Market Wisdom¶

General market knowledge, philosophy, and key insights gathered over time.

Why Simple Works¶

On Amit's Success

Amit is investing will be successful because: he says after making a lot of money in HOOD and PLTR now he wants to add another stock i.e. AMZN to dip buying strategy because it hasn't moved much this year and is probably safe to bet on MAG7 and rotate some profits into it.

He is not doing anything special; he is not trying to prove to his own insecurity inside that he is smart by counter trade trending. He did very basic dip buying and now he is making a safe move. He is not that smart and that's why he will make it in stock market.

Repeating Mistakes¶

Hari Seldon's Observation

Even after trading for a very long time: some people still make the same mistakes they would do as a beginner. This is what Hari Seldon said.

The Danger of Neutral Markets¶

Chop Zone Warning

The most dangerous period to be is when market is neutral or chopping. This is where people will lose all the money they have made until then.

It's very difficult for a strong bull trend to turn to Bear immediately... it usually has to go through a chop. Or multiple chop periods.

Probability Thinking¶

Think Like Gareth

Always think in terms of probability like Gareth does. Every outcome, setup, move, trend, support and/or resistance break, will only make it most likely to happen and that is 80%.

There is no 100% in trading. Max is 80%.

2-3 support zones, creating a strong S or R will make it 80% but not 100%. Perhaps this kind of philosophy also helps in life.

Trade Hierarchy¶

Position → Swing → Options

Think like this: always assume first you are gonna position trade a stock. If not then swing trade. If not then options for very short term... that should be the hierarchy.

Environment Classification¶

Rate the Environment

Classify a move before you make for the environment: rate if it's low prob or medium prob or high prob conducive env for that stock.

I like Matt's analogy of comparing the environment with a black jack table at casino. When env is bad, it's similar to casino putting up a board saying today's winning prob is low.

Low Probability Environment Example¶

For example if price is below all key moving averages and SMA 9,20,50 are below 200 but stock is Google (May 2025): even if it's a megacap, it may not breakout strong from this DTL line when moving averages converge and price pops a bit. It's a low prob environment, especially for options.

You may DCA and wait longer for such environments but not ideal for quick jump back to rising trend because there is no underlying good trend.

First Breakout Attempts¶

First Attempt Risk

First attempt to break above a key MA: probability of first breakout failing is usually high. Could also be a fakeout, combine that with low prob env for that particular stock or general market.

Moving Averages Too Close¶

Convergence Risk

Although all indicators may look decent with my indicator also showing entry, if moving averages are too close it is always a risk and I should follow risk management. (Look at my DOCU entry on Jan 31 2025).

I should follow very strict risk management because stock can easily come below the 20SMA with a half decent move and bam all algos trigger sell in all institutions etc.

Random Pullbacks vs Real Setups¶

False Pullback Signals

Understand one thing: Randomly being close to 9 or 20 and coming from underneath is NOT trading some pullback on underlying strong stock.

Sometimes stock could be chopping since a while and since all moving averages are so close, it may feel like a pop above 9 is powerful (intraday) but it may not be. Probability of success would be definitely lower than 80%.

Speed Matters¶

Why I Miss Entries

One more thing what I realized is that: I usually miss the correct entries and later chase wrong stock or sector thinking market ripped and these didn't rip so I have chance for good alpha.

Because when market rips it rips so fast and within few days or 2 weeks everything will be too much up. Combine this with my non-existent trade management is why I am losing.

This is similar to Fantasy. I miss buying a player, prices rise and I end up compromising and getting some other lame player to fit the squad.

So just like at work to impress bosses speed matters more than perfection. I need to quickly enter trades when markets are ripping instead of waiting or procrastinating.

Remember This

People who make money in the markets are fast, smart (trade management) or cheat.

Re-Entry is Easy¶

Cutting Early

Now I understand why cutting early is important. It's always easy to re-enter a trade if your timing of entry was wrong. Especially when you trade DTL compression moves, which could go either way.

Key Market Intuitions¶

Stacked candles at the opening implies urgency and strength in buying
Closing a recent gap up after a few days or moments of run up is a good thing as it's ready for a bigger run (happened with my VRT options trade in Oct 2025)
From failed moves comes fast moves: if repeated attempts to break down fail then stock will rocket up... and if repeated attempts to break a pivot fail then stock will rapidly come down...

