There was a time when earnings season felt much easier to trade.

A stock would report a clear beat, gap higher, trade well and often continue trending for the rest of the day. If the result was good enough, there was a reasonable chance some of that momentum would carry into the following sessions.

The same broad logic applied in reverse to misses.

Sounds simple?

There were always exceptions. Earnings trading has never been easy, and there have always been plenty of gaps, traps and inexplicable moves. But there were some underlying assumptions I felt reasonably comfortable building trades around. I have spent countless hours going through the data to prove and test that edges existed.

Over the last few reporting seasons, I’ve become less convinced. This is something I have written about frequently.

On the screen, the opportunity still looks enormous. The moves themselves haven’t disappeared. If anything, they’re getting bigger!

J.P. Morgan described the volatility this August as more typical of acute stress periods such as the GFC and COVID. Yet the underlying results weren’t especially extraordinary: 60% of companies were classified as in-line and earnings revisions were broadly consistent with historical averages.

We are getting bigger moves without necessarily getting bigger fundamental surprises.

Goldman came to a similar conclusion looking over a much longer period. Across more than 6,500 ASX earnings announcements, they found that the largest Beats and Misses now move around 10-12% on reporting day, roughly 50% more than the historical average. At the same time, the traditional post-earnings drift has weakened.

This sounds like a positive for shorter term players. However, these bigger moves haven’t translated into better trading opportunities. My experience over recent seasons has increasingly been one of large gaps, violent reversals and poor liquidity. Most importantly, it is just not scalable.

This August felt like a concentrated version of that problem.

There are plenty of possible explanations. More information is available to more participants, AI is speeding up the processing of results, market structure around the open has changed, capitalised traders are chasing skinnier pockets, whilst passive capital gains a much larger share of the broader market.

I don’t know how much each contributes, and I’m not sure I need to. What matters is how the behaviour has changed.

After going back through the data, there were four observations from August that stood out.

For subscribers, I link the data file below.

1. The gap told you something. Chasing it was a different question.

There were still genuine Day 1 drives.

Of the stocks that opened at least 3% higher, 86% finished the day above their previous close. On the downside it was even cleaner: 92% of stocks opening more than 3% lower finished in negative territory.

So the opening auction wasn’t useless.

The problem was what happened after the auction.

For stocks gapping more than 5% higher, the average move from open to close was actually -0.29%. Only 52% continued higher from their opening price.

The downside looked completely different. Stocks opening more than 5% lower fell another 3.14% on average from open to close, and 81% continued lower after the open.

That distinction matters because my natural style is to trade momentum. I want to buy strength following genuinely positive information and short weakness following genuinely negative information.

But the biggest positive gaps weren’t necessarily giving that opportunity. In particular, the long side was littered with traps.

For example, MP1 opened around 9% higher and got slotted. IMD opened +9.4% and fell 12.4% from open to close. APE opened +7.9% and fell 12%. ZIP gapped 11.6% and traded all over the place, breaking the open before midday but then closing on highs.

Even many of the positive gaps that held didn’t provide much opportunity after the auction. In some cases the gap simply looked enormous relative to the delta in the news. LOV opened +13.8% and drifted slightly lower. SGP opened +13.3% and faded marginally. ANN opened +9.9%, soared in the first five minutes, then spent the rest of the day fading back to the open. The repricing had simply happened very early in the piece.

There were some exceptions, as ever. Some of the cleaner drives occurred in less obvious announcements with smaller gaps. DTL only opened 3.2% higher before rallying another 14.2%. HMC opened 3.1% higher and added another 7.9%. ASX opened 3.6% higher and gained another 5.3%. Perhaps there was simply little liquidity, fewer eyes and offside pre-positioning, leaaving more price discovery still to occur.

This all raises an important question when trading earnings: what is the expected value of chasing the biggest positive gaps?

I'm increasingly unsure that "great result + big gap" is enough to justify chasing momentum. Over the last few seasons, the largest positive gaps had negative open-to-close expectancy.

Here is the data file to go through some of the moves in your own time.

R= Reporting Day.

Read more

I could often make a case for the individual stock and the underlying catalyst. Sometimes the setup itself still looked reasonable.

But I was fighting the broader sector trend.

If respecting the trend matters this much, perhaps it should be a central rule of the trading process rather than just an observation. But that immediately creates another variable: how do you actually define a trend, and more importantly, recognise when it has changed?

Because recognising the trend is only useful if you are willing to change behaviour when the evidence changes.

The last couple of weeks have provided an interesting live example.

The problem with defining a trend

There is no single definition of an uptrend or downtrend.

Much depends on your timeframe. One trader might use a close above a particular moving average. Another wants a higher high and higher low on the Daily chart. Someone else uses trendlines, relative strength or simply their own interpretation of price.

It can all get into the dark arts of technical analysis.

But I don’t think you need the perfect definition. For a trader, the more important question is whether the price behaviour supporting your original thesis still exists. Note that I am specifically referring to trading and not investing.

Last month, many of the sectors I follow were in clear downtrends.

The broader indices actually hid some of this. Outside Korea, many headline markets were relatively rangebound such as the S&P500, DJIA, and my own ASX200. Underneath the surface, however, the picture was much weaker.

AI, Gold miners, Lithium, Rare earths, Defence and various other groups had gone through multiple legs lower. These weren’t particularly good conditions for the type of basket or swing trading I was trying to do.

Then we had the panic into late July.

Of course, trends can start and end in different ways.

Sometimes there is a breaking news event or fundamental catalyst that immediately changes how the market prices something. Other times, price simply breaks out of a long consolidation or range and establishes a new direction.

Then there is the third type I’ve been thinking about more recently: a new trend that begins with the exhaustion of the old one.

The previous trend becomes increasingly extended, selling accelerates, volume expands and eventually you get some form of capitulation. If enough positioning and leverage has been cleared out, the conditions that sustained the old trend may no longer exist.

This is the one that interests me now because I think we’re seeing versions of it across several markets.

What I’m looking for around a trend change

In my Korea write-up I made an observation:

“From experience, IF this is a true capitulation event, the bounce needs meaningful price and time higher.”

We’re now roughly two weeks removed from that event, and I’m increasingly interested in the price action that has followed.

I’ve been looking at trend changes through three broad factors.

1. Exhaustion

The most obvious is price and huge volume exhaustion after an extended move. An extended move can be defined as multiple legs lower and a larget % retracement.

Korea is almost the textbook version.

After roughly three months of weakness, the market accelerated lower and volume exploded into the lows. This after a 40% sell off from the highs.

Importantly, this wasn’t the first leg lower. The move came after a substantial period of selling and distribution.

The time element in this new bounce sequence is the part I think is easy to underestimate. Korea sold off for roughly three months. If that move ended with genuine capitulation, two weeks of recovery isn’t particularly long in comparison. I would expect to see more of a bounce in price and/or time.

The way I think about it is that capitulation can clear out a lot of what sustained the previous trend: leverage, positioning and eventually the willingness of existing holders to sell. Once that process has run its course, the market doesn’t necessarily need an equally powerful new fundamental reason to move higher. The absence of the previous selling pressure can be enough to change the balance.

We’ve seen versions of this before. The tariff capitulation in April 2025, the April 2026 Middle East ceasefire low and during COVID in March 2020 following FED intervention. The initial reversal was violent in each case, but the more important observation was what followed.

The same broad pattern has appeared across a number of sectors I follow. Multiple legs lower eventually culminated in much more aggressive selling.

2. A change in structure

Exhaustion alone isn’t enough.

Markets can panic, bounce and then retest or make new lows. A large reversal tells you that something has changed, but it doesn't necessarily tell you that a new trend has started.

The more useful information comes afterwards. Does price immediately give back the bounce? Does it continue making lower highs and lower lows? Or does the character begin to change?

This is where price and time become important.

A market that falls for three months and then rallies hard for two days hasn’t necessarily changed trend. But if that bounce survives, previous lower highs are broken and pullbacks begin holding at higher levels, the evidence starts to build that you're dealing with something more than a short-covering rally.

You don't need to pick the exact bottom to take advantage of that. In fact, waiting for some change in structure means accepting that you'll miss the first part of the move.

That’s what I’m increasingly seeing now.

An example in SNDK illustrates this change in character succinctly.

3. Something changes fundamentally

Trend changes also often coincide with a catalyst.

Sometimes it is obvious in real time. Sometimes we retrofit the explanation afterwards.

One asset that is a barometer of risk is the USDJPY. It is one example I’ve been watching.

Just last week, the Bank of Japan intervened in the currency alongside the US Treasury. This assistance was the first coordinated US-Japan intervention since 1998.

The authorities appeared determined to prevent the carry trade becoming destabilising and to cap the rise in yields (given Japanese forced selling of US treasuries prior). It is a clear sign of intervention to support markets.

At roughly the same time, a substantial amount of leverage around AI had been cleared from the system. Leo Aschenbrenner and Situational Awareness became the headline “fundamental” reason for the bottom.

However, you dont actually need to know exactly why the trend ended.

The catalyst itself is less important to me than what price does afterwards. I can debate whether intervention, leverage being cleared or simple exhaustion caused the bottom. I’m never going to know the exact weighting of each.

What I can observe is whether the market starts behaving differently

Why the broader market matters

What makes the current move more interesting to me is that it isn’t confined to one chart.

Multiple sectors and indicies are now moving back up.

Gold Daily:

Defence ETF:

Rare Earths ETF:

Across a number of previously weak areas, I’m seeing trends beginning to turn.

I’m not planning on trading every one of these markets.

The charts are useful because they tell me something about the broader environment. If Korea had bounced violently while everything else continued making new lows, I’d probably interpret the move differently.

Instead, participation is broadening.

Former laggards are breaking downtrends. Some sectors are starting to make higher highs and higher lows. The weakness that previously existed underneath relatively stable indices is beginning to reverse.

That information matters for position trading, baskets and short-term catalyst setups.

The backdrop influences the probability of everything you do on the long side.

The danger of fighting yesterday’s market

There is an obvious counterargument to all of this.

If I keep changing positions every time I think a trend has changed, I can easily turn “being adaptive” into another form of overtrading.

Maybe I am better off widening my timeframe, buying the best stocks and sitting through more volatility.

For some traders, that’s probably exactly right. Some are blessed with strong fundamental skills to be able to capitalise on value and distress.

But it doesnt suit me and my character. My job is to make the equity curve go up from bottom left to top right.

I don’t believe you can consistently predict and time markets. I also know that you can be right on an idea but the market can take you out with leverage.

Thats why you need a process for recognising when the evidence supporting a previous view has changed.

That was my mistake last month.

I was holding onto stocks while their sectors continued trending lower. Price was giving me information that I wasn’t weighting heavily enough.

The challenge now is not making the opposite mistake.

After a violent sell-off, your expectations naturally become anchored to what you’ve just experienced. Stocks bounce and immediately look expensive. Markets rally and you expect a retest. The next leg lower feels more plausible because you’ve just watched several of them.

This is one reason V reversals can be so difficult to trade. Your expectations are still being shaped by the previous trend even as the evidence in front of you starts to change. You then hope for a pullback. But the market changes faster than your expectations.

Perhaps that's the real value of having some definition of trend in the first place. It gives something objective to come back to when my expectations are anchored somewhere else.

In my Korea post I wrote that if this was a genuine capitulation event, the subsequent move would need meaningful price and time higher.

So far, that’s exactly what is happening.

The question I’m asking now isn’t whether I can predict where these markets will be in three months.

Instead its simplier. Am I still trading the trend that exists today, or the one that existed two weeks ago?

There were some good trades and ideas where I did the work. They didn’t play out, but I would happily take those bets again. There were also some glaring performance mistakes that undid a lot of that good work.

What frustrated me most was that the market had given plenty of clues beforehand. Picking up on those changes is something discretionary traders should pride themselves on.

I just didn’t adapt quickly enough.

I came into July with a lot of positive energy after completing the end-of-financial-year review. It is also seasonally a strong period for the ASX, with tax-loss selling behind us and funds often putting money back to work.

I probably pushed too hard into that expectation. I had developed a narrative around some of my positions, and I was slow to change it when the evidence changed.

That became increasingly expensive as volatility picked up.

The market was changing underneath the index

One of the things I’ve been working on is extending my holding period.

As my account has grown, I need strategies that can accommodate more size. There are limits to how much capital you can efficiently deploy in some short-term Australian equity playbooks. I’ve therefore spent a lot of time developing basket trades and other structures that I can potentially hold for days or weeks.

There is nothing inherently wrong with this.

The problem is applying the strategy when the conditions supporting it aren’t there.

My basic framework for these basket trades has been:

Market + Sector + Stock-specific fundamentals + Institutional Sponsorship + Catalyst.

The further I got into July, the fewer of those boxes I could honestly tick.

Resources were in a persistent downtrend. Former high-flying leadership groups such as Critical Minerals or Defence had cracked. Capital raises were increasingly being sold into. Positive news wasn’t producing the follow-through I wanted.

The indices weren’t initially telling the whole story. The VIX hadn’t exploded and headline markets remained relatively well behaved until mid-July.

However, underneath them, participation had been narrowing for months.

And yet I kept holding things.

Some were stocks that I had previously made money in and couldn’t quite let go of. Others were old themes I kept returning to in Critical Minerals and Gold. I even found myself still dabbling in specs.

AYA was probably the worst example.

It had previously been a good trade and was still holding relatively well compared with the broader market. But by July, it was a long way removed from my original catalyst. My own trailing-stop system should have taken me out twice in July.

I didn’t follow it. Nor did I properly question whether the original thesis still held post the quarterly.

Eventually the trade cost more than $50,000 on small size. What’s worse is that I’d entered on a nothing pullback as an afterthought.

When I pulled the numbers on my basket trades from mid-June, they were terrible: a 43% win rate, -$92,000 in P&L and a profit factor of 0.17.

At some point the statistics stop being bad luck and start becoming information.

Either the playbook had stopped working in this environment, or I wasn’t applying enough scrutiny to the trades I was putting into it.

Probably some of both.

Everything gets found out in volatility

This is what I’ve been thinking about since, and what I should already know intrinsically.

There are periods where you can get away with being loose.

A strong market can rescue a mediocre entry. Sector momentum can bail out a stock where the catalyst wasn’t quite good enough. A position that should have been stopped can recover the next day and teach you exactly the wrong lesson.

Volatility removes some of that forgiveness.

Suddenly the things you were getting away with matter.

My overnight book was too exposed. My one-day VaR was regularly above $100,000. I was breaking rules around the maximum number of positions and strategy allocations. More importantly, I was carrying a collection of trades where I couldn’t really answer the most basic question:

Can I add value here?

If the answer is no, why am I in the trade?

By late July the change in environment became impossible to ignore. Korea was capitulating and became the center of market focus:

The KOSPI had fallen roughly 35-40% from its highs in a month, including consecutive limit-down sessions. Volume was rising, margin calls were increasing, and the index was becoming extremely stretched from its short-term averages.One data point I recorded suggested 3.4% of Korea’s population was margin called on Monday 13th July!

