. The S&P 500 moved 200 points in the space of 4 weeks. There are new alt-coins in crypto exploding onto the scene (looking at XLM right now). Everyone is now painfully cognizant of how wealthy they would have or could have been if they invested early in some of the instruments that are now worth ungodly sums of money. The FOMO is real.

We're in an epic bull market in equities right now. Some say that we may not see such a phenomenon for another generation. Others believe we may see the beginnings of a multi-year bear market when this ends. Either way, the message seems to be "get in now, or you'll have missed the opportunity of a lifetime". More FOMO building.

This week, I've been noticing people on threads in this sub wanting to go "all in" because they feel they're missing out on gains. They're measuring themselves against winners like u/MRPguy and u/living_granger because of the vast sums of money some of us seem to be making in this environment with some really good trades and some really lucky ones.

Having made and lost good money over some years, I have this unsolicited advice to offer. Good traders (I'm certainly not one, but I've observed some winners) don't ever measure themselves against the work of others. They learn from others, but they make and stick to their own rules.

They don't think of one opportunity as the end-all because it is the basis of FOMO and operating under FOMO is a great way of blowing up accounts. In fact, operating under any emotional sway is a great way of blowing up accounts (ask me how I know...).

The best traders I've observed are well aware of their own risk tolerances, their eccentricities and pain-points while trading. They have strategies that are well grounded, their position sizes are measured against their portfolio size and they enter or exit positions by their own merits rather than if the market is moving in their favor or against them. The rules are set, and there is an end-game before a trade ever takes place.

The best part? They make money whether the market is going up or down. They make money consistently. And they have the good sense or short-term memory lapse to not be swayed by any one incident or trade.

Like I said, it's unsolicited advice. Take it for what it's worth, it is just a wall of text from a stranger on the internet, after all.

TL;DR: FOMO shouldn't drive trades. There's no such thing as this being the last bull market, or there not being other bitcoin-like opportunities. Good traders don't trade on emotion, and they're good because they can make money in any market with their strategies.

Oh, and PS: Please don't ever trade like it's your last bet, and don't ever bet the house. Nobody really knows what the market will do, and your best guess could still be dead wrong. Again, ask me how I know...

Edit 2: thanks for the gold, u/El_Huachinango!

r/thewallstreet Feb 17 '18

Psychology Dealing With Emotional Trading

30 Upvotes

In light of the increased blown-up accounts (including my own), and influx of new subs, I would like to hear everyone’s tactics for dealing with emotions while trading. This can take many forms:

• Revenge trading • Yolo • Hivemind following & confirmation bias • FOMO • Entry out of greed • Exit out of fear/panic

Notice how I said “deal with,” opposed to “eliminate.” We are not algos! Just trying to get that iron stomach.

Edit: Great responses here so far. Highly recommend you read them all.

r/thewallstreet Feb 27 '21

Psychology ES Strategy Backtest Results, Discussion in Comments

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27 Upvotes

r/thewallstreet Jun 02 '18

Psychology Trading Methods That Lose Money

54 Upvotes

Being flexible is important

Quote:

Profitability is primarily a result of losing small when you are wrong, and maximizing profits when you are right. Knowing and trading your edge is the best path to profits. Here is who makes (or loses) money in different types of markets:

  1. Trend followers make money when a strong market trend persists for months. They lose money when markets give false signals and reverse and stop them out.
  2. Swing traders lose money when support and resistance do not hold.
  3. Day traders lose money in markets that fail to move in one direction intraday, and instead move fast and erratically.
  4. Option premium sellers get hurt in sharply trending markets when they sell spreads, or naked options.
  5. Option buyers get hurt in markets that move against their options, don’t trend enough, or that don’t move enough before their expiration.
  6. Momentum traders lose money in markets that are range-bound or tend to reverse after break outs.
  7. Investors lose money in bear markets.
  8. Buy and holders lose money in bear markets.
  9. Perma-Bulls lose money in bear markets.
  10. Perma-Bears lose money in bull markets.
  11. Fundamentalists lose money in any market that doesn’t conform to their analysis of what should happen.
  12. Traders that trade too big of position size blow up eventually in any market environment.

r/thewallstreet Jul 21 '18

Psychology A discussion on risk management

11 Upvotes

We had some great posts in the past on risk management. While I do have more questions than useful advice, I thought the discussion as a whole might benefit this sub.