Institutional Behavior¶

Dave Wyse's Key Insight

You cannot make money in trading by beating the institutional investors. We can only beat and steal money from other retail investors. (David Wyse)

His main logic is that when momentum is high it implies institutions are buying it. And his idea is that institutions make a buy and then just sit quiet for retail to buy little bit by little bit. His idea is to best find these moments where retail step in and buy.

My Unlucky Start¶

I was incredibly unlucky I think. I just started my investment/trading journey in September/October of 2024 and within 6 months there was such a crash so fast that it was within few days of turning into official bear market. SPY and QQQ were down more than 25-30%.

Quotes to Remember¶

Believe Your Eyes

"Believe your eyes"

Timing Tops

"People lost more timing tops than in actual bear market"

Why I Didn't Sell in Profits¶

Past Mistakes Explained

Now I understand why I didn't use to sell when I was in profits; why I used to feel stressed when I am in profits, because I didn't understand the boundary conditions... I didn't have any indicator to check.

I didn't follow the raise stop loss and take partials discipline either. I didn't even know that you need to sell when stock comes below 20. Use 20SMA as line in the sand.

I was naive about entry and also exit. Deep down I guess I knew it was a bit of gambling. I didn't know the consequence of not cutting early in terms of loss, opportunity cost and also leading to long term bad discipline.

Learning from Teachers¶

Trust the Process

I guess that is why when you start to learn a new skill, it's good to just follow the teacher and blindly trust him initially. Although Matt was not exactly spoon feeding.

This is similar to me learning driving fast and my dad having lost ability to follow rules and blindly trust a teacher couldn't learn to drive. I did the same mistake in trading and lost a ton of money.

TradingEdge Recommendation¶

Tradingedge guy is really good at picking stock names. I made good money by entering his stocks like HOOD and telling myself to stay long like position trade. I should probably subscribe back to him after a few months.

Telling Myself "Something Would Happen"¶

100% Certainty Trap

Sometimes I was telling myself that stock will run up to earnings. I tend to do this, where I tell myself "something" would happen and go all-in with 100% certainty.

I lack the probability thinking of an event happening, which Gareth Soloway is very good at drilling into my head.

EPs vs Swing Trading (Qullamaggie)¶

Current Market Dynamics

Qullamaggie says EPs (Episodic Pivots) are working now and not swing trading. This may be due to cut in interest rates and sharks not having free money to pump every stock which is growing. Maybe now they are looking into financials/revenues etc more.

Pullbacks vs Corrections¶

Definitions

Pullback: A decline between -5% and -9.99%
Correction: A decline between -10% and -19.99%

Frequency

As painful as pullbacks and corrections are, they are prevalent. Every bull market has them:

Stocks usually pull back roughly 3-4 times yearly
Corrections take place on average about once a year

Seasonal Patterns¶

September Weakness¶

Historically Weak

September is historically a weak time for markets.

Summer Choppiness¶

Summer Trading

Summers are choppy because:

Day traders are going on holidays
Summer Fridays could also have less or choppy action

Lunch Hour¶

In general, traders go to lunch between 11:30 to 13:30 during the day.

Market Correlations¶

Commodities¶

Commodity	Correlation with Market
Silver	Correlated (moves with market)
Natural Gas	Inversely correlated (moves opposite)

Bonds & Yields¶

Inverse Relationship

Bond yields and bonds have an inverse relationship. Which means that bond yields rising was due to the price of bonds falling.

What Ends a Market Cycle?¶

Causes of Market Cycle End¶

What Ends Bull Markets

Oncoming recession
Uncooperative Fed
Bond yields moving higher

NOT Causes¶

What Does NOT End Markets

Forward multiple of S&P being high

Geopolitical Tensions¶

Safe Havens

When geopolitical tensions are up, people buy:

Healthcare
AAPL

American Mentality on Debt¶

The Mindset

Because they are in trouble due to debt, their idea is:

"Other foreign countries are going to screw us, so let's screw them before they screw us"