This behaviour was obviously spilling over to single stocks. SK Hynix had gone from one of the strongest momentum names in the market to extremely oversold.

In the US, SNDK had fallen for four consecutive sessions on expanding ranges and increasing volume. At one stage it was roughly 25% below the moving average I was tracking.

This was a completely different opportunity set.

More importantly, it was much closer to what I am actually good at.

Going back to what I know

I’ve spent years trading short-term strategies and one of my growing favourites has become dislocations or “capitulation” trades.

I have traded these extensively and cited some here. They are characterised by strong prior downtrends, large gap downs, forced selling, all providing an important backdrop for possible intraday mean reversion here in Australia. They are situations where I can watch price action, receive feedback and adjust risk relatively quickly.

As volatility increased, this playbook started appearing selectively in Australia. It becamse increasingly apparent in Korea and some setups began to emerge in the US.

One of my stated goals for FY27 was to think more deeply about opportunity and scaling.

Where are the situations where you can genuinely put on risk when the expected value is unusually high?

The irony was that I’d spent the weeks beforehand losing money trying to become a longer-term trader in randomness, just as the market was moving towards an environment much better suited to my core skills

In Australia, the panic on Thursday 30 July produced gap-down setups in MP1, NXT and SKS for my playbook.

MP1 was the cleanest.

I built into the position as the trade worked, reached roughly 30,000 shares, before progressively reducing exposure. I wanted to hold this for longer, but Korea turned sharply lower through the afternoon.

NXT and SKS were less spectacular.

That’s actually important.

Going back to my core playbook didn’t magically make every trade work. Both these stocks had mediocre follow-through.

The difference was that the decision-making was cleaner. I knew why I was there and what timeframe I was trading.

That was very different from some of the basket trades I’d been carrying earlier in the month.

Then came Korea

Korea was the much bigger opportunity.

I initially traded the sell-off well from the short side on Wednesday 29 July. After hitting limit down the previous day, the early bounce failed, dragged lower by SK Hynix earnings. From there, I shorted the failed bounce with a target of another limit-down volatility halt. I was able to scale out into 2:30pm, shortly before the full capitulation.

The harder question was when to turn around and get long.

By then the setup was becoming extreme enough that I wanted exposure. The problem was structuring it.

The market finally produced what looked like a meaningful turn during Asian hours. The following session it rallied hard from the lows.

I tried buying the reversal.

For a while it looked right.

Then the entire move retraced.

That chart is important because hindsight makes what happened next look much easier than it was.

The market had rallied strongly, rolled over, lost the short-term trend and ended up back near the lows.

My note at the time was simple:

“Full retrace = this is not right.”

So I cut most of the exposure and kept only a small position overnight.

Then this happened.

KOSPI futures gapped 15% and rallied almost 19% the following session, while some of the related US names rallied 25-30%. The overnight catalyst, which will now live in infamy, was the news that Leo Aschenbrenner had been cleaned out of his margined longs by Citadel.

The rest is history.

Across Korea, the US and Australia I made roughly $60,000 around the whole sequence.

And the temptation was to feel like I’d missed a huge opportunity.

Was it actually a mistake?

This is where trade reviews can become dangerous.

Once you know what happened next, every decision gets judged against the perfect trade. The temptation is to feel you should have held longer or been bigger.

Except that’s not what the information looked like at the time.

The intraday rally had failed. Korea had given back the entire bounce. As a intraday trader, that’s your signal right there. The Australian gap-down trades were good, but MP1 was a B for the model rather than an A or A+ setup. There was still substantial overnight gap risk given the failed reversal in Korea.

Cutting exposure wasn’t irrational.

There are two seperate questions I’m trying to answer from the trade:

1. Why did I arrive at one of the best opportunity sets of the month already feeling defensive?

2. Does a setup as extreme as Korea need a completley different risk structure?

In the first part, that’s where the earlier July mistakes matter. I was coming into the trade in a drawdown. I’d spent weeks carrying too many positions. My VaR had been too high. I’d lost money in a portfolio full of marginal basket ideas.

By the time something genuinely unusual arrived, part of my attention was still anchored to what had happened before it.

There is a cost to bad trades that doesn’t appear in the P&L. There is the obvious hit to risk capacity, but also the drain on mental capacity. Both make it harder to press when something genuinely unusual finally arrives.

Every overnight position therefore needs to compete for scarce risk capital. I want to be financially and mentally fresh when the true big-dollar opportunities arrive.

In the second part, mean reversion trades are inherently hard to finesse. A true capitulation trade may need a wider stop against the previous day's low, perhaps 5%, rather than being managed entirely through an intraday lens. But that introduces meaningful overnight gap risk as well that needs to be accounted for.

In this case I was sized for an intraday trade, which meant I didn't have the risk tolerance to suddenly give the position a much wider stop.

Your timeframe should adapt with volatility

I’ve spent a lot of time trying to become better at holding positions.

But I’ve probably been treating holding period as too much of a goal in itself.

Holding longer isn’t automatically better trading. The objective is to use the timeframe that best matches the opportunity.

When markets are trending, sectors have leadership and catalysts are producing sustained follow-through, I want to give positions room. This is what happened through financial year 2026 in the commodities space.

When participation narrows, positive news gets sold, breakouts stop working and volatility rises, I need to become much less forgiving and move on. For me, that often means shortening my timeframe and going back to the skills I’ve spent years developing. It means saying NO.

I’ve made some simple changes after July.

At a minimum, I won’t hold a stock as a basket trade unless the relevant sector or ETF is in an uptrend.

I’ve also changed my risk dashboard to make breaches of stop and dollar-risk levels much harder to ignore. The changes are simple: big, bold fonts and automated email alerts.

But the bigger change is what I want to look at when my performance deteriorates.

I normally ask what I’m doing wrong. Am I executing badly? Am I being impatient?

Those are still important questions. But July was also a reminder to look outward. Are the conditions for my playbook being met? Are stocks holding their new issue prices? Are we seeing follow through? If a strategy that has been working suddenly produces weak returns at the same time as sectors are rolling over, I need to consider the possibility that the opportunity set itself has changed.

I don’t need to wait for the index to collapse before admitting the environment has changed. By then, the adaptation should already have happened.

That’s what makes the Korean opportunity frustrating in hindsight. I actually traded much of the volatility reasonably well. The bigger failure was arriving there after spending several weeks fighting a market that had already been telling me to change across playbooks.

I’m still trying to become better at holding positions and deploying more capital over longer timeframes. That hasn’t changed.

But holding longer isn’t the goal. Putting meaningful risk into the right opportunities is. July eventually gave me exactly that sort of opportunity.

Next time, I want to arrive there with more capacity to trade it.

This isnt something I fully appreciated when I first started.

Like most traders, I experimented with almost everything before eventually finding an approach that suited both my personality and the way I wanted to operate. It wasn't until I moved away from purely technical setups and began incorporating catalysts, as popularised by SMB, that things finally started to click.

Once I’d found a framework I could trust, the objective felt straightforward. Improve the tech stack, execute the playbook consistently and gradually increase size as confidence grew.

Reviewing the past financial year made me realise it isn’t that simple.

Some of my best playbooks have quietly become some of the least scalable. In some cases they’ve become more crowded, making any available opportunity harder to exploit. In others, the setup still works to a degree, but deploying meaningful size has become increasingly difficult. More than anything, I’ve realised that I am now trying to solve a different set of problems.

The biggest shift has been the questions I now need to answer before committing capital.

Don’t confuse brains with a bull market

As I worked through my FY26 review, there was a very clear recurring theme.

This was my best year since leaving the comfort of my previous firm in 2019. There were multiple six-figure trades and several personal bests.

Looking solely at the P&L, it would be easy to conclude I’d become a much better trader. I probably have in some areas. The fundamental work is stronger than it was, my process is more structured, and I have a great team around me. Furthermore, AI has improved workflow and tools. Above all else, I’ve become much more comfortable widening my timeframe and holding larger positions when the opportunity genuinely justifies it.

However, we just experienced a rampaging commodities bull market! This was a cycle that produced some of the cleanest trends I’ve ever seen. You could throw a dart at sectors such as Rare Earths, Gold, Silver, Copper, Tungsten, Lithium and make money in 2025/2026 (graphite aside).

I’ve traded long enough to know that strong markets have a way of flattering everyone.

Bull markets don’t just push prices higher. They attract participation, create deeper liquidity and produce the kind of sustained trends that allow momentum to compound. This momentum can lead to blow off moves and capitulation in spectacular fashion, such as those in DRO, Rare Earths and Gold/Silver. Such conditions naturally generate opportunities that simply don’t exist during quieter parts of the cycle.

One of the biggest mistakes I made coming out of the previous ASX bull market in 2019 was believing I’d solved my trading niche. I left full of confidence, increased my risk, became overleveraged and eventually ran straight into one of the biggest drawdowns of my career in a changed market.

The market doesn’t become easier because you are “smarter” or more informed. It is just a market that goes through ebbs and flows.

That’s why I think the hardest part of reviewing a great year isn’t celebrating what worked. It’s separating the skill and areas of opportunity that will compound from the conditions that probably won’t.

The uncomfortable number in the review

One statistic kept staring back at me.

Ten of my fifteen biggest winning trades came from the same style of setup. I call this “fundamental position trade” but others call them “swing” or breakout trading.

Examples of some of these below:

Initially I was pleased with this growth and being able to adapt to the new conditions. I worked hard to get up to the required knowledge expertise and tracked ongoing developments with various tools and contacts. Finding a new playbook that generated more than half of my annual profits felt like genuine progress.

But after sitting with the number for a while, it started to make me uncomfortable. Was this genuinely the beginning of a durable edge? Or had I simply found myself trading exactly the right playbook during one of the strongest commodity markets Australia has seen for years?

That question completely changed how I looked at the rest of the review.

All of my largest opportunities came from a completely different style of timeframe than the one that originally built my account.

If I want to continue growing in the same way over the next five years, are the strategies that got me here still the strategies that will take me there?

Capacity changes everything

One theme kept resurfacing as I read the new Market Wizards: The Next Generation.

It didn’t matter whether the trader specialised in equities, commodity spreads or futures. Nor did it matter whether they were discretionary or systematic. As their accounts grew, and as they sat through various cycles, almost all of them found themselves moving away from the very strategies that had originally made them successful.

Success changed the constraints they were operating under.

As accounts grow, liquidity becomes more important. Competition becomes more intense. As such, some trades simply cant absorb larger position sizes, while other trades disappear altogether as the market structure evolves and gets more efficient. The edge may still exist, but expressing that becomes increasingly difficult.

Simon Russo eventually moved away from shorting speculative small caps to focus on large caps. Lucas described a mid-cap breakout strategy that only really appeared during powerful bull markets. Kristjan kept trading this similar strategy without his usual trend guardrails and experienced a $60m drawdown when the market turned south. Other traders abandoned calendar spreads or niche volatility opportunities because they simply disappeared overnight.

Reading these examples made me realise this wasn’t an isolated phenomenon. All were forced to adapt and change if they wanted to keep growing their accounts. It marked a profound stage of professional development.

That’s the question I am sitting on.

When a good strategy stops being scalable

Morning Drives have been one of the foundations of my trading for years.

They suited my personality. They taught me how to interpret catalysts, read the tape and momentum. More importantly, it was this predominant focus that generated thousands of repetitions that helped build essential skills and screen time that shaped the trader I am today.

The edge hasn’t disappeared. But the conditions around it have changed. Large gaps on open are indicative of a more efficient and informed market. With bigger gaps comes reduced expected value. Liquidity disappears much faster under the new auction changes. AI has accelerated information flow, and more discretionary traders have been recapitalised after the recent bull market.

The result is that opportunities which once rewarded speed and tape reading have become increasingly competitive. Many traders are trying to exploit the same opportunities.

It sucks given all the sunk time, energy and improvements. Walking away from that investment feels uncomfortable as there is a natural tendancy to keep forcing something to work.

Here is a recent example in PNR.

• The company goes into a temporary pause at 11.21am and drops a stinker of a trading update.

• Production for the JuneQ was approx 20% miss to consensus. More importantly, FY27 guidance was weaker with AISC moving to A$3100 vs $2550s estimated. The company reset the decks.

• On the unwind, the stock instantly gapped lower by 13% on 300k shares. There was one order for 150k that was indiscriminate to take any available liquidity.

• The whole sell off was done in just a few moments before staging a full recovery.

  

Now I am not saying this is the best trade or has the strongest variables. The stock was in a sharp downtrend, so there was an element of pre-positioning into the news. My point is simply that these were the kind of trades that used to catch the market off guard and offer some opportunity. It is now being gamed out of existence.

Making the adjustments

The answer isn't abandoning the strategy. It's becoming far more selective.

There are always examples to buck the trend. After all, the playbook is about planting optionality and cutting losers quickly. You only need one of two major winners to make it viable.

As such, trade selection more than ever is paramount, requiring specific variables and nuances. This could be factors such as time of year, time of day, underlying market tone and sector strength, liquidity, the nature of the order-book, long vs shorts, the tradeability of a stock, as well as the magnitude of the underlying catalyst.

It all depends on who you are and your current journey.

For me, I have become more focused on large caps to accommodate sizing for this strategy.

Here are some examples from last year:

However, I find it very hard to let something go.

I often slip back into old habit patterns because I just can’t help myself. I chase stocks where I know there is less edge and where I can’t even get size. Invariably this all leads to a build up of losses or small wins at best.

The worst part? Some of my biggest losses are where I didn’t or couldn’t hit out quickly, and then a vacuum appeared below. Often these were just small positions that bled out to much worse losses. This despite saying I wouldn’t play in the first place!

By writing this down and reviewing, I have to come to an acceptance that I’ve reached the point where capacity for this playbook has become part of the equation.

The solution is to adapt whether it be entry, timeframe, or to move on altogether.

My biggest trades looked completely different

The biggest winners in FY26 told a very different story.

Almost all of them came from what I now refer to as “Basket” trades.

These weren’t fast intraday momentum trades on news. Instead, they were multi-day positions built around a combination of market, sector and company-specific strength. They required significantly more preparation before entry, much more patience once in the trade and, perhaps most importantly, they gave me something that intraday drives increasingly struggles to provide.

They all shared similar characteristics.

• A strong underlying market.

• A leading sector

• Company-specific fundamentals

• Institutional sponsorship

• A meaningful catalyst.

Importantly, position size over a longer holding is not a limiting factor.

Now this doesn’t necessarily make Basket trades better. They’re simply better suited to the new constraints for me in that particular market set.

And therein lies the challenge. It's not just recognising the conditions that allow a strategy to flourish, but recognising when those conditions have changed enough that it’s time to move on.

We are seeing more and more signs of these changed conditions right now.

Every strategy has a capacity limit

This review has changed how I think about opportunity going forward.

