A classic trading trap is disappearing among the leaves.
You are only seeing the trees, not the forest. All of these issues can prevent you from seeing the big opportunity in front of you: a business that could make your month or quarter more profitable. Let’s fix that…
Now imagine Warren Buffett as a day trader.
Here are two important facts you should know about Buffett:
- He doesn’t bet uniformly.
- He’s always ready to go big on asymmetric setups.
Asymmetric setup: Rewards are weighted towards you and trades are less likely to lose.
Now imagine that Buffett only trades in one market, the same market that I trade in.
Given its asymmetrical layout, he chose this store because of one important factor: its base price.
Let me explain.
Without going into the fundamentals, at times, price becomes unhinged from reality.
In the “short term”, the market is likely to be bearish on the current outcome, so that the copying skills of traders will create a market heavy on instant wins and losses, and if we use the poker example, all the way through.
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.
Caveat
This is a very advanced idea that requires more evidence. Without all the necessary changes, similar trading on the charts will punish you hopelessly.
In summary
Businesses with base prices and random offers are a great combination for big payouts.
Not to be confused with “buying the dip,” these trades are only made when multiple viable proof points are available.
