How to Optimize Your Trading.

To increase the efficiency of your trades and have better outcomes, you need to monitor the market constantly. But how should you monitor a market with +10K tickers to find the best trade opportunities?

Random Walk Theory and Efficient Market:

Random walk theory suggests that changes in stock prices have the same distribution and are independent of each other.
The efficient market hypothesis states that stock prices fully reflect all available information and expectations, so current prices are the best approximation of a company’s intrinsic value. (Burton Malkiel, 1973)
I believe both of these theories became obsolete in the algorithmic trading era.
Look at the following examples:

As you can see all these stocks have a significant positive correlation..!

Oil and Oil Companies:

EV Makers:

Cannabis Stocks:

After all these examples you should accept that stocks move in Clusters, and their prices could be under influence of others! The market is not efficient anymore..!

Having said this, one way to narrow down your watchlist could be clustering and then choosing between clusters by defining your favorable criteria..!

A lesson from Jim Simons:

"We have three criteria: If it's publicly traded, liquid, and amenable to modeling, we trade it."

“We search through historical data looking for anomalous patterns that we would not expect to occur at random.”

"Efficient market theory is correct in that there are no gross inefficiencies. But we look at anomalies that may be small in size and brief in time. We make our forecast. Then, shortly thereafter, we re-evaluate the situation and revise our forecast and our portfolio. We do this all day long. We're always in and out and out and in. So we're dependent on activity to make money."

I use some statistical modeling and narrow down the 10k to less than 50 to trade options, and I share My options trading watchlist link here:

This list may change accordingly.

There is no point in having many stocks from the same cluster in your watchlist, try to narrow it down as much as possible to increase your trading efficiency..!

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Moshkelgosha TradingView
@TradingView, Thank you so much for supporting my work.
I like your boldness in challenging these theories... anyone that calls themselves a trader operates under the premise that the market is NOT efficient and there is edge to be captured.
+6 Reply
@norok, I send him (Malkiel) an email 2 months ago, presented to him multiple examples of contrary analysis, and asked him: Would he write the same book today? he has not answered yet..!
+2 Reply
At this point I pretty much don't care about the prices of anything in the short term as long I'm still planning on holding for next three to five years. We could crash another 50 % and all that means for me is that I'll be accumulating more.
+1 Reply
@richardjeffrey THIS IS THE ONLY WAY!! I know what's popping long term. I'm more than happy to suffer while I accrue bigger stakes and more equity to know all I have is continue my DD and convicted in the reason I believe the trade is profitable or just worth holding until that time comes.
That is a very good point. Stock rotations is key to watch, sometimes you think an index can't stand up any longer, and boom it keeps rising, then you notice a group of stocks were moved into holding the whole house of cards up.

Very tricky, I need to diversify my watch list.

Thanks for the tip.
good and useful information. thanks for sharing