Seth Walsh
Iconoclast
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I am making this thread so no one will DM me with the same question.
Will try to be as clear and coherent as possible.
Rule 1. The goal is not smooth returns or being right often. It is no-ruin geometric compounding. Survival first. Treat every risk as if you will take it repeatedly forever, because a small ruin probability repeated enough times becomes ruin.
Behaviour? Nonpredictive, opportunistic, positive-skew. Accept many small losses and a few very large gains. Focus on exposure, not forecasts. It is better to be convex than merely right.
No portfolio leverage. No dependence on stable correlations. No optimizer-driven allocation games. No systematic short-vol/carry that earns pennies and hides a steamroller. No book whose “hedge” only works if markets stay continuous.
What to trade? Trade markets that are liquid and only trade them when they are trending. What is a "trend"? A trend is when price is persistently moving away from a level with momentum.
If bearish, I would use puts, put spreads, or other defined-loss structures, almost never naked shorts.
When I'd trade? When there is a clear TREND, and when downside is explicit and small, upside is multiple times larger, and the trade does not require precision on timing, correlations, or path. When others are forced, benchmarked, levered, or have career risk and I do not. This is why retards always say "Why is Seth saying buy when the price is at an all time high?", not knowing it's the best time to enter. The trend either continues, or breaks. If it breaks, you get out with minimal loss. If it continues you ride it out. Forced selling/buying from stoploss clusters and collective liquidation levels can push price if your favour; then your only job is to protect the downside by placing your stoploss.
When would I not trade?: In ALL other market conditions.
When would I especially not trade?: When the edge is mostly a story. When the book needs calm markets to survive. When the PnL is suspiciously smooth. When I feel pressure to be active. When I cannot explain the worst-case loss in one sentence.
In conclusion:
I trade rarely, hold a lot of dry powder, tolerate looking wrong or inactive for long stretches, and build the book so disorder helps me more than it hurts me.
Will try to be as clear and coherent as possible.
Rule 1. The goal is not smooth returns or being right often. It is no-ruin geometric compounding. Survival first. Treat every risk as if you will take it repeatedly forever, because a small ruin probability repeated enough times becomes ruin.
Behaviour? Nonpredictive, opportunistic, positive-skew. Accept many small losses and a few very large gains. Focus on exposure, not forecasts. It is better to be convex than merely right.
No portfolio leverage. No dependence on stable correlations. No optimizer-driven allocation games. No systematic short-vol/carry that earns pennies and hides a steamroller. No book whose “hedge” only works if markets stay continuous.
What to trade? Trade markets that are liquid and only trade them when they are trending. What is a "trend"? A trend is when price is persistently moving away from a level with momentum.
If bearish, I would use puts, put spreads, or other defined-loss structures, almost never naked shorts.
When I'd trade? When there is a clear TREND, and when downside is explicit and small, upside is multiple times larger, and the trade does not require precision on timing, correlations, or path. When others are forced, benchmarked, levered, or have career risk and I do not. This is why retards always say "Why is Seth saying buy when the price is at an all time high?", not knowing it's the best time to enter. The trend either continues, or breaks. If it breaks, you get out with minimal loss. If it continues you ride it out. Forced selling/buying from stoploss clusters and collective liquidation levels can push price if your favour; then your only job is to protect the downside by placing your stoploss.
When would I not trade?: In ALL other market conditions.
When would I especially not trade?: When the edge is mostly a story. When the book needs calm markets to survive. When the PnL is suspiciously smooth. When I feel pressure to be active. When I cannot explain the worst-case loss in one sentence.
In conclusion:
I trade rarely, hold a lot of dry powder, tolerate looking wrong or inactive for long stretches, and build the book so disorder helps me more than it hurts me.