The first question is no longer whether a strategy makes money. It’s whether that strategy can be scaled. It is also identifying new pockets of opportunity outside my normal niche should other playbooks get taken away once more.

Some playbooks are exceptional for building an account because they're flexible and repeatable. Others only become attractive once liquidity and capacity matter more than pure expectancy.

The mistake is assuming every profitable strategy deserves a permanent place in your trading business.

It doesn’t. Every playbook has a natural lifecycle.

The next stage

As we move into Financial Year 27, I’m thinking more about opportunity.

This was the feedback from a mentor:

“My biggest concern for you in trading has always been OPPORTUNITY. I would rethink the potential trading opportunities in futures (and other markets), as that will broaden your trading opportunities. I am not suggesting to hawk these every day. But I am suggesting considering filling the biggest challenge in your business, while keeping life balance- OPPORTUNITY.

Trading the biggest US opportunities is an excellent area of exploration. Maybe sacrificing a few days a quarter for the biggest opportunities outside of ASX is necessary.

We are all getting bailed out with extra opportunity because of the current US administation. But this will change.

How do you use the next two years to inoculate your business from a lack of opportunity?”

I loved this.

I’m now asking where I can continue to scale. That probably means spending more time refining and scaling Basket trades in good markets and improving risk systems. Continuing to develop Quant strategies for timeframes beyond just intraday. Expanding US and Asian trading playbooks for unique and rare setups. Potentially moving further into futures where liquidity is significantly deeper and I can quantify the setup.

It also means accepting something that’s uncomfortable - some of the strategies that built my confidence may gradually become smaller parts of my trading business, if at all. Its about being able to say no.

Looking back, the obvious lesson from FY26 was that Basket trades made me the most money. But I don’t think that’s the real lesson.

The real lesson is that every playbook has a season. Eventually, if you want to keep growing, you'll need the judgement to recognise when it's time to leave one behind and start building the next.

Your best trading year can easily become the reason for your worst one if it convinces you the market will keep rewarding yesterday’s playbook.

The truth is, I have struggled to segregate writing from trading. Over the past few weeks, I found myself pulled deeper and deeper into the Middle East conflict.

The chaos was real. It was layered, constantly evolving, and got very scary. I poured myself into the news, trying to map the full chain of consequences. That meant being glued to screens, going down rabbit holes, and burning the candle at both ends.

At some point, it stopped becoming useful and just became overwhelming. I started to let my bias creep into each trade instead of heeding the price action. The inevitable result of all this was burnout and emotional trading. And when that happens, mistakes occur.

Writing was the first thing to slip. Other routines followed.

But the one habit that has never wavered across my career is the end-of-month review. It is the key tool for feedback, a pause in self-reflection, and growth.

What follows is a summary of this March review and some of the key lessons. If you have been trading through this period, parts of it will feel familiar.

Read more

They are usually wrong.

As traders, our views should change. The positions will most certainly change based on the underlying price action. Trump compounds volatility with his incessant stream of commentary and noise.

Nonetheless, I thought writing down my thinking would help better organise decisions in real time. It is easier to act when you have done the background work and are presented with IF/THEN scenarios. Think of this as a working document. A rough map and not a forecast.

The truth is that playing this macro tourist game is not my real edge - or an edge for most for that matter. Do you really have an insight into the global oil market or the Middle East war? Can you metagame Trump’s next move? Its a complex and interconnected fragile system. There is so much you cannot control, and the timing of events is not predictable.

I would rather take the risk after the fact than position prior.

However, assessing the current environment and then adapting to fresh catalysts as they break is the job. I am seeing dominoes fall one after the other. This is what I try to convey in this post below.

First Principle: Do No Harm

This is the reminder I keep coming back to - volatility does not necessarily equal opportunity.

This is a risk off-market.

The broad indices don’t fully reflect it yet, but plenty is going on under the hood:

• After a very strong run, leading stocks are breaking down

• Cap raises are cracking

• SaaS has blown up

• Base metals are now having their downturn as the USD rips and the market prices demand destruction

Most importantly, some playbooks have stopped working, which is the lead indicator. That’s always the tell.

Sidelines is a great position.

You don’t have to trade. You don’t have to have a view. This is a gentle reminder when the temptation is to start forcing a narrative.

So now onto that narrative…

It’s all about the Strait of Hormuz

It is now becoming common acceptance that this war is all coming down to who controls the Strait. To spin Drake, ‘started with the Nuclear and now we’re here’.

Don’t take my word for it, read this excellent piece by Ray Dalio on X

In retaliation, Iran has triggered the US pressure point to cause maximum economic pain and leverage. Despite best efforts, the regime hasn’t stopped launching drones and missiles throughout the Middle East. War is messy, and it seems to be getting messier.

The major commodities that flow through the region have been widely cited, but here is a simple graphic reminder to illustrate the significance of this passage of water:

(Source: TraderFerg)

Those are some vital goods. That is a huge % of global share.

It goes without saying that Iran having de facto control of this area and blocking supply chains for these commodities would be hugely damaging for the world economy. Everyone would be held hostage - and the US allies most notably.

Drawing on parallel scenarios

I feel like I am witnessing a chain reaction of events that have played out before in recent memory. These scenarios include:

1. Russia’s invasion of Ukraine

2. COVID

3. US trade war with China.

Different catalyst but same structure.

All of these historical events led to meaningful supply chain shifts and reallocation of flows for multiple months. They each had their intricacies, but they had profound implications on global markets.

Complex and interconnected systems don’t absorb tinkering - they amplify it. One policy move in the Middle East doesn’t stay local but cascades. Outcomes are non-linear.

Here is a flow sheet I am monitoring based on my readings:

Hormuz closure → Oil/LNG/Diesel shortage → power + chemical feedstock shock → fertilizer + petrochemicals + sulphuric acid shock → food + plastics + copper/cobalt/uranium/rare earth shock → grid hardware shock → semiconductor/compute shock → social stability shock → finance shock

If that sounds depressing, it is because it is. But honestly, that is the chain reaction of events already underway. The headline market complacency seems crazy given the cracks cited below.

The Market is already reacting

This isn’t theoretical.

We are seeing real-time stress across key inputs as per this graphic from UBS

The increases in jet fuel, diesel, and urea are already in EXCESS of the moves seen through the Russian invasion of Ukraine! And we are only 18 days into this war.

Some more charts to illustrate…

European Gas

Asian Crack spreads

Asian LNG swaps

Sulfur futures

Ammonium Nitrate/Fertiliser

The big misunderstanding seems to be that it will all just come back when the war is done.

Sure, perhaps there is a TACO, or this war gets resolved somehow through a deal. The assumption is that as soon as that happens, we flick a switch and suddenly commodity production is back on, and it’s all daisies.

It doesn’t work like that.

LNG liquefaction takes weeks to restart due to the cryogenic constraints of 160 degrees Celsius. These LNG trains are massive and require huge heat exchangers. Apparently, when you idle an aluminum smelter, the molten aluminum in the pots freezes, which takes 6 months+ to restart. Restarting Oil and Gas is also not simple, depending on the assets and depending on how many missiles are flying over your head. You need to repressurise systems, check and test equipment, and stage ramp-up. The market is forward-looking, but these are real-world constraints.

The longer this Strait remains closed, the more pronounced the effects. It will not take long for markets to shift from complacency to scramble. We are on that precipce.

So how can you structure trading around this?

How I am gameplanning

As per my initial point, my first thought is to think less about making money and more about preserving. This means cutting back on market exposure and some of the stocks or playbooks that have served so well in the recent past. This is a NEW market.

Secondly, it is about identifying and avoiding those obvious losers that could be caught up in the vortex of this all. Examples include:

• Producers that require large amounts of diesel and power. Think big open-pit mines or multi-asset operators.

• Miners that require sulphuric acid to process, such as Nickel HPAL or Uranium in-situ recovery.

• Companies exposed to demand destruction, such as new vehicle sales or construction, and consumer goods.

It is impossible to model the impacts or when these headlines may drop, but I do not want to be exposed.

The third is to structure potential second-order winners and the headlines that would serve as the catalyst. What are the consequences of the consequences?

Examples:

• If LNG remains constrained → coal becomes the marginal fuel → thermal coal bid. NHC and YAL top vehicles here. WDS is also in the front seat as the major LNG exporter to Asia with some volumes contracted to spot.

• If Energy becomes national security and is safeguarded → Australia increases Fuel Security Services Payment to refiners as an incentive → ALD and VEA bid

• If sulphuric acid tightens → ISR uranium supply risk → uranium price response → PDN bid.

Case in point:

The shutdown has led to a surge in Asian refining margins given their reliance on Gulf crude feedstock (see those crack spreads above). China has compounded the situation by suspending exports of refined products for a minimum 30 days. To aid the crisis, the Australian government is opening up regional access, releasing stockpiles, and reducing the sulphur standards for 60 days (great article here). In the background, there is already a stage 1 review of the FSSP. In a crisis situation like we are seeing, there are strong odds the support increases materially for refiners to make long-term decisions.

Who benefits?

• domestic refiners who have already secured feedstock months in advance e.g. VEA

• fuel retailers “with a troublesome refinery attached” e.g. ALD. Highest torque

It sounds obvious- but this is the simple framework I want to follow to navigate the noise.

The problem is that most of these ideas are structured as swing trades which increases time in the market. However, there will be multiple opportunities to increase size intraday on the right headlines. I am using tools around me to be on the lookout for those confirming events.

The bombing of Raf Lassan could be the big see-it moment. This is 20% of the globe

Final Thought

This isn’t about having the perfect macro view. I literally have no idea how this plays out.

It’s about trying to form a game plan of events. It’s about joining all the dots of the lead indicators we are already seeing. It’s about trying to anticipate and not react.

No one enjoys war and its consequences. From my seat, there is a very meaningful breakdown in the supply chain coming.

Themes already in motion through 2025 extended into a crescendo - most notably across silver, gold, and base metals stocks. Volatility is high and opportunity feels abundant. However, that’s exactly when it becomes easiest to lose perspective on the goals that were set so recently.

In my last post, I explored a different way to think about 2026 goal-setting. Instead of starting the year with new resolutions and endless to-do lists, the focus was on something harder: identifying the biggest problems currently limiting your growth — and dealing with that head-on.

That idea comes from Principles by Ray Dalio, and it has become the overarching game plan for how I’m thinking about the year ahead. It applies so cleanly to trading because it is a profession that requires constant confrontation with adversity and honest self-assessment.

The framework is simple:

1. Set ambitious goals.

2. Identify problems and don’t tolerate them.

3. Diagnose the root causes.

4. Design solutions.

5. Act.

My work on this format is unfinished. That became painfully obvious on Thursday, 5th February, when I experienced a near record-losing day. But instead of suppressing that discomfort, I’m turning towards it. Because the pain is information, and refusing to engage with it is how problems compound.

This post isn’t about fixing everything at once. It’s about identifying the constraints and showing how to address one area properly. The example today is “sizing” — the adjustment that positioned me for a record January. However, risk management deserves equal attention, particularly after the recent drawdown, but that discussion is for another time.

Start With the Real Problems

Before solutions, you need a clear view of where the friction actually is. For most traders, it isn’t a lack of effort. It’s misallocated effort.

When I stepped back and reviewed my results for 2025, four broad problem areas stood out. I suspect many readers will recognise versions of these.

The first is a misplaced focus on P/L goals. Money is a by-product of excellence. Fixating on a number can distort behaviour relative to the opportunity set in front of you. At the same time, completely avoiding a yardstick can lead to playing too small when conditions are favourable. This market has rewarded aggression and may be the best conditions I have seen since 2019 in Australia. Used properly, P/L can be a scoreboard against planned goals and not a fixed target.

The second is trade selection and overtrading. This shows up as participation without edge: trading names that lack liquidity or range, reacting after a move has already occurred, or failing to assess expected value explicitly before acting. Activity replaces selectivity.

The third is sizing. This is where intent and actual execution often diverge. Many traders recognise high-quality setups in real time but fail to express that conviction through size. For me, risk accumulates through too many positions instead of through a small number of well-chosen big bets.

Finally, risk management. Correlated overnight exposure tends to build during periods of overconfidence. Intraday losses aren’t always accepted in full and instead, stops become piecemeal. Other areas of weakness included ad hoc hedging decisions. Ultimately, more overnight risk leads to higher variance and many more of these showed up last year in stronger markets.

These problems are rarely surface-level issues. They’re symptoms.

Diagnosing the Root Causes

Once you identify the problems, the more uncomfortable step is asking why they persist.

For me, one root cause is the compulsion to be involved. Unconsciously, I seem to equate being across every catalyst with success. Participation feels productive. Selective aggression feels like restraint. Over time, this leads to mixed focus and weaker execution.

Another is insufficient EV formalisation. Most experienced traders know what a great setup looks like intuitively — but intuition isn’t the same as a decision framework. When expected value isn’t made explicit, sizing becomes inconsistent, and hindsight bias creeps in.

Sizing, and the stress that comes with it, also play a role. I tend to build risk through accumulation across positions rather than concentrated conviction in the best ones. This isn’t always about fear of loss or cowardice - it’s often about not systematically stressing oneself to higher levels of responsibility. Performance literature is clear that controlled stress is not harmful. Instead, it is a necessary input for adaptation and decision-making under pressure. Avoidance does the opposite. The root cause is staying within comfort thresholds or goals that no longer challenge capacity.

Finally, attachment to ideas is an undoing. The biggest losses are rarely “good trades, bad beats.” Instead, they are average trades that aren’t cut decisively when price action invalidates the thesis. Partial exits soften the emotional hit, but they also delay acceptance. That delay is expensive.

Blame your upbringing, private school, or the boss who made you insecure. Whatever it is, there is always a root cause behind the behaviour.

You don’t fix these by trying harder. You fix them by designing systems that remove discretion at the wrong moments.

Why Focus on Sizing?

You can’t fix everything at once. Dalio’s framework is explicit about this: find the constraint.

For me, sizing is the highest-leverage problem to address first through examining the data. This also serves as a forcing function. It exposes weak trade selection. It reveals whether conviction is real or rhetorical. It determines whether the best ideas and strategies can actually be scaled and matter to the P/L.

This is particularly relevant in Australia, where there are so many illiquid stocks and many crowded setups. I always want to be asking - can I add value here? Does this edge have multiple variables? If not, why am I bothering?

If sizing improves, many other issues improve with it.

Some of those examples where I could have scaled exponentially include:

• LYC Long on 11/7/25 due to MP deal with the DoD

• EOS Long on 5/8/25 due to HELW contract win

• DRO Short on 2/10/25 for gap-up mean reversion

• SYR long on 14/10/25 due to China export controls

• ARU Short on 21/10/25 with EXIM funding announcement.

These are just a few of the playbooks where liquidity, statistical edge, and information advantage justified materially more risk.

Designing a Solution: How to Size Like It Matters

The goal is not to be aggressive all the time. It’s to be aggressive when the opportunity warrants it.

