So you're looking at your portfolio and you're doing one of two things right now:
- If you sold your crypto and went into safe haven's in 2018, then you're probably licking your chops and screaming "C'MON STOP PLAYING WITH CRYPTO, MR MARKET JUST F**KING KILL THIS THING ALREADY SO IT CAN GO BACK UP!!!"
- If you didn't sell, e.g. your strategy is HODLing, then you're hiding under your desk in your underwear with the blinds closed and you're seeing demons on the ceiling and when you close your eyes.
No matter which camp you're in, I want to give you some words of wisdom that I wish someone had given me when I started trading over a decade and a half ago...
Not every trade that loses money is bad
Consider that thought above.... Its very simple and I know some of you are rolling your eyes right now going "cool saying bro, but I know for a fact the only good trades are ones that make money... THIS IS THE JUNGLE, BITCH, you eat what you kill!!!"
Not debating those last two points. This is indeed the jungle, and you eat what you kill. But that doesn't take anything away from the fact that I'm currently dropping golden nuggets of wisdom on your head.
I will repeat it again: not every trade that loses money is bad
How do we determine which losses are good and which are really bad??
When you lose money learning, you're making an investment in your future trading ability. A loss which causes you to become bigger than you were before is like paying tuition for college. Yes it sucks that you have less money right now than you had before you made the trade. But just like college increases your future income, losses that you learn from increase your future trading payouts.
Losing money when you're doing something that works most of the time is not bad either. You're never going to make money everyday; even a good trading strategy will lose from time to time. What you need to make sure of when you lose is whether or not 1) the loss makes sense and 2) the loss was reasonable in size.
For number 1, what I mean by "making sense" is that you should know what kind of price moves / trading environment your strategy likes, and more importantly, which one's it doesn't like. If a normally profitable strategy loses money when its supposed to (e.g. my strategy performs poorly in high volatility) then there's nothing wrong. If a strategy starts losing money when its not supposed to, or loses money when its supposed to be making money, then the reason should be investigated thoroughly.
For number 2, take a look at the size of the loss. Does it fit within historical parameters? Is it smaller than you thought it might be? If your strategy is functioning properly and a loss is within the normal ranges, then the loss isn't really a bad thing, its just the cost of doing business in trading. If the loss is way over historical thresholds, however, you definitely want to investigate.
Losing money when you're reducing risk during a crisis, while painful, also is a good thing. Living to fight another day is a good thing. Sure, your backtest might say you can make 500% if you're fully invested, but can you really handle that 50% drawdown when you're fully invested??? Sometimes its better to keep some cash reserves. If you literally cannot sleep, sometimes its good to reduce the size of your position; this is calling the sleeping point.
On the other hand...
Not every winning trade is good
A winning trade which is not repeatable is not a good trade. You will forever be chasing the phantom of what "worked" on a trade that will never come again. Good strategies identify trades which you will encounter and be able to profit from again and again and again...
Taking too much risk to make too little, is not a good trade. Risking $100 to make $1 might make sense if the probability of loss is 1 in a million, but its f**king bat-shit crazy if its 50/50. Make sure you know the probabilities of your trading strategy, as well as the reward (how much you will make if you are right) is worth the risk (how much you will lose if you are wrong).
Trading without a systematic strategy, even if you're making money, is a recipe for disaster. Your profits are temporary and will evaporate quicker the more trades you make. Someone without an edge should make as few trades as possible in order to maximize their luck, the more trades someone with no edge makes the more the law of large numbers will take over and their pnl with drift down down down...
Understanding when a loss or a win is truly a loss or a win is critical to long term success in trading, crypto or otherwise
edit 2018-04-01: happy april fools!! but in all horrific seriousness, the market has decided to join in on the pranks, and looks like eth is going to go to a 200 handle, and bitcoin we might see 5k handle, the small bounce was apparently a dead cat and the sellers are still out in force. this one looks like it is going to get worse b4 it gets better
upvoted for visibility / PSA
and full disclosure, i would very much like to be wrong on this call
and here we are, 3 days later... seems like we should have bounced already...
for me the line is 350 in ether and 6250 in bitcoin... if we go below that and watch out... if we stay above it, and everything we're seeing now is just fuckery to accumulate a position
Thanks for the great post. It reminded me of the only good strategy to use playing roulette in a casino.
Walk in with your entire sum of money and put it on red or black. And whether you double your money or lose it all on that one bet, walk away and never go back. That single chance is the best odds you'll ever get, it's downhill after that.
It just reminded me of people who trade without knowing the statistical probability of what they're doing :-)
I like the reassurance I get from reading this. It made me a little less hesitant to make some money moves today.
thanks, just be careful out there, this market is writhing around like a bag of snakes right now, very slippery price action
Thank you so much for sharing,
Amazing article i hope to read more from you in the future, its my first day here. Are there any reviews about EOS on your Profile? :)
thats like the 4th or 5th dude to randomly bring up EOS, are u genuinely interested in EOS or are you part of a bot army programmed to ask about EOS and get ppl talking about it? I don't care, cuz I'm long it anyways, but just curious....
Thanks for sharing this content
basic rule of market is invest at right time and screaming your profit while you have make suitable trade, and prolem is you are always searching right time in between market ups&down! better for sustain in equal trade value rather than unusual.
investing is risky, you can earn a large amount of money in seconds as you can lose your money in minutes .. that is everyone's risk, without any extrategia start is not a good idea to enter
Sometimes I get confused with this crypto things.
How can I go about with EOS.
Do you have a post on that?
yo, same question to you as i asked @riccardo47 above (or below, depending on the votes)
Thanks for sharing valuable post.
I continue follow your post.
I appreciate your contest
Thank you for your honesty and consideration for returning the money I sent you, I just realized it was an accident. Thank you friend.
For me they are golden nugets, these points are clear and what you're saying makes total sense. My brother in law introduced me to crypto and it's a whole new language to learn. Thanks for insight
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Totally agree, every bad experience only make us stronger, if you learn from your mistakes.
Have a great day
Tom
Try to trade by holding assets for longer period of time and without getting affected with FUD.
i love it!
Thanks for sharing a good content. It's helpful specially for new ones:)
Thanks so much sir for upvote me
excellent blog friend @marketstack thank you for this valuable information greetings
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Thanks for these important tips. @marketstack.
Informative post.Much obliged for sharing it