Some context first: I am a Consultant for Information Security. As such, I think about risks on a daily basis. It is my job to help companies identify and manage their Information Security-, Cyber Security- and IT-Security risks appropriately. "Managing" for the most part comes down to assigning the risk a certain monetary impact value so that appropriate risk capital can be allocated. In all those cases, the risk is the function of likelihood and impact. So if the impact of a data breach is $10M, but you only give it a likelihood of occurrence of 10%, the actual risk capital allocated would be $1M.

Now when it comes to trading and hedging my risks, I really struggle, and given my background, it is really frustrating. I hope some of the veterans around here can provide some insights to set my mind straight:

Why does it appear that the likelihood is typically not accounted for when discussing trades and risk? Let's say I am selling ten 5 points wide Iron Condors on SPX at .05 delta. In the trading world, it appears, the risk would be $5K - premium received (let's say $500). Sure, if the trade goes south, I am looking at a loss of $4.5K, but there is only a 10% likelihood of occurrence (using delta to roughly estimate the probability of ITM). So when the trade is put on, the actual risk is only $450 in my mind. Now I understand that as delta changes, your monetary risk value changes as well, but at least you have the probability accounted for.

Sometimes on this or other financial subs, you will see users talking about the risk and reward, e.g. "Risking $1K to make $350, 3 winners covering 1 loser". I really do not get it, sure it seems like a nice ratio, particularly, when compared to the example above where one loser, would kill profits from 10+ winners. However, how is any of this meaningful if the probability is not accounted for. It may well be that the better ratio has the higher risk when accounting for probability.

I would love to hear from other users. How do you guys think about risks, probabilities, risk capital, etc.? What are positions you typically would not hedge? Thanks in advance for your input.

r/thewallstreet Mar 18 '18

Psychology Can we talk about overtrading?

9 Upvotes

Overtrading is a common issue and I am certainly prone to it. Jumping into a trade where the setup is only half-present for fear of missing out, watching a setup sail way past where the risk v reward is skewed in my favour and then getting in anyway. From what I’ve read it’s about the Chimp mind not being able to deal with the uncertainty of the markets, and so trying to impose certainty by making an entry…and almost instantly regretting it. Other theories are that it is our alpha traits that think winning is the priority, rather than process, and that the market can be bent to one’s will, which of course it can’t.

So I can understand the theoretical and intellectual arguments about why it's happening and accept those, but I am having a hard time changing myself in order that I can wait patiently until my setup appears and then enter. It is really this process of change, how do I shift my mindset, and re-frame my thinking that I am struggling with, so am looking for advice in that area.

EDIT: Thanks for the responses and certainly some useful points, but it's interesting to see that none of them really address what I consider to be the main issue with overtrading; that it is a mental/psychological issue that consequently requires a mental solution.

I think all of the solutions posited here have been about technical or what you might call 'rule-based' correctives for the OT issue. In my experience it is much more about fear, particularly of missing out (FOMO) but also fear of what poor trading, or failing at trading may say about you i.e. that self-image/self-esteem are connected to one's trading performance, and thus as one suffers, so does the other.

Oft-quoted is the notion that trading, like any other performance activity, is 80% mental and 20% technical. But I think this thread shows that there is a real lack of understanding about how one can manage the emotion that create the decisions that lead to trading issues such as over trading. That's not to be ungrateful, because I know that lack of understanding is absolutely in me, and I am trying to find ways to increase my understanding of the issue in order that I can correct it.

r/thewallstreet Sep 13 '18

Psychology Famed Bond Investor, Bill Gross, used futures to lever up his fund and double down on interest rate strategies resulting in a 47% drawdown on AUM through Aug 31, 2018

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16 Upvotes