That starts by defining risk buckets tied to playbook strategy, trade quality, and edge factors. High-grade setups deserve exponentially more risk than average ones. By default, this forces better trade selection — because you simply can’t size everything. The tool to synthesise this all together is a grader and risk management sheet.

As an example, to define exponential risk buckets, a simple process could look like:

A+: $25k risk

A: $15k risk

B: $5k risk

The next step is creating a deliberate pause between trigger and action through planning. This removes urgency. It creates space to ask: Is this truly unique? Can I calculate expected value? Does the liquidity support the intent?

Every strategy should be defined in advance — with default grades, default sizing, and clear invalidation points. Adjustments can still happen in real time using trader discretion, but they happen against a reference point and within constraints, not from impulse.

Mental preparation matters more than most traders admit. Visualise the pattern you want to see, the size you intend to deploy, and the point at which you cut before the open. This makes execution calmer and more decisive in real time.

Over time, historical data closes the loop. You don’t need perfection. You need enough structure to answer simple questions honestly: Do my highest-grade trades actually drive my returns?

As an example, January grades across multiple strategies looked like this:

Read more

But goal-setting is often cheap and fades quickly.

Real progress starts when you get brutally honest about your problems.

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As I reflect on 2025, one example stands out as genuinely painful. Trading, and life for that matter, will always deliver pain at some point. There will be mistakes, hits, and setbacks. The real question is whether you let this story become a permanent source of suffering.

A new rule I have come to love - only suffer once.

From late October through November, I handed back a lot of profits. It wasnt a comfortable number, nor was it planned. It was largely self-inflicted.

(not inclusive of comms, so the drawdown was significantly worse )

Losing on a well-constructed trade doesn’t bother me. Strong markets, like we have been experiencing, invite participation and offer opportunity. You have to stay involved and let the market give you real-time feedback as to when conditions are changing.

What I can’t tolerate is missing the shift. Worse is putting the blinders on and doubling down with weak trades that don’t meet the standards - the unsystematic, spontaneous ones. These are almost always fuelled by overconfidence. And changing market conditions will punish that fast.

That is exactly what happened in this drawdown from October highs. I didn’t heed the build-up of compounding losses, which was the first obvious sign; I was buying into broken leaders without the right setup; I continued to carry overnight risk exposure that no longer fit the market structure; and I became desensitised to bigger losses - all before it was too late. Ultimately, I didn’t have the right tools and was found out.

The lessons were simple:

1. Context matters

2. Adapt quickly with better risk systems

3. Do more of what works and return to core strengths

In this post, I want to expand on these insights and the rules they have created. Most of it comes from a deep-dive November review - a hard look at the data that became a turning point. It’s the same approach I want to take into the year ahead: turning toward the problems, and using mistakes as a pathway to growth rather than something to avoid.

No denial or ruminating.

As Alex Hormozi says:

I want memory dividends. Not memory liabilities.

Why Context is so important

Strong setups do not occur in a vacuum. They are the product of context and a handful of key variables aligning.

It has been estimated that 25% of a stock’s upward movement is due to the fundamentals of the company; another 25% is due to the group or sector to which it belongs; and 50% due to the market action itself.

In other words, the market cycle is at least half as valuable as the fundamental and technical knowledge about a stock and its sector!

Your best trades will happen when you are aligned with the trend across time frames. No doubt there are exceptions based on differing strategies. But it’s no coincidence that so many traders made money between June and October. When the index is pushing all-time highs and commodities are launching into a bull market, the tide lifts almost everything.

This is why context is everything. In the same vein, if the market and the underlying sector are rolling over, going long in an exposed name becomes a lower-probability game. It is not that you can’t make money - it is just that you are fighting through headwinds.

The backdrop changed in October. The US indices began to sell off, being led by high-beta tech as “AI bubble” fears crept in. At the same time, the strongest sector - critical minerals - put in a euphoric blow off top! These moves trapped a lot of new money, which needs time AND price to unwind.

The plays I was making didnt fully heed this context. For instance:

→Buying into former leaders such as EOS, ZIP, MP1, and NXT

→Holding residual “core” positions in critical minerals stocks, hoping for a further catalyst, e.g., VMM or FXG.

→Day trading fresh catalysts on the long side

Here are a few simple heuristics that could be used to rectify:

• Build a market and sector environment checklist as a filter.

• Define the trend of the market. The underlying sector or market must be above a trend filter on a specific timeframe. This trend can be defined by an indicator, vwap, or simple higher lows.

• Introduce time-based rules post a capitulation or major extension. For instance, if the prior trend was 3 months, you could need a minimum of 1/3rd of that time before re-entering.

• The VIX must be below a threshold if holding overnight positions. Higher volatility leads to increased variance.

• Analyze how the market or stock behaved after an “event”. Did the market fail to go up on good news? Did a breakout pattern fail on volume?

You can get as creative as you want, but some simple rules to wrap around context are invaluable.

Adapt quickly

The beauty of being a short-term trader is that you don’t have to be in the market. I chose this timeframe because I have no idea what is going to happen, and I want to increase what I can control.

Being more active creates a tight feedback loop. You are more able to pick up on the tone and character of the market through real-time results: whether breakouts are holding, dips getting bought, or momentum coming in. There are clues everywhere. The best traders are highly self-aware. When the P&L starts slipping, or trades stop behaving, they adjust instead of forcing.

You can move quickly.

Again, some possible heuristics to introduce as solutions:

• Increase self-awareness through check-ins, daily report cards, or accountability with colleagues/a mentor.

• Set risk parameters around consecutive losses to assess trading and strategy. Don’t just wait for the end of the month. Use your P/L as a regime indicator.

• Use hedging tools such as sector ETFs or correlated pairs.

• Create a HARD initial stop-out limit to cut everything. No lazy residuals.

• Never take a losing position home. The best trades should go from the start.

• Add a friction rule to avoid extended charts, low liquidity stocks, or crowded catalysts.

• Wait for confirmation rather than trying to anticipate moves.

Ray Dalio summarised blind spots perfectly when he said those who adapt do so by a) teaching their brains to work in a way that doesn't come naturally (turning to pain), b) using compensating mechanisms (such as programmed reminders), and/or c) relying on the help of others who are strong when they are weak.

Once you have assessed the problem and taken the hit, the process of getting out of the drawdown becomes easier.

Do more of what works

The reality is that most traders do not like to admit they are one-trick ponies.

I do believe that diverse playbooks with real edge are essential to succeed and scale. After all, edges come and go.

However, some traders will change while their one trick is still working. You would be surprised how many different ways you can milk and structure an edge for the better. There is a lot of time before erosion.

I am a catalyst momentum junkie at heart. I know this is where I can make money. It’s when I think I am smart and can do other things that I invariably step outside my lane and lose money. Most traders probably fall into the same trap: they get bored, or they get excited seeing the shiny toys everyone else is playing.

You can’t do it all. Everyone has their own unique strengths and character traits.

So when trading gets tough, get back to basics and focus on easy money playbooks. For me, this always comes from waiting for the truly great catalyst and dropping down to my intraday timeframe.

It always comes.

Examples in December included:

• EOS contract win

• 4DX multiple contract wins

• EQR after a balance sheet cleanse into a surging Tungsten price

• Lithium stocks on ESS demand revisions and the underlying futures

It’s no coincidence these trades worked as the market recovered and sectors began breaking out again after a long, drawn-out consolidation.

Diagnose the problem - what is the root cause?

Root causes behind problems seem to manifest themselves over and over again in seemingly different situations.

You are overconfident- why?

You overtrade- why?

You don’t take stops when you say you will- why?

When you have a confirmed edge, finding the right questions for you and dealing with them will pay dividends.

So perhaps starting the year with a host of new to-do lists is the wrong method for setting goals. Instead, what is the biggest problem you are facing right now that is impacting your growth?

Solve that.

Let the good stuff take care of itself.

Thanks as always

Austin

I have spent the past few weeks deliberating away from the market - something I am not naturally very good at - focusing on family and trying to lap up the Australian summer.

The intention on return was to post reflections on a recent (and very significant) drawdown experience through November, as well as goals for the upcoming year.

However, markets don’t wait. One headline jumped out at me and pulled me out of the sun and back to the desk.

So instead of theory and goal-setting, let’s start the year with a trade.

It began with those magic words that I have grown to love: “export controls.”

China imposes export controls on “dual-use” items to Japan

The headline dropped at 7:03 p.m. on January 6. This was in direct retaliation to the comments from Japanese Prime Minister Sanae Takaichi, who said in November that a Chinese attack on Taiwan could trigger a military response.

China doesn’t take these threats lightly and served them the playbook that we have seen time and time again over the last 6 months - the weaponisation of rare earths as leverage.

The specific details from MOFCOM were as follows:

“In accordance with laws and regulations, including the Export Control Law of the People’s Republic of China, and to safeguard national security and interests…it is decided to strengthen export controls on dual-use items exported to Japan. The relevant matters are hereby announced as follows:

• All dual-use items are prohibited from export to Japan for military users, military purposes, or any other end-use that may help enhance Japan’s military capabilities.

• Any organization or individual, in any country or region, who violates the above provisions by transferring or providing relevant dual-use items to Japanese organizations or individuals shall be investigated for legal responsibility in accordance with the law.

• This announcement shall come into effect on the date of publication.”

Game on.

This is a playbook we should all have become very familiar with by now.

Why is this so meaningful?

Japan is the biggest magnet maker outside of China - they even invented the NdFeB technology.

Multiple industries, such as Autos, Aerospace, Semis, and Energy systems, are fully dependent on this product. The words specifically mention “military” users, but the dual-use nature has sweeping repercussions. Recent history has shown the control process to be slow and cumbersome for all end users. At a minimum, both the US and Japanese defence contractors cannot get access to Chinese rare earths.

To illustrate the importance of Japan in the chain, here is a recent table from Ords showing current Asia (mainly Japan and Korea) rare earth capacity vs the rest of the world:

No doubt the US is the big swing factor for future capacity, but Asian growth is also expected to surge.

Back in 2010, when geopolitical tensions simmered between the nations over the Senkaku dispute, China cut off Japan from supply, leading to a spike in NdPr prices > 500%.

LYC is the major exporter to Japan for rare earths. It was this 2010 dispute that led Japan down the path to diversify away from China. This is undoubtedly beneficial to LYC sales and pricing, with particular emphasis on their heavies. The company has recently announced an expansion of its HREO separation facility in Malaysia, and is one of the few global vertically integrated players.

The West has very limited access to heavies currently, and this may intensify post the new export control. You can’t make magnets without them.

Variables

When thinking about a trade, I want multiple factors to line up to add strength to the setup.

In this example, further variables included:

1. Daily chart at the low end of the recent range and consolidating

2. Shortbase has increased once more to 6% or 60 million shares.

3. The offshore critical minerals sector is moving back up from bases in a new uptrend. There has been alot of time in the pullback from the October euphoira.

4. It is the peak Australian holiday season, so potential for less crowding and concentration risk amongst traders.

5. Post the recent capital raise, there is $1bln of cash sitting there on the balance sheet.

Where could I be wrong?

Most analysts already have US$110kg in their models for long-term pricing. A short-term price bump from Japan tensions is already part of the global narrative. Furthermore, just as Trump retreated in his trade war with China over rare earth supply, Japan could also quickly apologize to move on. The details are very opaque so it may not be as bad as feared.

Ultimately, I like to shoot first and then ask questions later.

What did I do?

After big catalyst events, I make a point of reverse-engineering the trade with specifics - it is one of the most effective learning tools.

Below is an overview of this write-up.

-Overview:

• This is EXACTLY the trade I want to build into this year. Material catalyst + big liquid stock + high volatility trader + background knowledge of sector with multiple reps. These are the opportunities to really push size.

-Execution Options:

• Stock will gap given the news was released overnight. Need to see the stock gap and go right from the start as confirmation. To consider a bigger all-day trend trade, the stock must hold in price and time post 12 pm. Focus on that morning drive first.

• Look for breaks of $14 to open up $15.

-Specifics:

• Open Volume: opens at $13.75 on 400k shares or $5.5m. This is a gap of 4.5% on strong volume. Although a meaningful gap, the delta of this news event is way higher for me.

• Entry: on open. Bought 30k+ or $425k. Additional entries once the gap was held, and it started to make new intra highs post the tight morning range.

• Risk: $15/20k risk given the grading of the setup.

• Size: 65k-80k shares intended size. Using a 25c-30c stop, this meant risk of $20k or so. Obviously hard to stop all of this out in one go, so the plan was to scale in and stop out adders when price action invalidated the additional size. I did get to the lower end of my target range.

• Max adverse excursion: -0.50%. It goes from the start which are the best trades.

• Adds: idealised spots to increase size were through 14.00 at 10.22 am; Add 2 was through 14.40s at 12.20 pm when it had consolidated in time. Could fight for price against this level on pull-ins. These adds could all be managed with tighter risk versus core position from open.

• Exits: reduced 1/3 of the position into 11 am as per strategy rules. Stock was never super extended. The pullback from the morning high was gentle, and the trend remained strong > 14.00 so I kept a core. There was really no clear price extension until we broke through the 14.50s in the afternoon, leading to a move > 4% from vwap. Clear turn candle at 2 pm was an indication of a possible unstable trend and exhaustion so I reduced more. However, there was no follow-through on the reversal, and it instantly resets with consolidation. This is a sign of unusual strength and a further signal to add back/hold to close. I held core all the way to the close, which was the optimal exit as it captured 92% of the trend.

• See it moment: there were no big blocks or major prints. The price action was very stable and then a clear trend formed as we broke 14 which was the inflection point. It never drops below and the pullbacks were small, max 15-20c.

• Other Notes: patient in this one. I tried to sit on my hands early and let it work. When it broke the morning range, I added to get to full size which was good mental planning, but equally, I may have taken some off too early as influenced by this larger position. Trading around the position underperformed a simple hold to close (which it always will in strong trend days). Given the strength and material catalyst, I ran a small residual position overnight to sell into any gap up.

Chart mock-up:

Daily:

Post-trade review

Sizing: A

Management of trade: happy with gameplanning and execution BUT one clear overtrade was needlessly taking some off into the 14.50s at 12.30 pm. This is just overtrading the tape and scalping in front of a clear seller. It was a short-term top but I never got this size back on as we re-break later. Too much finesse there. The best catalysts just need time. I am ok with selling a good chunk into that price extension at 14.80s as clearly more unstable here. I also managed to get some of this size back on as we held higher instead of reversing.

Now more of the same.

Themes everywhere have unravelled:

• Critical minerals have gone from a strategic reshoring super-cycle to a crowded, busted trade

• The AI revolution is now under scrutiny as capex surges and competition intensifies in a stalling easing environment

• Crypto is doing Crypto things

If there ever was a clear signal of the market’s fragility, it was the price action after NVIDIA's results. The saviour of the market beat the street, sending the stock more than 5% higher in the after-hours. The ES ripped 80points. It all looked back on. However, as the cash market opened, the stock was sold sharply and all sectors collapsed with it.

