Boss Trading—Redefine Your Trading

View Original

Why Buffett Would Crush It as a Day Trader

A typical trading trap is getting lost in the foliage.

You're only seeing the trees and missing the forest. All that clutter blinds you to the enormous opportunity right in front of you—the trade that makes your month or even your quarter. Let's fix that…

Now, picture Warren Buffet as an intraday trader.

Two crucial need-to-know facts about Buffet are:

  1. He doesn't bet uniformly.

  2. He's always ready to go big on asymmetric setups.


Asymmetric setups: where the reward is massively skewed in your favour, and the trade not working is unlikely.


Now, imagine Buffett trading in just one market—the same one I trade.

Given his principle of asymmetric setups, he’d choose this market for a critical feature: a built-in price floor.

Let me explain.
Below, you see a screenshot from Sunday's foundational knowledge session (recorded for future reference) showing my view of a client’s 4 x 27" monitor setup—with the trading platform I installed—giving him the same tools to see what I see.

It feels like I'm sitting beside you as I use the mouse to point out fundamental principles.

As luck would have it, we covered this email's exact principle—built-in price floors and asymmetric setups.

Without going into the fundamentals, at times, price becomes unhinged from reality.

In the 'near term,' the odds of the market going below the current floor are so low that it produces a trade so massively skewed to winning versus losing, savvy traders jump at it, going all-in to use a poker analogy. 

Note: The 'floor' also contains overall trading risk—adding extra safety when developing professional trading skills until reaching proficiency.

From Monday:

Above you see trading begins with short-term scalping—winning and losing equally.

Finally, the market trades at a level triggering the asymmetric long opportunity.


From Wednesday:

Due to the EOM theme, the opportunity was greater as per the trade below.

Caveat
This is an advanced strategy requiring multiple points of evidence.
Without all of the necessary variables trades which look similar on a chart will punish you relentlessly.

In summary
A market offering a built-in price floor and non-uniform betting is a powerful combination to achieve outsized payouts.

Not to be confused with 'bottom picking' these trades are only taken when the necessary multiple points of evidence are present.

They set up an opportunity to increase the size of the trade (to increase your payout) by using the accumulated profits so you don't take on extra risk.