Key SMO Concepts: Actionable 80/20, Market Phenomena First, Stock Setups Second
I agree with the December 21, 2024 X post below. To me, this should be neither complicated nor controversial. However, I do recognize the opening quote which is there for a reason: "For those who believe, no explanation is necessary; for those who do not believe, no explanation will suffice."
TLDR, following the 80/20 rule, not all information is created equal: market and sector strength and weakness are more equal than individual stock information.(This strength and weakness is my interpretation of relevant "market phenomena" noted in the post below.)
Relevant to the quoted post:
The Stock Market Organizer system is focused on "the structure of the markets, their dynamics, and the common characteristics that make stocks powerful."
Marios Stamatoudis, @stamatoudism
Posted on X
December 21, 2024
This is something that takes years in the game to fully realize.
"We don't trade setups...we trade market phenomena, with setups being an expression of a small part of the whole."
Setups are merely a sporadic expression of an overall phenomenon. Textbook ones are even rarer.
I can't easily articulate how much of a difference it made for me when I shifted my focus to understanding the structural tendencies of the market, its inner dynamics, and underlying phenomena, rather than focusing solely on the setups themselves.
I am confident that, in the long run, you would almost always make money if you deeply understood the structure of the markets, their dynamics, and the common characteristics that make stocks powerful and simply threw a dart at where to buy, with predetermined risk and stop.
Conversely, I am equally certain that, in the long run, you would almost always lose money if you focused solely on setups while neglecting the rest of the iceberg beneath the surface, that gives these setups meaning.