John, thanks for the detailed reply
I especially liked the part about stops, which I think is something too few people mention here. I frequently read people on the board announcing an entry into a position, and sometimes my first thought to myself about their trade is "He's doing that? Now? Whatever stops are he's using, I hope they're tight." Your approach about the total portfolio moving against you is something I had not considered, and I assume it means having several smaller positions (and a sizeable amount of cash) at any given time rather than larger ones that can cause more than a couple percent movement on any given day.
If I'm interpreting you correctly I see that you consider margin debt to be one of a number of larger macro indicators to help you gauge general market conditions at any given time.
What I meant about how does it affect your trading, for example a trade you anticipate making today, does the data you cite mean that you would not go long except for a wiggle, or does it mean that you will only consider opening new short positions right now, or does it mean something else? I was also wondering how you might connect your macro indicators with the the specific micro indicators, such as where you might say to yourself "gee, all my macros are pointing bearish, yet we are still going up so I won't go really short until there's a break in the of the trendline on the (index) on the (timeframe) chart or until the (index) goes below the (number) moving moving average" or something like that. |