That is not what the Bulls wanted to see. It is not how I was positioned.

I have no idea if this sell-off gathers more momentum or not. I believe the job of a trader is not to predict but to anticipate, gauge price action, and manage risk.

What I do know is that I came into Friday’s session in Australia with completely the wrong positions. I was totally wrong. I rushed and forced a discretionary trade onto the market to participate in a market bounce. It was another example of failing to adapt to current market conditions. You can read this setup here

There is no time for hindsight in this game. You can’t rewrite the past, but you do have to face the present moment.

The Short Bear couldn’t have put this better in a recent tweet when talking about navigating losses and setbacks:

The dramatic drawdown, the painful reversal of fortune, the failed strategies and idea, is not the exception. It is the natural, inevitable friction of any high-stakes venture.

Every one of us will face moments when the fundamentals we trust are questioned, and the bottom line is bleeding.

The vast majority of the world operates under the delusion that absolute, seamless success is the expected norm.

They are unprepared for the depth of the valley, only perceived by those who try something worthwhile.

Our true value, our competitive advantage, is not established during the bull run. It is revealed entirely by how we act in those dire moments.

It is the disciplined response to a crisis, not the reaction to a windfall, that defines us as leaders and shapes our enterprise.

Long-term, compounding success is never a stroke of luck. It is forged in Perseverance. It is built on the strength of our Adaptation and our Action through the most grueling part of the journey: the daily, painful requirement of showing up without capitulating.

This is the game we sign up for. It can only be felt as a market participant.

There are times when it is going to get hostile and smack you around. The only way through this is to maintain systems and trust the process over the long game.

For me, this process starts with facing reality and creating a new plan. It is about taking responsibility. I did that on the morning of Friday 21st November, before the open, when I knew it was going to hurt. This post is an insight into that action plan and how it carried through the day. At its core, it is about accepting when you are wrong as a trader. It doesn’t come naturally. It is a hit to the ego. It triggers our survival instincts.

But the reality is you can still make a lot of money with a 50% win rate.

“Pre-Open Plan 21/11/25:

Worst possible case outcome. NVDA got sold into on good news and risk off across the board. The ES reversed almost 200 points off its highs and the sector ETFs are down 3% or more. Australia SPI futures are -150. This is clear confirmation of a change in market character. If it wasn’t obvious already, it is now.

The US Daily structures are all at breakdown points. Real risk of a break into the weekend. Have to act now in case this unravels.

Weirdly, it is easy for me to accept when I am dead wrong. I know exactly what I have to do as my idea is completely invalidated.

The market hedge should help somewhat, and oversold Dailies should limit some of the damage - but no doubt this will be expensive. I have internalised the potential risk loss number and cross-reference realised loss with the planned 1-day VAR sheet.

It has taken me too long to fully adjust, but this is the slap in the face. None of my positions are big, but the sheer number of them is excessive. It is also discretionary chart trading vs meaningful edge. Go figure.

I have said it before, but I need to protect everything I have built over prior few months. Hacked back a lot, but re-buying again yesterday is another trap. The root underlying issue is my desire to always be involved. Address this later.

Action Plan:

• Automate out of overnights quickly into algos. Don’t look. At the market and just move on. This is GMG, NXT, TNE, and SLX.

• Keep the hedge on until the dust has settled. This includes market and EVN short.

• Only longs to remain are FRS and VMM. I know why I own these, and I know the timeline of events. It will hurt today, but the thesis is not invalidated. The risk to stop is defined.

• Can I structure a short? I will be at my intraday stop-out limits early of -$25k. Therefore, accept a de-risk day. The priority is limiting damage early. When I have created the space, I can take one trade at a time with focus. The max loss I can take on any Intra idea is $5k max with 2 stocks only.

• Extended Lithiums are the choice expected value shorts. Confirmation with the reversal in ALB overnight. Potential trapped momentum longs. Plan what I want a CXO, PLS, LTR short to look like. Where is the vacuum and where are the longs trapped? Break of prior bar lows; key levels break early; RVOL; no move back above open.

• Avoid shorting oversold techs. There is a low edge and low EV here. This will just compound things for me.

• Think deeper about BBUS throughout the day and whether to get bigger if the sell-off continues.

• Accept my losses. Get a clean slate again. Rising volatility means all bets are off, and refocus on what I can control with core intraday strategies. Back to being a one-trick point intraday catalyst trader.

• Don’t overtrade. Focus on just one good trade.”

That was the plan.

And the Result?

“End of Day Report Card 21/11/25

• -$25k to small green.

• Really proud of the performance. I knew I was totally wrong pre-open and accepted it. Huge reversal overnight, and all positions were wrecked. Fortunately, I had some hedges to stem the damage. Early loss was in line with the planned 1-day VAR risk.

• I was really calm. Writing out a plan pre-open helped to increase self-awareness. I must keep writing pre-open as part of my visualization routine. This lays out a roadmap that makes execution easier in real time.

• From cutting losses early, I created the space to focus on 2 fresh shorts in liquid names e.g. PLS, LTR. The Lithiums had the best Expected Value given the Daily structure, extension, and turns lower. I was focused on the tape and not flicking around tickers. I watched with purpose and was right from the start in PLS, which made it easier to hold.

• The saving grace was MYX breaking news on Bloomberg: “Chalmers to block Cosette bud (bid) for Mayne Pharma.” The stock was not halted! I heard the headline promptly and went to the market instantly. Unfortunately, a thin stock and lack of borrows meant I was not a great size, but it was a start. An arb fund had left an algo on and hadn't seen the headline. I assessed the EV and potential target down into the low 4s, which meant I was happy to hold a core. There was just no real big bid to hit, and I was waiting on further borrow approvals. At best, I could have done another 25k down to $4.80s if fully aggressive. I did cover some into 470s, which was a rule-break, but there was some confusion as to whether it was an error or a hack given the initial typo.

• Ultimately, this was a very high edge trade and a huge EV. It needed to be assessed on its own merit vs the losses I was taking elsewhere. Having all the losses overnight negated the ability to fully capitalise on the fresh opportunity set and real edge, which is my sweetspot.

• Coming into the close, perhaps I was too overconfident again and actually ended up net short with index hedges and Lithiums. However, markets are at a very precarious juncture and need to keep on a hedge. The data is overwhelming that the weakness of this magnitude on a Thursday could bleed over the weekend.

• Next week is all about replicating what I did today. Specifically, this means being on the sidelines and focused on the best catalysts in front of me. It is executing one thing at a time and watching that tape.

• I am at my worst with lots of positions, lots of exposure, and constantly flicking around trying to be involved or make something happen.

• Important question- why have I put myself in this position in the first place? There is hindsight here given the sell-off post NVIDIA. Nonetheless, I was forcing a trade. It wasn’t a playbook. Sure, the EV was ok but I was forcing myself to be in the market rather than on the sidelines. The answer is to do more of what works and less of what doesn’t. Focus on structured playbooks. Increase self-awareness and checks into the close. I can only be putting these discretionary playbooks when I am out of drawdown and experimenting in small size. If it wasn’t already self-evident this market is heavy, this was it.

• Always be hedged if taking overnights.

MYX:

• Good speed and initial execution. The idealised was to keep offering stock into 530s and lower given the wide spread. An arb had left a buy algo on the market.

• The only real error was early cover into the first dump at 470s. The target is all the way down into the low 4s, where the stock came from. Still so early in the piece and a Merger-Arb funds are trapped in size. I resorted to “see profit, take profit” given the buildup of prior losses.

• Need to assess the new independent EV

PLS

• Gap and go short from the start. $4 was the inflection point, and the bust of this level early created a quick algo volume dump. Tried to add in spots through the day, but no real aggressive seller or follow-through.

LTR

You can’t argue that the market is wrong

The job is to make the profit line go from the bottom left to the top right. It is as simple as that.

If the price action invalidates the thesis, and if losses deepen or persist, you were wrong.

You can’t argue with the market. No doubt the maths or fundamentals or trade idea may be proven right at some point in the future, but this is a moot point. Because the job is to trade what is in front of you and make the equity curve go higher.

Starting each trade with this mindset is actually totally liberating.

People who say trading should be emotionless talk bullsht. It is never easy to face losses and adversity. It is not easy to handle emotions when winning. However, there should be a repeatable process and strategy that operates as the overriding framework.

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The critical minerals bubble finally burst — and with it went a chunk of my open profits.

It was long overdue. The euphoria had been building for weeks, visible in the exaggerated moves playing out across multiple stocks and sectors. Each morning, new money poured into the open, a newsletter dropped a fresh “recommendation”, and suddenly everyone had discovered the next cornerstone of the global supply chain.

All the signs were there.

However, saying this is one thing. Being able to action it and adapt when the theme reverses is very much another.

The turn always comes quicker than you expect. There is very rarely an obvious narrative change at inflection points. Instead, I believe, it is the price action that is the ultimate truth.

Despite being in the markets for years, I found myself relearning this lesson the hard way in the second half of the month. I got caught up in the narrative. I lost sight of the setup and started treating all trades like investments. I was fixated on a future event despite multiple reversal signals telling me the moment to get out was NOW. Once it turned and the backside was established, there were plenty of opportunities to capitalise on the short.

It is frustrating but that’s the thing about trading - everything looks easy in hindsight.

The only way I have ever known to deal with such situations is:

→Face the problem

→Learn from it with new plans

→Move forward.

What follows are these exact steps I took at the start of last week to get out of the slump. I needed to put in the work to re-center. The key is often getting back to what you can control.

In reviewing the month, this post also touches upon the anatomy of a top; the late-stage expansions and extensions; the moments when conviction turns to complacency; and how refining exit management and self-awareness can make all the difference. Many of these points may resonate in your own trading.

Know your lane

The reality is, I was playing a different game.

In a bid to join powerful sector themes, I expanded into more structured holds and position trades. This style of trading was relatively new and a step away from pure intraday setups.

When exploring new edges or techniques, you simply haven’t had the reps, exposure, or feedback to build a robust edge yet. This particular playbook is a working framework with lots of discretion. I adapted to the strength in the market by doing the fundamental work, taking on risk, and widening timeframes. It worked with the market tailwind and sector flows.

However, by holding positions for a longer time, you give up control and become exposed to more randomness or headline events. It’s part of the game, so you have to take the good with the bad here.

The tailwinds that worked previously reversed on residual positions into a weekend US-China trade deal. This event was the real catalyst for a sharp unwind across the board, but there were also multiple signals prior with clear extensions and backside cracks.

Ripping through the charts illustrates clear moments of exhaustion and climax.

LYC:

ARU:

UAMY:

Blurring the lines between a “trade” and a “hold”

Wins have a habit of building some complacency.

The biggest observation was that I blurred the lines between what was a “trade” and what was an “investment”. This is an important distinction. Know the game you are playing. Almost none of the stocks I held will see the light of day. I am there for sentiment, narrative, and the theme. It’s all a Fugazi and I know that.

There were clear price signals of climax. Examples include the NVX and NVA adrs; WWR and NMG in the US for graphite; and then blow off tops in ARU, COB, HAS, NTU, and SYR in Australia. Almost all of these occurred before the Au-US deal. As a trader, these are the cues.

Ultimately, it is hard to wear multiple hats.

Where did I specifically blur the lines? I was slow to sell some trading positions - when they turned lower, instead of cutting, I convinced myself they were “investment cores” I would sell on the next bounce. They never came back. Examples included SYR, where the gap up on the 15th October was not as strong as expected. It sold quickly. I had plenty of time to stick to the plan and cut everything into the close. But I clung to the story instead of the system. A similar bias appeared in VMM or FXG, where I had built up a considerable buffer. That is not a reason to ignore the now.

Small positions blew out for > $100k give-backs.

SYR

No doubt there were some bad beats with the US-China deal, but that’s the position trading game. I wasn’t taking any off into that extension, nor did I adapt on the turn.

The key going forward is drawing a clear line between what’s a trade and what’s an investment, with rules for each.

Exit management via extensions

The real lesson is to understand expansion phases leading into extensions.

Read more

The events of the past week in the Rare Earth sector are a great illustration of the market as a forward-looking pricing mechanism.

Nothing but good news was coming out of the meeting between Trump and Albanese. The headlines stated that billions of dollars in new investments were set to flow through to Australian critical mineral projects - aiding capex bills and accelerating production. Both governments pledged to cut red tape and collaborate with partners to provide price support mechanisms.

All great news. And yet the entire sector topped out on this day!

ARU was the headline winner with US$100m in Equity funding from the EFA and a $US$300m letter of intent from the US EXIM. Yet the stock proceeded to sell off 20% from the open to the close!

It wasn’t pretty across the sector. LYC sold off 10.75%. Other casualties included HAS -16.5%; NTU -8%; and ILU -7.7% all from the open to the close.

New buyers joining the news were “rekt”.

Stepping back, the clear hindsight observation was that the event was weeks in the making. The run-up across the whole sector was extended and well-flagged. I would be lying if I said it was obvious they were going to sell so hard, but the trader in me did have a specific playbook to manage this event.

I thought this was a great example of the paradoxical nature of markets, which would make for a good post.

To be clear, I have no idea if this is the true top for the sector or just an exhaustion point. It doesn’t really matter. I believe the role of a trader is not to forecast markets but instead to anticipate structures through repetition, playbooks, and observation.

The “Deal”

A critical mineral alliance was formed following the Trump-Albanese meeting in Washington, where both governments agreed to provide in excess of $US1bln in funding each over the next 6 months towards a US$8.5bln pipeline of priority minerals projects. US EXIM and Export Finance Australia issued Letters of Support to seven Australian companies.

Furthermore, both counties plan to mobilise government and public capital to support new mines and processing plants; cut red tape and provide price support to make the economics actually stack up.

The letters of intent targeted a range of Australian rare earth plays that included NTU, ATR, VHM, and ARU. Each of them has its own unique characteristics with distinct advantages and disadvantages - specifics that go beyond the scope of this newsletter.

The catch? Letters of interest are not guaranteed funds.

In fact, they are in-principal expressions of support that are announced PRIOR to any formal technical or legal due diligence being conducted. They are issued without any party assessing financial viability. This is a piece of paper currently.

No doubt the support does increase the probability of further funding down the line. It is a big statement of intent. However, the cynic in me sees this as nothing but a free option and bargaining chip for Trump to take to China to wave in front of them for further tariff negotiations.

Most importantly was the flagged nature of the event. Various news outlets had been running stories on the event with specific recipients cited. The market read the words and sent stocks such as ARU on a jog from 20c to 45c in the days before the event.

This was the setup for the climax event and a buy the rumour, sell the news.

How did I play it and what to do better?

One of my core principles is simple: never fade a catalyst on Day 1. Time and again, that rule has kept me out of trouble. Fighting fresh information and new flow is a hard and low-probability trade. I want to make life easy by going with the momentum.

However, in this case, that discipline stopped me from pressing a trade that set up perfectly.

Such is the joy of discretionary trading.

The goal here is to reverse engineer and question any self-limiting beliefs with real evidence.

