Fintwit uses words like "beta", "Factor exposure", "value", "rotation", "momentum", "yield". The funds who use these words are happy with 8% a year that doesn't correlate with stocks. Is that your goal?

I want more. Words have power. Time for a new vocabulary. A thread

2/ Today I'll be discussing my trading "vocabulary". There are four pillars I want to impart
A] Pre-Catalyst - trading before events
B] Post-Catalyst - trading after events
C] Macro - betting on trends and boom bust sequences
D] Flows - harvesting non-economic repeated actions

3/ Pre-Catalyst - stocks have earnings, FX has employment data, commodities have production reports. Pre-catalyst trading means harvesting other's expectations and asset momentum, comparing with unique data, and holding a trade into an event to catch a surprise.

4/ Post-Catalyst - once you've prepared for an event, you have a nuanced view if it's surprising. Other people who haven't prepared are slow on the draw. Post Catalyst trading is about speed - quickly responding to new information *after* it is already released

5/ Macro - macro is about herd behavior. Trend: Ideas, and movements trend - like populism. If a trending idea drives asset prices you can profit. Policy makers see trends, and try and correct them. When they don't correct them, bubbles form. Bubbles tend to repeat themselves.

6/ Flows. Flows are measuring actors repeatedly transacting for reasons other than a view on fundamental value. The BOJ buys the Nikkei to make it go up not to value it. The Fed buys IG credit to stabilize it not bc it's a good deal. Yoloers buy GME calls for fun not for profit.

7/ Pre-Catalyst you do tons of work before earnings season. Post catalysts, you do during earnings season. Flow strategies should typically be quantitative, and avoid events. Macro happens rarely but bubbles can override flows or fundamentals in terms of importance and returns

8/ The first point is that these 4 strategies tend not to overlap in time. Using them is like always surfing the best wave available. The underlying philosophy is that you should let the market move, rather than forcing your PNL with leverage. Trade moves, don't move to trade.

9/ The second point is that each strategy requires a different set of skills, edges and technology. Pre catalyst thrives with data, post catalyst with speed, flows with solid causal analytics, and macro with human judgment and custom implementations.

10/ The third point is that pre-catalyst, post catalyst and flows are fundamentally "equilibrium" strategies. Macro is disequilibrium. In the surfing analogy, it's when the Tsunami comes. Realistically, protocol is going to go out the window then anyways, so this is fitting.

11/ Using this vocabulary has helped me create better hypotheses, track my own trading results, and understand how to classify the market itself as in equilibrium or disequilibrium. Will end with a quote: "Words are free. It's how you use them that may cost you"