Narrative Trading #2 - Thesis & Invalidation
This is the 2nd thread on this topic on how to narrative trade, the first thread can be found at the end of this post
This is the 2nd thread on this topic on how to narrative trade, the first thread can be found at the end of this post
1/ Assuming you've done everything I told you in #1
You now have a project / token that you're looking at, and you're wondering
How do I evaluate this?
You now have a project / token that you're looking at, and you're wondering
How do I evaluate this?
2/ Probabilistic Thinking
First, you need to understand probabilistic thinking.
Trading is:
- Unpredictable
- Full of uncertainty
Probabilistic Thinking allows you to evaluate things in probabilities, and taking the highest EV bet
First, you need to understand probabilistic thinking.
Trading is:
- Unpredictable
- Full of uncertainty
Probabilistic Thinking allows you to evaluate things in probabilities, and taking the highest EV bet
3/ Creating your Thesis
So, now is time to create a thesis. This is where your own system comes in.
- Why am I bullish on X project / token?
- What's the overall market structure look like?
- Are there pumpamentals
- Does it have solid tokenomics?
- Who dumps on me?
So, now is time to create a thesis. This is where your own system comes in.
- Why am I bullish on X project / token?
- What's the overall market structure look like?
- Are there pumpamentals
- Does it have solid tokenomics?
- Who dumps on me?
4/ These are some elements of your thesis creation
If you want a full structure, here are some thesis factors I use:
If you want a full structure, here are some thesis factors I use:
5/ Next, you apply probabilistic thinking
- What are the chances this play out
- What are the chances overall market structure remains good enough such that coins don't absolutely nuke
Have probabilities for every scenario.
If P(token goes up) = 5%, are you trading or gambling
- What are the chances this play out
- What are the chances overall market structure remains good enough such that coins don't absolutely nuke
Have probabilities for every scenario.
If P(token goes up) = 5%, are you trading or gambling
6/ Finally, create and respect invalidations
A trade is always because
- You have an idea of what might happen
And so when does that trade stop?
- When what's supposed to happen, doesn't
A trade is always because
- You have an idea of what might happen
And so when does that trade stop?
- When what's supposed to happen, doesn't
7/ And so, your invalidation should be in line with the idea in the first place
Technical: X price is strong support, buy here predicting bounce
Invalidation: Price didn't bounce
Narrative: Y type of coins will pump next
Invalidation: Y type of coins doesn't pump in Z days
Technical: X price is strong support, buy here predicting bounce
Invalidation: Price didn't bounce
Narrative: Y type of coins will pump next
Invalidation: Y type of coins doesn't pump in Z days
8/
Catalyst: N coin will pump due to news
Invalidation: N coin doesn't pump upon release / news suddenly delayed
Fundamentals: M coin has fundamentals think it'll pump given enough time
Invalidation: Fundamentals change / doesn't pump after quite a while
Catalyst: N coin will pump due to news
Invalidation: N coin doesn't pump upon release / news suddenly delayed
Fundamentals: M coin has fundamentals think it'll pump given enough time
Invalidation: Fundamentals change / doesn't pump after quite a while
9/ Here's the full substack talking about this
0xkyle.substack.com
0xkyle.substack.com
10/ And here's the tweet thread for the first narrative trading post:
11/ Anyways, follow me @0xkyle__ for more narrative trading tips
Like/Retweet the first tweet below if you can:
Like/Retweet the first tweet below if you can:
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