ARU Short

Overview:

• This trade is all about prior positioning. Huge run-up in the stock into a well-flagged meeting. This was the backdrop for a capitulation top.

-Catalyst:

• Receives EFA US$100m in equity funding and EXIM US$300m LOI from the Trump-Albanese meeting in Washington.

• Non-binding funding arrangements do not guarantee the receipt of any funds. No formal technical or legal due diligence was conducted. Very few EXIM funds have actually been converted in the past.

• Total existing sources of funds stand at US$1.4bln with all the packages. Total requirements for ARU are US$1.9bln, so the residual gap is still around US$450m. With the EXIM, this reduces to “just” $US150m.

-Variables:

• Huge run-up into the event with stock tripling from 20c.

• Prior day open-to-close move 17%; the Gap 26% on the news. Major extension from all moving averages and vwap.

• Borrow is not widely available.

Execution Options:

• The whole trade is waiting for that vacuum. This was a clear hold below that 60c open and then press through key intraday levels.

• Just like the DRO previous example on 1st October, a flood of new retail orders came in pre-open. This is fresh liquidity, creating the unwind should we fail to hold.

• I don’t like to fade Day 1, so a vwap entry early is too aggressive. Wait for that turn, which is a clear break and hold below open. Need the market TRAPPED.

• Risk 20-30k? It is an A, but Day 1 news negates this somewhat. This was not a DRO-level opportunity. However, the news was so well flagged that I am happy to be more aggressive.

The vacuum is key. 31m shares traded at 60c or better. That is a lot of new money caught out if the price starts to fail.

-What did I do:

Read more

Last week was such an example where there was one major opportunity after another. Every morning felt like a new move and a new reason to stay in the chair. It was one of the most eventful I have seen this year.

I kept trying to write, but each time I started it seemed like a trade would pop up that demanded maximum attention. My thoughts are that if you don’t have the time or energy to do a deep review at the end of the day then that’s ok - the manpower is better spent on trading in busy periods. This is when you get paid. Being present on what’s in front of you cannot wait.

Right now, it takes enormous drive to sit down and unpack it all. The sun is out, the kids want to rip around, and every distraction feels more inviting than another session in front of the monitor.

However, without a break or a pause for reflection, overconfidence and complacency creep in. You cannot sustain the high-level focus and required discipline for optimal performance without this. I felt this at the end of last week. Furthermore, by not analyzing trading, an amazing opportunity has been lost to get better and learn.

As Trade Dante writes:

If you have done well, you might tell yourself “why bother?”.

If you’ve done badly, you might think: “I can’t bear re-living all my mistakes, i’ll just try harder next week” without any solid plan of exactly what youre going tow ork on or how ti improve on it.”

You have to fight these thoughts to consitently elevate performance

I find myself caught in the middle of these two extremes. Last week brought out the best AND the worst. It was a record day followed by inevitable givebacks as the market turned lower, and then some poor trading to chase my tail. The planned and structured nature of the prior weeks was sporadic at the exact time I needed it most in a toppy market.

So in this post, I thought I would conduct a specific weekly performance review using the Tom Dante template. The goal is to get back into best habits, update the market structure, and make plans going forward with SPECIFICS so that trading does not spiral further. This review is targeted at the Australian equities market but you may find a lot of value in a similar process to your specific niche.

What worked well this week?

• Intraday trend trade and core in SYR

• Breaking news in NVX adr

• Overnight momentum in Critical minerals such as ARU, COB, FXG, LIN, LRV, NTU, and NVX.

• Stock-specific news events such as 29M guidance downgrade, FFM drills, SRG accretive acquisition, SS1 on Rudd love, and TLX guidance upgrade.

→Overview

The main event was momentum in critical mineral plays post China’s new wave of rare-earth export controls announced on Thursday, 9th October. The scope added recycling technologies to its list and increased license scrutiny to sensitive end-uses such as defence and semiconductors. This was then followed up later by new export controls on the Lithium and Graphite battery supply chains. It was a clear retaliation to continued US meddling and attempts to create a domestic downstream chain of their own. The news has been months in the making, so it was there for the taking for the prepared.

Australia was perfectly positioned with the release of this initial news at midday. It set in chain a sequence of Global flows that fully kicked off into the weekend and culminated in a gap-up exhaustion on Wednesday, 15th October.

To me, the options were:

i)) Trump doubles down on building out his supply chain with haste

ii) Trump folds to China

The market voted by sending all names viciously higher that were linked to US financing on Friday US time. Trumpy doubled down.

→Did I enter trades correctly?

Immediate reaction was to enter Au-exposed names on the breaking news intraday and add to core swing positions such as LIN, VMM, and FXG. In the evening, I entered NVX adrs promptly on the release of the graphite controls.

On Monday, the whole critical minerals basket lit up with solid trends into the close. I took overnight momentum signals in MEI, NTU, SYR, and LRV. This was followed by more momentum signals in COB and LRV on Tuesday. What triggered the move was a surge of volume in the US OTC market as traders positioned for companies that could be on the shortlist for US government investment. This was a clear front-run into the Albanese meeting the following week.

All these signals were correct as per my rules and systems.

→Did I risk enough?

I spread my risk with a basket approach and with concentrated bets in NVX/SYR. I was never too exposed to one individual name, but allocated a portfolio across the theme.

On review, I could have been bigger in NTU given the liquidity and denomination of this stock.

→Did I miss any trades?

You can’t kiss all the girls. However, I had a fundamental bias that stopped me from taking valid momentum signals in ARU and ASM.

→Did I exit correctly?

Yes, but I learnt a lot about position trading management. I can do better.

I was completely automated with my overnight momentum system as per the rules. This was ideal. Exits in adr trades were fortuitous.

It was residual position trades where I was slower to act. You can’t have it both ways, so you have to take the good with the bad when it stops working. You are never going to sell the top and the goal is to ride the fat in the meat of the move. However, I was aggressive with only parts of the position and never really committed to a full exit.

I have spent a lot of time building out risk tools, which did a good job of defining worst-case scenarios. I had trail stops to define my risk, but this is easier said than done on the way down in smaller stocks when liquidity gets poor. Of course, multiple positions expressed the same thesis, so when it turns, it gets ugly quickly. Correlation all goes to 1.

→What did I learn from this experience? What to improve on?

I acted quickly when needed, as well as planned for systematic trades. I did so much right BUT greed took over.

Specifically, I did not accept the price action. On Tuesday, I expected more of a gap up given the move in the overnight comps, so I wasn’t looking to take any profits. SYR and the sector fell sharply. The stock is 2x off the low and 3 days up post news, so it is primed for extension at a minimum.

Furthermore, there was a strong reversal lower on Wednesday night in the US, which was confirmation of a top—total climax everywhere across meme stocks and Resources. Instead of heeding this, I put on a fundamental hat. I thought the risk was to the upside into the weekend Albanese/Trump meeting despite the chart extensions. The US markets had other ideas. The truth is that all these stocks are extended and trading at ridiculous valuations.

I was prepared to cut some, but not fully or aggressively. I did not entertain the short in very valid setups such as ASM or NVX. There is an element of hindsight here as a prerequisite for my playbook is a big gap up which did not eventuate on Wednesday.

The big lesson: volatility expansion = unsustainable trends

It is this expansion where I need to be de-risking and taking off more meaningful chunks of trend positions. The truth is that lots of stocks get very thin on the way down, and it is hard to exit fully, e.g., VMM or FXG.

The other major lesson is to accept my Daily stop loss and move on fully. I knew I was going to give back, I was professional and committed to selling, but I didn’t stop trading and instead dropped a further $20k day trading in an EOS/DRO headline. I didn’t put up the guardrails. I compounded the situation. Complacency got the better of me after a good run.

→What is the recurring pattern to be addressed:

i) Trying to trade my way out of a hole. The solution is to create a $ risk Daily stop-out plan where I stop trading. At best, only 1 new position can be entered with a max $5k e.g. a breaking news trade. Share with the risk desk.

ii) Complacency when I am up money and the need to be involved. Greed takes over, and I start overtrading by jumping into stocks in random spots that have already moved. The solution is to take my 11 am check-in to get present. The solution is to make sure I have graded each play. I instantly know that feeling of being loose, so just hit out straight away and take the loss. Refer back to my overtrading journal and the commonalities.

Summary of the report card on Tuesday, 14th October here

Biggest Closed Wins:

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Back in 2020, the fallout from COVID-19 and the slashing of rates sparked a stimulus-fueled craze. Fast forward to today, and Trump’s trade war with China has set in motion very powerful global themes. It has forced the US to confront its deep dependence on China’s downstream strength and has accelerated efforts to reshore and secure strategic supply chains. The government is taking equity stakes as if it’s Trump Inc. 2.0. And just like then, markets are once again front-running rate cuts.

As a catalyst-driven trader, it is a great time to be in the seat.

Some examples of the froth…

FXG on Antimony

VMM on Rare Earths

Gold stocks on Gold

EOS on Defence

However, when everything is working, it is easy to get complacent and overestimate your skillset or “edge”.

An old mentor once told me that the probability of a stock move can be broken down into a few parts:

1. 50% due to the market

2. 25% due to the sector

3. 25% due to the stock-specific fundamentals

I have no idea where he got these stats, but it always made conceptual sense to me. In this market, with new all-time highs printing day after day and with so many powerful sector moves, you would be hard-pressed not to make money. The odds are stacked in your favour, no matter the stock you choose.

A self-fulfilling positive feedback loop has been created: breakouts lead to profitable trades, which build confidence, attract more flows, and drive further breakouts.

It is all leading to trends that are extending in time and price.

To adapt to these conditions, I have shifted gears by relying on different playbooks and widening timeframes. This has led to holding more positions overnight and for multiple weeks. The consequences are giving up control and accepting greater variance, but with the chance to capture a bigger slice of the move. It is essentially “swing” or position trading, which takes me down a few unfamiliar roads and brings back memories of some expensive lessons.

Traditionally, swing traders rely heavily on charts to time and manage the move. Technical analysis tools seem to become the default framework.

I thought this would make for a timely post. Is trading off the technicals really an edge or just an illusion in this pocket of time when everything is working? Can you consistently extract signal from noise? Does it even matter if you can manage risk?

Much of what I have learned along the way is finding its place in my current playbook, and perhaps those lessons can help serve you as well.

Moving beyond pure technicals

In my earlier years, I leaned almost entirely on technical analysis. It was appealing and easily accessible. I cycled through every candle, indicator, and pattern you could imagine. I tested momentum systems. I even dabbled with Fibonacci supports and Elliott Wave counts.

The problem? There was just so much randomness in my results and approach.

Sometimes the setups worked beautifully. Other times, they completely fell apart. The reality was that my strategy had no grounding in the actual market context. Why would real players care and act right now? It wasn’t an edge.

Invariably, the trades that did work were because of healthy trending markets. This wasn’t something that was repeatable over and over again.

It was this frustration that pushed me toward a catalyst-driven approach.

The advantages of focusing on catalysts vs breakout trading:

• They are quantifiable instead of discretionary

• There is more certainty with timing as you can gauge what is moving the stock right now

• They can be sized dynamically instead of sizing every pattern the same

• There is rapid price discovery instead of wins coming randomly based on whether a stock happens to perform well post-breakout or pattern

• There is less drawdown as positions are not correlated to market direction

Bottom line, you can pinpoint the exact conditions where a strategy works. It is based on real-world events.

It is overlaying the catalyst onto the underlying chart structure that forms the framework for a stronger trade setup.

A blended approach

I don’t dismiss technicals or fundamentals as they both work. The stronger edge comes from blending them and increasing the number of variables in your favour.

Here’s how I now think about it regarding position trading:

• Sector theme – the macro narrative driving flows into or out of whole industries.

• Stock-specific fundamentals – understanding how a catalyst ties into the bigger picture of the company and its trajectory. Leaning on Broker research fills blind spots and frames the market opinion.

• Institutional involvement – often visible in how capital raisings perform. When a stock consistently trades above its raise price, that’s a strong signal of sponsorship and real demand. Is the stock widely owned, or is it in a market cap sweet spot for further flows?

• Price action (technicals) – not indicators, but behaviour in how a stock responds to newsflow and events. Is the Daily chart at equilibrium or is it extended into the event? Does the stock gap up and hold? Follow through on good news? Show relative strength on weak days? Is volume expanding at the right moments? This is how I now think about “technical trading” through the lens of price response and tape behavior, not indicators or noise. It is the technicals that help confirm entries and manage exits.

This layered approach is now anchored in a real market context while still benefiting from technicals.

In a follow-up post this weekend, I will walk through these factors in recent trade examples such as FXG, VMM, MTM, and POL. They are all uniquely positioned in powerful sector themes, have institutional sponsorship, and broke out from meaningful technical structures on a catalyst event.

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I poured myself into the love they showed.

Saying you are grateful is one thing, but actions speak louder than words. As I reflect, I think more about the example I set and the values I pass to my children. They are like sponges. This is the time in their life when they fully absorb their social surroundings and the characteristics you hand down. When I think back to my own Father, I remember less his teachings but more the actions, values, and principles he embodies to this very day.

So in this post, I expand on the lessons I want to set for my kids - principles that extend far beyond childhood. They apply to health, relationships, and work. And yes, they are especially relevant to trading. This is, after all, a trading newsletter.

1. Work extremely hard with the best efforts always

Finding the balance between work and family is complicated. However, I want my kids to know how important work is to me and to always be putting in their own best efforts. There is no substitute.

I was a spoilt private school boy. This came with huge opportunities but also intense competition. Being distinctly average across domains, I had to work extremely hard to bridge the gaps. Most kids were smarter or more athletic, but I smoked them with my reliable work ethic. Consistency beats flashes of brilliance. Over time, that’s what makes you exceptional.

The same holds for trading. Underlying talent in any performance domain is no doubt a prerequisite. However, you do not have to be the most intelligent or the biggest fund to make money. You do need to put in the work to build a real edge and then be able to keep working when markets or edges run their course. It doesn’t stop.

I don’t want to be writing up report cards or studying late at night, but it is what I must do to keep up.

The inherent problem is that trading results are not linear. What you put in, you do not necessarily get out straight away. It is a probabilistic game, and you can make money by pure blind luck or by being involved in a strong market. This current environment is breeding a whole new generation of chart traders who think stocks only go UP and that trading is easy. It’s not. You need time and work to experience different cycles and playbooks. There is no other way around it.

Hard work isn’t staring at charts all day or swapping hot takes on forums.

When asked about the balance between talent versus work in trading success, Ed Seykota famously replied:

“I don’t know where one starts and the other stops”.

Putting in the work develops your talent, and the presence of talent makes the work effective.

Hard work will never be overrated.

2. Be ok to make mistakes and learn quickly

Never be scared to have a crack. You can only truly grow by getting out of your comfort zone and testing yourself. The worst that can happen is that you fail, but these are seldom as threatening as they first appear. Instead, you gained valuable experience.

