The Seven Day Scope: Snipers Only

Position sizing, Bitcoin, Oil and a look across the macro landscape.

Trading, can be difficult. Most of the time we make it difficult.

Why do we make things more complicated than necessary?

First, complexity extends engagement, satisfying our need for attention and ego reinforcement, regardless of whether the engagement is positive or negative. Second, our highly evolved brains, once used for survival and conquest, now face boredom, leading to overthinking. Third, we falsely believe complexity makes us sound smarter, when it often has the opposite effect.

Trading is as simple as, figure out what has worked in the past and apply it to the future. Read Market Wizards, not because it will tell you exactly what to do, because it will show you what not to do. Also, it will help you find what style of trader you want to be. Trend follower, fundamental, macro, stock picker….

I chose macro trend following because I think that all sectors and asset classes go through good periods and bad periods. For myself the best course of action is to take signals across assets and different time frames. This keeps my strategy simple.

That does not mean that this is the only way to trade.

Everyones starting point should be the same. Position sizing. I say the same thing every time. 1% stops and so on but let’s go through the important part.

Here is my bitcoin system. It is a very profitable system. It cuts your drawdowns in half. However, it has losing periods. Something to get through your mind right now is that EVERY SINGLE TRADER LOSES MONEY AT TIMES. Every system loses money at times. The best traders ever have losing periods. Losing years as well.

I look for a 5:1 risk to reward profile. Also how I size my positions on this system is based on the backtest. This system that I am showing you has a very high win rate for a trend system at 67% but Bitcoin data only goes back to the last decade. This same system uses a 35% trailing stop.

If I cut my stop loss in half, the return goes from 36706% to 13415%. It does not work for my strategy anymore. Still usable but our goal as traders should be to outperform the asset. If we are not outperforming, we should put our money in to the asset itself.

So now back to my boring talk about position sizing. If I want to take a position with my 35% trailing stop in a 100k portfolio for example. My position size would be 3k at most. So my max loss would be $1050. If I am only risking 1% of my portfolio. If I am risking 2% I can double the position.

Keep it simple. Start here.

Sector Performance

YTD Futures Performance

YTD Countries

YTD Factors

Global Yields

Fixed income factors

Currencies YTD

Currencies QTD

Crypto YTD

Bitcoin range trade. Bitcoin is currently trading within the large 60k to 72k range, with a notable support level around 62k, exactly where the current trading price stands. The price is below the 100-day moving average yet remains above the 200-day average. A close below 60k could be fatal.

If we can get above that right shoulder that would tell us that this oil move might seriously have legs.

Currently, the OECD commercial stocks nowcast continues to show a decrease, although the pace of these draws has slowed. Despite this, the global visible stocks experienced a notable reduction of 10 million barrels week-on-week, and our tracking indicates that global inventories continue to diminish. Additionally, both the average crude basis and prompt time spreads tightened last week, pointing towards a tightening market.

Moreover, the U.S. oil rig count has declined to its lowest since December 2021, which could imply a decrease in future production. While oil net managed money positioning has shown some recovery, it still remains at a low based on data since 2017, suggesting potential for upward movement as sentiment improves. Geopolitical tensions, such as increased Houthi attacks on shipping routes in the Red Sea, have decreased flows by 1.5 million barrels per day from early June peaks, further constricting supply. Additionally, exports from core OPEC countries have significantly reduced in recent weeks, a period when domestic demand typically rises due to summer usage increases. Despite some challenges like the ongoing decline in China’s oil demand due to lower refinery runs and weak macroeconomic conditions, the overall tightening of global oil markets provides a strong basis for anticipating higher oil prices in the near term.

Warm regards, Jason Perz

YouTube: @againstalloddsresearch https://www.youtube.com/channel/UCLvDNCnhNQbQnABUSFbwagg

Twitter: @jasonp138

Substack: aaoresearch.substack.com

Against All Odds Research