Comments on: Screw signal….NOISE is where the trade is at

By: infoarbitrage

infoarbitrage — Fri, 13 Mar 2009 03:28:10 +0000

Andy, you are a smart, intuitive trader with fantastic instincts. This is one of the ways your “feel” for the market manifests itself. I've seen you combine both price action and non-price related variables (such as noise) to make intelligent investment decisions. This was a good piece to share. A nice wake-up call.

By: sanddo

sanddo — Thu, 12 Mar 2009 15:34:09 +0000

In short, we haven't seen the bottom.

By: Soren Macbeth

Soren Macbeth — Thu, 12 Mar 2009 15:13:22 +0000

I'm not implying that this is always a signal or that it is your only one. simply that you used “noise in unison” as a signal to get long. I agree with your fundamental premise, which I take to be don't always ignore the noise.

By: andyswan

andyswan — Thu, 12 Mar 2009 14:53:17 +0000

I hear you, but I disagree. There is a big difference between recognizing
“noise in unison” and seeking out THE signal(s) that you're going to follow.

By: Soren Macbeth

Soren Macbeth — Thu, 12 Mar 2009 14:43:19 +0000

I would suggest that this is just you taking your signal from the noise level, not that you don't need a signal. The level of the noise WAS your signal.

By: derek

derek — Thu, 12 Mar 2009 11:56:35 +0000

Well done, Andy

By: beanieville

beanieville — Thu, 12 Mar 2009 05:59:24 +0000

I thought it was Kass and Ritholtz bottom calling that was the trigger?

Bottom calling coming from the usual bears are very powerful.

By: ivanhoff

ivanhoff — Thu, 12 Mar 2009 05:00:02 +0000

Contrary trades are really hard to time. This is why they are best executed by gradually building your intended position. This is what I did with FAZ. I initiated a 1/3 of intended short position on Friday. Added another 1/3 on Monday as I noticed its weakness. On Tuesday morning added another 1/3. Wednesday I saw it dropping below $55 and decided not to be a pig and put a trailing stop to cover my position. Got stopped at 53.

I noticed that your portfolio has positive theta to provide yourself with a little downside cushion. What was your contingency plan if SPX had dropped below 650, where the damage from negative delta and vega would be horrendous.

By: darin

darin — Thu, 12 Mar 2009 04:52:47 +0000

I entirely agree. In the past I tried reading a ton of news and analysis and it didn't help at all. I trade off charts and if I just focus on that I do well.

Hearing non-traders talk about stocks is so fascinating. Not only because they are usually good contrary indicators, but also because of their strange way of deciding what and when to buy.

By: avcacio

avcacio — Thu, 12 Mar 2009 04:48:42 +0000

Nice letter! The feather – it's true!
I felt it the prior evening – seeing the ES Futs climbing…

It's a pleasure to learn from you and still look up to that Range Rover Trade – which I thought was a pretty cool approach to a trade. (I have some longs, but still leaning short)