Live the growth mindset and actively seek out such challenges.

Every trade comes with incomplete information and uncertainty in how it will play out. Furthermore, our sensory system is constantly bombarded with inputs that can lead to a breakdown in focus or self-management.

Mistakes are inevitable - but you must close that loop.

The best traders I know are ruthless at cutting when wrong, learning, and then moving on. They don’t dwell on mistakes but move forward. It becomes part of a continuous positive feedback loop.

3. Practice like your life depends on it

I used to drive my Dad crazy by leaving Tennis ball marks on the wall or smashing a window with a stray footy. I want to actively encourage this household destruction.

The research from Anders Ericsson et al is overwhelming - exceptional performance is a product of deliberate practice. This specifically means a highly structured, effortful mode of training characterized by goals, deep concentration, and immediate feedback1. It is the kind of environment I try to build for myself and those of my trading clients. For now, the kids can simply enjoy hitting a few balls - but they should know I’ll be coming for them soon…..

At a higher level, this repetition forms the neural pathways that build the unconscious. Whether in sport or trading, it is this internal pattern recognition and knowledge we are trying to tap into to take performance to the next level.

What constitutes practice in trading is highly individualistic and tailored to the individual’s current level. I have thought deeply about this idea, and please find a tweet with more specifics here.

4. Get curious and experiment widely

The path to discovering what you love is through experimentation. Once you find that place, go all in. This is the platform my parents provided for me and I am eternally grateful.

In trading, edge discovery comes from trial and error. There are so many products, strategies, and styles. Go deep and explore what works for your unique skillset, then give your full energy.

For me, stocks are a puzzle. There are always new headlines, sector themes, or stock specifics to explore. Always be curious to reverse engineer.

5. Network and be generous

Be kind to everyone you encounter- life is better this way.

You open yourself up to deeper relationships and more experiences as a consequence.

As a market participant, acting with the utmost integrity and showing compassion towards others, irrespective of outcome, goes a long way. Only by networking do you put yourself in a position to receive constant opportunities. You can choose to do what you want with information, but always be respectful. Everyone is just trying to make it work and has their place in the market ecosystem. Taking shots at others doesn’t win you any respect.

The market tries to turn you into a cynic. Don't let it.

Any little success I have had is a direct correlation to the strategies and information I have received from other traders who are better than I. This is possible by trying to be a good bloke and paying it forward.

6. Run, Swim, Play, Get Outside

I grew up in the UK. It’s not great.

In Australia, we are blessed to live in this amazing country with its climate, ocean, and natural surroundings. I want to revel in all of this with the kids in tow.

CrossFit is my current obsession - constantly testing the body in new and varied ways. I ride my mountain bike to work, jump in the surf when I can, and try to stay active. The name Baytrading comes from a deep connection to the water. The kids see and respond to all of this.

To sustain a continuous cycle of self-improvement for trading, it is imperative to stay healthy and find enjoyment outside of the markets. Obsession is necessary BUT burnout is real. Sustained focus, day after day, is exhausting. Not only does exercise build the resilience needed, but it is also the switch to disconnect.

7. Get off your fkng phone

This is a problem we all face, and it is only going to get worse. With your head buried in the phone, you are missing out on a rich experience right in front of you. There is no way to be present with this distraction.

I realise there is hypocrisy here, as no doubt I am guilty of scrolling. But there is literally no hope for our children without setting an example.

I went to my daughter’s swimming on Saturday. This is not the Olympics, but I counted 8 sets of parents who were mindlessly scrolling away, oblivious to their kids in the pool. I am not holier than thou, but I do lock my phone in the car during these sessions to remove any possible temptation. I get enormous enjoyment from her class, and she is constantly looking back at me for that source of engagement.

In the Trading social world, there is so much bravado and noise. The new “for you” algorithm has amplified the bombardment of senseless content. You can get pulled away from what really matters - being present in this moment on your own performance and edge.

8. Reading and writing skills will never be obsolete

I have read books to my children every night since they were born. It has become a deeply meaningful ritual where the stories and characters have helped them build imagination and curiosity about the world. It provides a moment of enjoyment and closeness.

A chatbot will never take this deep connection away.

AI will make our lives inexplicably easier. It will lead to shortcuts and obsolete industries. However, there will always be a premium for those authors who provide real value to society. It is a timeless tool for building intelligence and creativity.

I am increasingly using AI across multiple facets of my trading to help with research, data mining, and testing assumptions. However, at the end of each day, nothing de-sensitizes me more than throwing myself into bed with a good book.

9. Entrepreneurship is the hardest thing you’ll ever do but also the most rewarding

School is great for structure, experience, making friends, and memory regurgitation. However, it is not going to teach you a lot of the skills needed when you step out into the real world.

Never before has there been a better time to put destiny in your own hands. There are limitless tools to build and to get leverage.

Rip up the 9 am to 5 pm playbook. Entrepreneurialism offers the ability to build personal purpose through direct problem-solving and to turn your unique skills into a system that frees you from corporate limitations. It is challenging because it requires relentless self-reliance, discipline, and a willingness to embrace discomfort and uncertainty.

Trading is this constant entrepreneurial endeavour.

The start of this year was a minefield. I lost a lot of money. The only way through this stress was to build a plan to bridge the gap between my expectations and reality. Ongoing accountability is a non-negotiable.

The end benefits go far beyond money. It is about creating leverage and more control over your future. You get to choose what to work on, where to apply yourself, and how to spend your time.

10. Don’t whinge or complain - focus on what you can control

Bad sht is going to happen - deal with it.

When something’s in your control, act on it. When it isn’t, complaining is a waste of time.

The bad beat story, the broker who doesn’t load the borrow in time, the stock that has no borrow, the stop out on the low, the cut on the high, the IRESS trading platform that drops out, the match you missed, the lack of liquidity, the headline that hits when you are in the bathroom- these are all just excuses that happen to every trader. We all vent but it’s rarely productive.

When you complain, you’re giving too much power to the thing. Instead, channel energy into productive use.

Thanks

Austin

Another Earnings season bites the dust, and I am left with mixed emotions.

No matter how much I try to ease the pressure and reduce expectations around this time of year, the result feels similar- long hours at the desk, plenty of effort and intense focus, some wins, and yet that unavoidable feeling of missed chances and fatigue.

The truth is, trading reporting is tough. Markets absorb information faster than ever. Each season has its own unique characteristics that are often not repeatable, and randomness plays a bigger role than most admit. The volatility doesn’t necessarily equal opportunity.

There is just so much you can’t control and so many headlines you can’t possibly keep up with.

With that in place, the method I’ve found to break the hindsight cycle is to step away and return with fresh eyes on the data. Shift the focus from the outcome to measuring performance based on the execution of strategies and discipline. As I do this, I am proud of much of what I achieved and the focus I maintained on my lane.

A clear feature of this season was the crazy intraday volatility seen in some of the ASX big caps. It felt like a market built less on any real fundamental substance and more on sentiment, flows, and global market giddiness. Big caps that missed were punished, and slight beats often lead to dramatic re-rates to the upside. Indeed, as JP Morgan notes, approximately 30% of the ASX 50 moved by more than +/- 3 sigma on result day. This smashed all records.

You would think these were perfect conditions for short-term traders? Personally, I found this environment unique and tricky for a myriad of reasons:

→Gaps were huge versus the underlying delta of the announcement

→Resting liquidity on the market post-match was poor

→The moves were often over in a very short space of time

In this post, I go deeper into the themes from the ASX Earnings season. I also investigate performance and areas to explore for playbooks going forward. This may benefit you as you study your own results from the month.

Key Observations:

1. Quality announcements were scarce

Those filtering the market by standout earnings beats may have been disappointed.

Strong headline numbers that caught my eye included 360, ZIP, TAH, NXT, SUL, and ASB. This translated into huge gaps and varied intraday movement post the open. However, elsewhere it felt like slim pickings.

There was actually an equal split of companies that beat vs missed against consensus. Consumer discretionary showed the most consistent “beats” with strong sales updates since June from ADH, HVN, BBN, LOV, NCK, and SUL. Consumer staples and industrial stocks had a greater tendency to miss, such as ING, WOW, REH, and RWC.

This is most aptly summed by a neat diagram from UBS:

However, turns out you didn’t need to filter the market into such neat fundamental buckets to make money.

2. Who cares about Fundamentals? The disconnect between the underlying announcement and the stock move was huge

There was record-high share price volatility with dramatic moves to the upside for slugs such as BXB, COL, and QAN. Several blue chips suffered record or near-record declines on Day 1, such as JHX, CSL, JBH, and WOW.

I still have no idea what was in those announcements to justify the move. What I do know is that context is everything.

As a colleague said, I don’t think we’ve ever had a market with fundamentals (read valuation) so disconnected from reality.

Implied in this → if you have a market where stonks have little underlying valuation support from their fundamentals, then you would expect bigger moves because value investors aren’t buying the dip from 300x earnings to 200x earnings. See CBA, CSL, and GYG

Conversely, it was the “underowned” sectors of the market that caused the biggest surprise to the upside, such as consumer discretionary and mining services. The lucky country is no longer just resilient but actually showing signs of recovery. Well, that was enough for Mr Momentum Fund Junkie! Stocks re-rated off the back of meh results in a global equity bull market. The “glass half full” mentality was in full force. Breaking out to new Daily highs seemed to trigger even more momentum.

Here is some more specific data for those who like to go deep on reflection:

Biggest % Gaps (R = Reporting day)

Biggest % Open to Close move (O2C)

3. Liquidity post the match was woeful

From my seat, the real reason for some of the sharp moves post the open is due to the lack of resting liquidity in the order book.

This was a phenomenon witnessed in a previous reporting period, but it may have been exacerbated by the introduction of the new ASX opening system. Indeed, the exchange released a report on the initial impact of the changes, where they suggested as much:

You can read the full link here.

Participation and volume-seeking algos, which make up the bulk of market turnover, are forced to catch up to transacted volume. With some clients delaying market-making or algo adjustments to "observe” in continuous trading, and with supposed reduced concentration in the auction, there has been less resting volume. This has led to a frenzy for any available liquidity post the match.

JP Morgan states that “a key factor in the escalating volatility is declining trading velocity in the ASX 50." This specifically means stocks are doing less $ turnover as a % of market cap:

This plays into the strengths of order book traders who sense tipping points in liquidity with fast execution skills to front-run flow.

Bottom line, if you took the right matches with tight risk, you could get paid very quickly as the bots tripped over themselves.

4. Shorts were high variance with some notable traps

Despite the headline beat-ups, shorts had a wide dispersion. This is often normal, but was accentuated in this market.

For those stocks gapping down more than 2%, the average open-to-close range was 5% vs 3.6% for gap-ups. However, there was a weaker trend with only approximately 46% continuation. They are faster but less directional. What is interesting is that some of the very large gaps showed a consistent short bias, e.g., AGL, CSL, DMP, GYG, and ING.

The outliers? You got your face ripped off shorting CAR, MP1, and NXL. Don’t fight “Tech” and the ability for analysts to smudge revenues in future years in their models to account for all the new long-term GrOWf.

5. Drift was contained to just a select few

Outside of the Day 1 volatility, the ongoing drift was varied.

Revisions to forward estimates have been slightly skewed downward, with 5 upgrades for every 6 downgrades. UBS states that “the downbeat skew was visible when we look at the magnitude for the revisions, with the median upgrade to next year's EPS being just 2.4%, versus a median revision of - 4.0% among the stocks downgraded.”

Post result 12m revisions from consensus:

However, the negative revisions did not have a good correlation to ongoing negative share price performance. Stock such as TWE, PLS, FMG, TLC, MVF, and GYG all rallied off their lows despite multiple broker downgrades.

What did I learn and what changes are needed going forward?

There is so much to glean from the monthly data. Some standout themes to double click on:

→The edge on Day 1 is less about fundamentals and more about flow trading

The main point to stress is that you can’t be across it all. I have filtered reporting into a strategy that suits my skills and looks to benefit more from moves over a wider timeframe instead of fighting the crowd early. I was nowhere in the Day 1 drives and have to accept this.

If I want to take these drives more aggressively, I will need to learn new skills, test data more thoroughly, and build better automation. Study the order book and nuances. The focus will need to be more on liquid stocks and matches.

The trade-off may not be there. The phenomena may well be gone come February if the market goes to sht again. No self-limiting beliefs but I would rather take the easy money than the hard money.

→Stay clear of shorting tech or those names with very poor liquidity where I can’t manage risk

Any small upside I made from buying good stocks for morning drives was undone by trying to short beta stocks on poor headlines. This strategy is just too high variance, and the traps can be nasty.

Better is to define candidates by liquidity. I know the stocks I can and cannot play. There are stocks that are wreckable and others where the market can give the benefit of the doubt.

Be ok just to say NO

On the whole, shorts did not work for my main drift strategy, which may just be a function of the strong market. Examples included ING, GYG, PLS and TWE. It is what it is.

→ Increase sizing in my best hands

Sometimes you have to trust the system and just keep gambling. One bad beat or result should not define the season. The tendency is to overanalyze or size down after an early loss to the detriment of future trades that have the same or even better expected value. This makes no sense.

The data is clear as to the setups where I have an edge. My bet sizing model could be dramatically improved.

Specific examples that offered increased liquidity and edge included ZIP, TAH, A2M, and SEK.

The goal now is to better automate sizing and improve risk management structure.

If you would like to receive the Excel data file I used above to track the underlying reporting moves, please feel free to contact me1.

How was your Earnings season? What were your observations?

I used to love this time of year, but my excitement has been beaten down through a grind of continuous disappointments. The market seems to have become increasingly informed and efficient. Volume can get sketchy. Furthermore, there are cross-flows everywhere, often with a clear disconnect between the sell-side views and buy-side orders.

However, it is still very possible to make money. There are always one or two choice moves.

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The solution is to carve out your niche and playbook to circumnavigate the noise.

Here are some potential guidelines, as well as my early initial interpretation of events from Week 1:

Earnings principles

1. Price action is the truth: good news can get sold whilst bad news can get bought up (particularly in this market). All that matters is respecting the price action as the flows are bigger than you. We make money by following these flows. Refusal to accept this principle gets ruthlessly punished in a fast market. Stop quickly when wrong.

2. Don’t be a moth to the flame: be selective on meaningful news delta rather than just chasing every announcement or gap. The temptation is to be involved, but there is just so much randomness that traders try to explain after the fact. This is Taleb’s “narrative fallacy”.

3. Build context and variables: the market is more informed and more efficient this time of year. To increase trade selection, build meaningful variables. Examples could include positioning via the Daily chart, turnover, Broker research, the surprise factor of the news, or forward-looking guidance.

4. Filter and automate: it will get extremely busy. The only way to handle the load is by filtering the best trading stocks for you that offer liquidity, volatility, and the headlines that resonate. Automation via algos can help with bandwidth to be involved without having to click buttons in a frantic state. Furthermore, AI has become such a powerful tool to assist in deciphering the underlying catalysts.

