Common Mistakes in Positioning Based Trading
Nearly every losing positioning trade the Obsidian desk reviews traces back to one of the same handful of errors.
What is the most common positioning mistake?
Trading a level without checking the gamma regime is the most common error by a wide margin. The identical level justifies a fade in positive gamma and a breakout trade in negative gamma, so ignoring the regime means taking the correct level in the wrong direction.
Why is trading stale levels so costly?
Levels are only valid while the open interest creating those levels remains in place. A wall that was rolled away overnight looks identical on a price chart and behaves nothing alike, so a trader using yesterday's levels is defending a position nobody else holds.
What other mistakes cost traders the most money?
Entering before confirmation, sizing by conviction rather than by invalidation distance, averaging into a broken level, and trading every level rather than the two or three best levels of the session account for most reviewed losses at the Obsidian desk.
- Entering on proximity to a level instead of rejection at it
- Sizing by conviction instead of by invalidation distance
- Averaging down into a level that has already broken
- Trading every marked level rather than the strongest few
- Ignoring scheduled catalysts inside the holding window