Jun 16, 2018 | What trading gave me, and what it stole from me
For a few weeks, I have been doing research projects again, as opposed to the past few months when I was mostly trading instead of doing any science. My aim was to work out an independent source of funding for myself, but also to rest from science for a little while in order to see if this relationship has a chance to last forever. So, trading turned out to be a refreshment of a particularly painful sort, as it did not make my daily life any easier – rather the opposite. You might think that if your only daily concern is making money, your reality becomes very simple: you just work out a strategy in order to gradually increase your assets, you work out a rhythm, you close your computer at certain time every day, and enjoy the rest of the day in peace and quiet, preferably lying on the beach with long drink in your hand. Nothing could be more wrong than such a thought.
Let me start from the beginning. So, why are you getting into trading in the first place? There are safer ways of allocating money, like real estate, bonds or art. When you go into trading, this is mostly because of your need for adventure, personal preferences for high risk – high gain choices, and a dare to let go and watch the spectacle, whenever a thunder comes to the market.
But this characteristic is exactly what pulls you down later on, once you are already in: your own emotions push you to make fear- and greed-driven decisions, which will eventually lead to losing money at a fast speed. The more you lose, the more badly you want to play it back, and the whole effect intensifies. For instance, if the value of your investment is below the original entry price, you need to constrain yourself from selling it at the moment, and wait for better times – and the associated pain from watching your investment sinking may be so high that it will eventually make you sell at a loss anyway, only because you feel an urge to cease the pain and forget about the whole thing rather than experience this every day suffering.
Also, if you ever want to go into trading, you should throw out your previous beliefs about yourself to the dustbin. If you thought you are intelligent, do not think about yourself too good over here. Most people lose money from trading, and textbook knowledge does not save you from any mistakes. Even the opposite, being overconfident about your rational conclusions about what might happen next on the market, can pull you down. After all, this is all a crowd behavior, driven by the same hopes and basic emotions, and you are just no better than the others, even if you graduated from university with an A score. There is just no comfort zone: no strategy that makes you always win and your intelligence has nothing to do with that. I would compare it to poker – good players win only in the long run, as any single hand can just turn out bad by chance.
Also, it is very energy-consuming; there are so many aspects of the market that it is almost impossible to track all of them. There are global market moves driven by the overall atmosphere by either greed (aka, FOMO) or fear (aka, FUD), local market moves within a given sector, rumors, random pump and dumps, new technologies taking over the older ones, big names from twitter influencing the market with their tweets… Also, with time, you make more and more friends in this space, and each one of them represents a different type of trading. There are scalpers who look at the trend and make small gains throughout the day on the basis of small rebounds from support levels. There are swing traders who gradually buy-in once the coin is sinking and gradually sell out when the coin is going up. There are ‘hodlers’ who stick to the projects they believe in for a long time. And, there are also traders whose decisions are fully driven by rumor and/or news. Of course, each one of your friends wants good for you, and bombs you with their own findings and personal advice – which makes the overall picture even messier. Just as if all that was not enough, there are dozens of youtube channels broadcasting every day, and each one of these youtube influencers sounds elaborate and, of course, gives you advice contradictory from all the others. It is easy to find yourself lost in this information overload. I remember I used to wake up and realize that the grocery I brought from the convenient store two days before, was perishing next to my chair as I did not find a while to place it in the fridge for the last 48 hours.
Yes, this was a difficult time. That would be about the downsides though, as there were good sides to trading as well, and I would like to add a few words about this below. Trading teaches you a few things about real life. Firstly, what it teaches you is how to lose all delusions and look at the world very sharply. What do I mean by that? Let us assume that you are a researcher and you make for a living by producing scientific literature. How do you react when your publication is rejected in a peer review process? Most often, you soothe yourself by telling to yourself that you have just bumped into an unfortunate set of reviewers, that your topic is not easy to publish, that you were unlucky because someone else published something similar in the meantime, etc. In other words, you immediately come up with a long set of excuses explaining the failure. And what happens when you are trading? If you make a wrong decision, you lose money – it is simple, it is numbers. If the number drops, it means that you suck, and you need to improve. No excuses there.
Secondly, what trading teaches you, is that knowledge is power. As mentioned before, there is never a comfort zone to trading, and the only way to ever fall asleep with peace of mind is to put your money into what you feel relatively certain about. And, the only way to do that is to find out what has a real value in a given market – this is a lot of work and intellectual effort, as professional venture capitalism is a full-time profession. But this effort pays off, and the reward is that once you get any certainty with your judgments, you start feeling that the stress level slowly goes down, and you become more and more indifferent to everyday fluctuations in the market.
Thirdly, what trading teaches you is specialization. I could compare this to getting on a diet: there are thousands of different diets, and it doesn’t really matter which diet you choose; if you are strict about it, you will eventually achieve your goal (although, of course, some diets will be more painful, more time consuming and giving slower progress than others). Similarly, with trading, it does not really matter if you choose hodling, playing the news, investing in new projects, scalping or swinging – just choose something that suits your personality, specialize and stick to your strategy, rather than frantically jump from one strategy to another. It is not essential that you can do everything well; mastering one strategy is good enough but you need to really master it and not just scratch the surface. For those reasons, what trading also teaches you is you yourself. You need to know perfectly well where on the greed and fear scale you are and use this knowledge in order to protect yourself from making stupid decisions. You have to know well when to trust your own judgment, and when you have a tendency for wishful thinking – as wishful thinking means a loss. You need to find a trading strategy that matches you and your personality – and this requires a lot of introspection.
Next, what trading teaches you are building trust. There are other people online, whom you might be speaking to on a daily basis. But after all, these trading friends are people whom you might never ever meet in person and you, nevertheless, need to rely on each other. How to trust someone whose real names you do not even know? Sometimes you need to stack money for a pool and that means that you need to physically send them to someone else whose identity you do not know about – and hope that this person will be honest and will close the deal the way you both agreed. This teaches you a lot about reading people’s intentions. Painful learning process but it will make profits in the long run.
Lastly, what trading teaches you, is that life is very short and that every single little decision has very definite consequences in time and space. I think ever since I started trading for real, I have become very sober in terms of evaluating which actions bring any value to my life, and which of them do not and should be skipped. If something does not work, one needs to immediately change the strategy rather than glue to the original thought and let the time pass by. I was always rather practical, but recently, this practicality reached new highs and I feel very good about this.
One side note I would like to make here is that I see one additional, unexpected benefit from trading. Namely, I was always wondering how does it feel to have this legendary manly friendship between two dudes. Time spent at trading let me answer this question; as 97% traders are men, no one typically assumes my gender correctly, and I use to be called as ‘dude’, ‘bro’ or ‘lad’. So I was spending a few hours a day as a dude, chatting with other dudes about how to get rich, how to get the first Lambo, how to get chicks et cetera. And using tons of non-parliamentary words of course. It was obviously funny to me, but it was a really interesting experience as I finally got a flavor of how brotherhood feels. Feels good!
To sum up, is it worth trading? Very much depends on the person. For me, this was probably the roughest personality training ever, as I needed to drastically tame my own impatience and impulsiveness. But I think that after all, I am more resilient to stress right now, as research life does not compare to trading in terms of pressure for fast results and the overload of information. And, for more, I tend to see things as they are much clearer now. Just as if some fog that was always around me, just faded away and left the world looking so sharp that it almost hurts in the eyes.