5. Focus on the strongest: every season, there are just a few winners and losers. The market seems to bless these stocks and ruthlessly punish others. Spend focus and resources on picking your spots in these trends. Right now, there are very powerful trends in the Defence (DRO, EOS) and Rare Earth (ILU, LYC) sectors. The market is working. The same laws may well apply to new sector themes and companies that surprise to the upside. This is where I focus my energy.

You can find some of my previous write-ups on trading Earnings here and here.

Early observations

Assessing earnings based on one week of data does not make a trend. The volume of companies reporting by weight is still to come. Nonetheless, here are my early observations:

• Profit taking on gap-ups in extended stocks: despite solid headline numbers, stocks such as 360, JBH, and TPW were hit hard off the open on Day 1. Indeed, TPW has continued to sell off sharply in subsequent days. This is a warning sign for those chasing gaps higher. The higher EV entry may well be once the early volatility has subsided and meaningful volume prints.

• Misses got punished: the most aggressive sell-off to date was in AGL, which gave a FY26 NPAT guidance range 10% below the street. This offered a very clean intraday move. I will be paying particular attention to forward-looking statements going forward.

• Drift has been nonexistent so far: despite some meaningful earnings revisions, very few stocks have continued with the Day 1 move. NCK has been the standout.

R = Reporting day

Final Thoughts

Despite witnessing several cycles, every earnings season seems to have a personality of its own, shaped by the market’s shifting dynamics. Nonetheless, the principles outlined are a framework to better help cut through the noise and get focused on the most meaningful. The tendency is to try to be across it all, but this inevitably leads to frustration and overtrading. I have found sitting back and heeding the early tone to be one of the most important factors to gauge future market patterns and edges.

July has come and gone, but it would be a mistake not to reflect on what was a truly opportune month. There were catalysts and setups everywhere.

I haven't seen trading conditions like this since the COVID period.

Liquidity has improved dramatically, and money is flowing back into the market once more. This has led to increased intraday ranges and trends. Furthermore, the repercussions of a Trump tariff world have led to some powerful new themes. You can’t tinker with a global ecosystem without triggering real-world consequences.

Most prevalent here is the US realisation of its complete reliance on China’s downstream supply chain capabilities. In turn, China has also pivoted inward to its sectors to address excessive competition, eliminate outdated capacity, and create a more unified market. Apparently, it’s called “Anti-Involution”. These policy shifts have led to dramatic moves in the rare earth, coal, and lithium sectors.

For once, Australia was uniquely positioned.

As a catalyst-driven trader, it is imperative to move where the action is. You have to be a market generalist and go deep where necessary. Some announcements are stock-specific, whilst others play into a broader narrative and a bigger-picture tailwind. The job is to build context, filter the most impactful, and then focus on where you have an edge. More often than not, that is following the price action and pattern as a small player in a big pond.

August provided a wide range of examples:

• Sales update for BOT

• Market positioning in DMP

• Thesis breaking fundamentals in BOE

• Breaking news in the Lithium and Coal sectors

• Commodity supply disruption and intervention in rare earths, boosting LYC and ILU

• Global defence policy initiatives lighting a fire under DRO

It is impossible to cover all this ground in this post. However, what follows is a general overview of the month, observations, and a review of some of the key events.

Overview and Observations

A headline strong performance. This was all due to a buildup of reps during the previous few months and some very strong catalysts. I was finally trading from a position of strength, so I felt free to run fundamental positions like VMM; size with conviction in breaking news; and also execute wheelhouse morning drives without overthinking or overtrading.

I worked hard inside and outside market hours. The truth is, we were blessed with good trading conditions that paid focus and being involved. Headlines and real money were coming into the market with multiple sectors firing - this created intraday ranges and decent overnight follow-through. I was solidly focused on exit management rules, which showed in a record profit factor.

Plenty of guys put up record months. It doesn't come often, so be grateful.

Having said that, signs of complacency are setting in. I wrote about this in my last Substack, which was timely. Multiple capital raises have busted, as well as fades in some momentum themes. That first big loss came in SYR, and I took it as my warning. Now it is time to ruthlessly cut it back. Get back into my lane and focus on earnings season.

What were the key observations?

1. The most important skill is being able to move on to focus on the next available opportunity. You can’t dwell on the past or let it influence your decision-making in the present moment. They are independent events. The feedback from colleagues post the DRO climax trade was one of frustration and meaningful drawdown. However, multiple fresh opportunities presented themselves in the aftermath if you were able to compartmentalise and move forward to the next hand with resilience.

2. When the market is working, press the advantage through bigger size, more exposure, or wider timeframes to better leverage. Recognise the conditions and swing harder.

3. Big gaps, crowding, and traps are part of the cyclical nature of markets. When something is working, the natural tendency is for more traders to want to join that same setup. The patterns may change, but the edge over a large sample size remains - the biggest catalysts need price and/or time. Adapt accordingly. Ultimately, all you can control is your own application and execution.

Some stats:

• Win rate 54.2%; Profit factor 4.65; Av Win 6.8k vs Av Loss -1.8k

(Gross P/L; Across accounts; Educational purposes only so relax)

Wins:

• Some notable outliers, but still plenty of room to push size in some key names e.g., BOE, DMP, and SMR.

• The glaring miss was making nada in LYC and ILU. I just didn’t make new plans post the initial MP news.

Losses:

• Kept losses very tight.

• The HLI morning drive was thin and an example of where I should have a hard “NO” as I am just not going to be able to push size or add value here given liquidity. Some madman just wants to keep owning this thing.

• A key improvement for earnings is to cut off all illiquid names, irrespective of the catalysts. PNV, PPS, HSN, and FPR all fall into this category.

The Best Plays To Analyze:

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I haven’t seen conditions like this for a while. For too long, I have watched the US markets with envy - traders chasing powerful new themes and catching huge moves in a catalyst-rich environment. The volume, liquidity, and ranges have been wild!

I will admit that I questioned myself and the edge I trade.

But now it finally feels like some of this sentiment has spilled over down under.

Of course, the market has been notching all-time highs and has been doing so long before the recovery from the Trump tariff rout. However, it was a rally that was largely confined to the ASX50 and passive ETF flows. Think CBA. New themes now appear to be emerging, and money is coming into a wider range of sectors.

Some signs to me that we have entered a more frenzied bull market:

• Intraday ranges are expanding

• Real momentum in multi-billion-dollar caps, namely DRO and LYC.

• Stocks surging off small revenue announcements, such as MSB

• Sizeable capital raises priced at a small discount that go straight up on resumption, like IPX or CU6. More broadly, we are seeing a flood of cap raises, which is a classic sign that the market is open for business.

• Previously unloved sectors catching a strong bid and forming fresh uptrends - see Resources, Rare Earths, Coal, and now possibly Lithium

• Overnight gaps are following through higher consistently

• Spec stocks are firing

• Swing trades are working

• Short trades have become more trappy with less follow-through, with recent examples in PDN, BAP, and the dreaded DRO on 16th July

• Twitter is getting more vocal, and there is an uptick in chest-beating.

Maybe it is just money being put to work at the start of a new financial year. It could be flows adjusting to the chaos Trump stirred up. And sure, it may all fizzle out just as fast. However, for now, it feels like that post-COVID energy and 2021 all over again.

I like bull markets. We all like bull markets. It is easier to make money in bull markets. In this way, it is crucial to maximise these rare conditions for all their worth

This obviously comes with a huge warning and caveats.

In this post, I wanted to expand on how to adapt to changing market conditions. What are possible strategies to leverage this backdrop, and how can you put up guardrails to fight complacency?

On a personal note, I’ve learned that one of my weaknesses is not being big enough in the best hands and situations- I commit, but I don’t account for exponential sizing. And on the flip side, I tend to overtrade. I’ll jump into multiple names just because they are “in-play”, but it is rarely worth it. Both of these variables need to be particularly addressed if this new environment rings true.

The following words are an attempt to reconcile this and lay the groundwork for what comes next.

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Adapting to maximise

There are a few possible methods to better take advantage of stronger market conditions. These include:

1. Strategies to widen the timeframe

Bullish markets generate wider intraday and overnight ranges. Just see the recent DRO poster boy.

Intraday traders could consider broadening the holding timeframe, increasing take-profit extension, or stretching trend-following trails to not get caught out in chop.

Furthermore, there may be some circumstances where running a residual position overnight could be examined. This is particularly apt for powerful new catalysts, which often need “time and price” to play out. Real players are underweight and actively chasing performance instead of profit-taking at every turn. Money is getting put to work.

As an example, I have been allocating small core positions in a separate account to try to widen my timeframe in themes across the Gold, Rare Earth, and now Graphite space. The separate account ensures that it will not interfere with my intraday strategies and capital. If it is somewhere else, I am less likely to touch it!

Other solutions involve building a new playbook to focus specifically on strong commodities, systematic momentum, or even spec trading! Build solid variables and backtest where possible. I have written about how to build a new playbook previously here.

2. Increasing size

Traders are inevitably always trying to grow in size. Strong markets make this more viable as the available liquidity is significantly increased. Not only can you scale, but the protection to stop out when wrong is also there, which decreases slippage.

Most importantly, in this environment, the number of quality catalysts and setups is clustered. There seems to be one new opportunity after another whether it is breaking news in tariffs, coal, lithium, rare earth, or momentum leading to blow-offs in DRO. These trades deserve disproportionately more size → not a linear increase but exponential.

As Lance makes the point, your edge isn’t evenly distributed, so your capital shouldn’t be either. You must press hard when it aligns. This is where your whole year can be made.

Key to this is defining your A+ setups and thinking in exponential risk tiers.

3. Extending bandwidth

Busy markets require bandwidth to be able to better capitalise. You can’t be across it all, but you can better automate to take away discretionary inputs and decision-making in real time.

For example, I use out-of-the-box algos to participate in large gaps around the open. This circumnavigates potential problems with filters and ensures fills based on my requirements. Using simple automations in the background can define risk, sizing, entries, and exits across multiple strategies.

Having said all that, these are also the conditions that breed complacency and overconfidence. Markets like this are dangerous because they feel so good. Style drift becomes real. Before you know it, you can be way out of your depth and experience that painful reset trade. I know this because my biggest losses are often after a winning stretch where I put down guardrails, relax the rules, and neglect the very processes that served me so well.

Create a system to fight complacency

It is easy to make money when markets are good. What is harder is to build and follow systems to avoid the dumb mistake that takes it all away.

To that end, the most important solutions for me are to manage risk and increase self-awareness. These include:

1. Hard stops where the idea is wrong

It is my stop because a break of it means, on aggregate, the position will move against me - so it makes no sense not to get out of everything. Increasing size and risk should not mean widening the stop. The trade idea is wrong when the price action invalidates. There can be genuine areas in Australia that cause slippage, but invariably, the stock never returns. Just hit out.

In this way, you should always set hard limits on max $ risk exposure per stock defined by an underlying level, % move, or volatility metric.

For example, to counter the devil in me, I recently had a developer build automation to execute stops seamlessly based on planned criteria. This takes away any discretion or guesswork.

(if interested, please drop me a comment below and I can point you in the right direction)

2. Overnight risk management systems

It is very easy to go far and wide when everything is working. Filters go down, and I start collecting stocks like they are NFTs - full of hope and probably worthless.

Hard limits on the number of open positions, max $ risk across the portfolio, and index hedging strategies are all methods to consider. The goal is to build open profit in a position and move the stop up to breakeven. From here, new stocks can be added and you are trading from a position of strength.

The MOST important rule that I have introduced is a simple volatility check. When the VIX triggers above a defined threshold and we begin to see consecutive down days in the S&P of 2%, I am cutting it all back to my intraday wheelhouse. This takes you out of the market if/when markets change. Be in tune with that first big hit.

3. Increasing self-awareness routines throughout the day.

The boring work often doesn’t get written about, but it is integral to staying focused and present.

Building pre-market routines to plan and visualise the setup, journaling about current sentiment or situation, and checklists to be completed throughout the day are all key routines. This keeps one anchored and consistent on a daily structure.

To this day, I still write my end-of-day report card where I review my trading, goals and and any degradation.

There is a bit more of a bounce in the step amongst traders and investors in Australia right now.

A reset of global trade and supply chains in a Trump tariff world has created some exciting themes and opportunities. There are real-world implications. This is the time to get curious, research, work extremely hard, and take risk when it lines up as a trader.

I'm not talking about reckless abandon, but I am talking about controlled aggression.

In past cycles, I was naive and lost my head with too much exposure. This time around, I want to ensure that I increase self-awareness and build the appropriate checks. You may also find it helpful to integrate into your trading as you feel the excitement rise.

Thanks

Austin

There are months when the market just gives. June was one of them.

Headlines seemed to come one after another - China's export controls on magnets, Israel's antics in the Middle East, and company-specific guidance announcements. If you were dialed in, the opportunities were everywhere.

These months reward preparedness and those who show up fully focused every single day.

Inevitably, with the market so active, you probably feel like you missed out somewhere. Often, I find the worst feeling in trading isn’t losing - it’s underperforming setups that were begging to be maximised.

However, there is a great deal of hindsight at play here. Ahead of time, it is impossible to know with any certainty the magnitude of a potential move. Quantifiable characteristics, databases, and pattern recognition all contribute, but it remains a game of probabilities and human performance.

For the more experienced, you often know what you have done wrong. Beating yourself up isn’t going to help. I like to close out the frustration by reflecting on and reviewing the trade. What specifically did I learn, and what do I need to do better?

For more developing traders, the truth is that there is probably a real gap between perceived opportunity and your current skills or playbooks. The most common vent I hear is “I sold too early". However, if you don’t have clear rules or reps or a focus on an exit goal, how could you possibly expect anything different? It’s resulting. You didn't miss what you didn't have a system for.

The solution here is to work hard to close this gap. Get curious, get immersed, and reverse engineer the best plays.

This post expands on many of these points as I review June. Like you, I am human. I caught a few clean, botched a few, and watched some run without me. Instead of stewing over it, the idealised mindset is to reframe it as a lesson. As Nick Fabrio rightly commented on X,

"You performed how you performed....you just need to limit how long you're in a bad patch for".

Exploring the good, as well as the bad, is the method for building momentum into a positive feedback loop to bridge this.

Main opportunities

From a catalyst-trading perspective, these were the standout headlines and trades in Australia as I saw it:

• Israel’s attack on Iran: breaking news

• China’s export controls on magnets

• Morning drives in stock-specific catalysts such as AMI, AX1, CKF, CTT, DRO, IEL, and SBM

• Earnings drift, such as CKF

• Gap up fades such as DRO

Similar themes and nuances come out time and time again:

→ The catalyst should be so obvious that it slaps you in the face

→ The best trades go from the start

→ In a rapid price discovery phase, get big earlier

→ When working, be hands-off. The real money is made from maximising these unique situations

In the following newsletter, I review some of these setups, what went well, and performance gaps.

Trade write-ups

DRO 25/6/25

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