Why Am I Writing This?
I usually refrain from posts like these. But recent discussions have made me wonder if there's a increasing lack of maturity in our community. I'm seeing a lot of posts on how much money people have lost and how they are "out" etc etc. To each their own – but I figured I'd share some of things I've learned in my journey thus far.
1) You’re a victim and you don’t know it
We are ruled by our emotions. Almost every single buying decision we make is an emotional one. News sites, advertisers, salesmen and pro-traders all understand this very well –– and they use it against us. The question is: Do you understand this about yourself?
Last week the narrative was:
“Ethereum scaling issues, ICOs are dumping etc etc”.
This week there was a push for
“Breakthrough in Ethereum Scaling! Novo calling the bottom!”
I hope you see a pattern here. Think back to last year:
“BTC mempool, BTC can’t get their shit together, China banning exchanges!”
A good salesman uses emotion to make a great sale. Similarly, a good trader will use emotion to make a good buy (at the bottom). He’ll then use emotion to make a good sell (at the top).
In a way, you can’t help but appreciate the art of it all. But do not be a victim to this. Your emotion is the sword they wield when they attack. But it’s your sword. You can keep in check.
How To Fix It: Know thy enemy & know thyself.
I spend most of my time on the fundamentals/technology in this space. But that hasn’t stopped me from learning about how traders think & how market cycles work. I have read over 10 books on market psychology, trading mindset and market cycles/crashes. Does this make me a pro-trader? Absolutely not – but it does arm me with knowledge that keeps me from making bad decisions.
So pick up some books/tutorials on the trading psychology, market cycles etc. If you have money invested, you owe it to yourself to spend time learning some of the basics. This doesn’t mean you have to become a trader yourself. This will simply help you become more aware of what’s happening around you
2) You’re trading and you don't even know it
Many of us think that we are “investing” – but in truth, our behaviour leans closer to that of a trader.
“Woah..woah… I hate Technical Analysis! I don’t believe in that crap”
News Flash: You don’t need to be using TA to be trading. Here are some signs that suggest you are trading without realising: Are you making your buying & selling decisions based mainly on the price? Are you trying to time the tops & bottoms to increase your stack? Yes? You’re a trader.
We’ve all heard the saying: “96% Of Traders Lose Their Money”. So the odds are already against you – but imagine being a trader and not even knowing you are one. It’s like walking into a Ice Rink with soccer sneakers.
The truth is that most of us in this space behave like traders – and we don't even know it.
To be an investor, you need to speculate on the direction, fundamentals & adoption of the technology.
A trader on the other hand, mainly speculates on the direction of the price (and may use short-term fundamentals to strengthen his thesis) But since very few of us understand the fundamentals, it’s easier to speculate on the price.
How To fix this?
- If you’re not interested in trading – and “in it for the technology” – then it’s time to start living up to the claim. Before you invest your money, invest your time to learn the underlying fundamentals. You don’t need to learn it all. Start with Bitcoin & Ethereum. You can refer to my Blockchain Analogies page for simple explanation to various concepts
- Realise and accept that you’re trading – and it’s what you enjoy. Trading is a competition/game. You’re going to keep losing if you don’t even know you’re playing. Learn “how” to trade – start with the basics, and start small.
Again, I understand that it’s a struggle to find good resources, so let me know you need help to find something specific. I’ve read a lot of great books, and a lot of shitty ones as well.
3) You are forgetting what this space is all about
It seems like we’re rapidly diverging from the ideology that gave birth to this space: Decentralisation. Most of us are focussed on the upcoming ETFs and the scaling issues of Bitcoin and Ethereum. Are we really excited for a financial tool that will allow for further centralisation and possible manipulation? Isn’t that precisely what we wanted to get away from?
“Oh but we don’t scale enough yet for adoption, we need this asap”
How To Fix It?
Think back to why you really entered this space. Was it the ideology? Or the money? Make your decisions accordingly. But try not to get caught on the fence.
Final Thoughts
I'll end my rant here, but the takeaway is this: If you're playing the game, it's important to know that you're playing. And if you're playing – you better get good at it. If not, just stay in the sidelines (aka: buy & hodl)