Hot Market: Everyone is a winner?
*Note* — I didn’t intend for this to be so long, not sure if there’s a real point to it. Was initially formatted as a TwitLonger, however ended up being long enough for a blog. I hope you enjoy regardless of the disjointedness.
The market is hot!
There’s this, that, futures, corona virus pumps, multi-day runners and volume galore. A lot of people will make a lot of money, you’ll see it too. Everyone is very proud of their PNL, as they should be, and will post it up every single day till they don’t. The thing is that the market is a zero-sum game and there are going to be a lot of losers out there who won’t show their mistakes. People who try to ride or die with their positions and typically just die.
In fact, I was reading through a thread of people admitting to have blown up or have taken significant losses but when I visited their profile it was as if nothing had happened. Literally business as usual, posting watch-lists and commenting on tickers everyday since their supposed drawdown date but no mention of it on their timeline.
We can observe the amount of runners that spike into the close and the intraday blow-off tops. I know from first-hand experience, those are margin calls. Those are shorts who decided it’s time to lay it all on the line and freeze up or double-down in the face of being ‘wrong’. Two recent examples, among many, in the past few weeks.
When I got into the game seriously, by going live, it was during the bitcoin mania. I could’ve drained my account and went to crypto and possibly made a good amount of money without even knowing what I was doing. However, I knew that I wanted to make this a career and not some get rich quick lottery-type gamble. I stuck with what I was doing, what was working for me, and kept my head down. During that time I saw so many people banking, even within the smallcap sector running in sympathy. It was obvious that a lot of people’s success came down to pure luck and that this bubble was going to burst at some point. I wasn’t quite ready to take advantage of the times, so I sat back and felt a lot of FOMO.
Eventually I decided I’d take a stab. Through that process I was constantly taking losses, I began to really develop a fear for trading those names until they puked their guts out for some of the most obvious fades like we see today. I missed most of that backside. As a result of those losses, I was able to understand the dynamics real-time and make a dramatic turnaround in the following months with those lessons. Those lessons carry forward and allow you to see the next sector with a bit more clarity. Trading sectors is always different than the market we are used to, but what should always remain constant is our risk management, stock selection and timing abilities.
If you are having issues with any of those, this is simply the best time to sharpen your blade. Markets like this fine-tune your skills by demanding perfection and that is something to be grateful for. It means that your trading muscle is being pushed harder so that when things line up for you, you’ll be in the best shape you’ve ever been and you’ll nail it when the time comes. I found this certainly true for myself and hope that the little guys hear that it’s okay to not make money when it seems to be raining from the sky.
Truth is, a lot of people who make money fast end up losing a lot of it trying to get lucky again anyways.
People ask me how I’m doing in the market, and my answer is the same as I’ve ever done. I don’t necessarily change what I’m doing, avoid any situation or go in bigger than normal. I just trade my system, refine the process and then work on myself. The only difference now is that I’ve been able to level up my game significantly by optimizing my skills to match the market. This is all it ever should be, and by that I mean this is a game of YOU vs YOU.
I understand that a ‘hot market’ can make or break someone’s career but there will be more don’t you worry. What’s more important is that you recognize your own strengths and weaknesses and get it so that it’s simply another day in the office. You cannot force your own progression, it simply must evolve through experience. You cannot allow others around you to influence your behaviors or have you step out of your lane, nor can you let success get to your head.
I recognized over the years that a lot of people have just straight up disappeared into the abyss. It didn’t matter that they were killing it, it didn’t matter that they posted gains or charts everyday and it didn’t matter that they did it consistently for a period of time either. A lot of them liked to post frequently for twitter, but you could start to see cracks in their game towards the end such as big winners but some comment about ‘C grade or D grade’. I think their desire to push it became the norm and the $ became far too intoxicating. I saw that the excitement, the overabundance of positive emotions and the feeling of validation from others ultimately played a part in leading to their largest losses.
I’ve been there. During one of my most important tournament runs, our team was on an absolute tear and defeated a world-championship team in an elimination match. Our emotions ran high, we reveled in the experience, thought we were hot shit and slipped up in the next match and barely got edged out. There were people high-fiving us down the halls, hugs and a lot of emotions behind it after the match.
Our little victory lap after the win, feeling good.
Instead of focusing on the path before us we placed way too much significance in that one victory. For the next match our preparation was not 100%, our diligence was not 100% and our egos were inflated. I remember walking away after losing that match with an intense regret that I wasn’t the competitor I needed to be because I let one victory get to my head. From that moment I remembered that experience and decided that I would celebrate to be sure, but keep myself humble and remind myself that no ONE victory, or trade, is going to distract me from being 100% focused on the next objective. Take time to experience the highs and lows and just because the highs feel great, it doesn’t mean that there will be 0 consequences for how you internalize and process it.
In a sense, it’s like having a big day/days and posting that PNL to twitter (which I’ve talked about at length in my blogs), to where that now can have a psychological impact on your ego. Whether you’re in completely in control or not, I think this whole self-reporting thing is overdone and ultimately harmful to the user and onlookers alike. You can imagine how either party feels if you think about it for a moment. It begins to paint a picture that is so far removed from the actual process of achieving those results and, while we can be happy for those individuals, it also places a seed of envy, doubt and urgency within some hearts. To that extent, it’s important to filter out traders who make you feel inadequate because this is always going to be an extremely personal journey.
I believe that we are where we need to be under every circumstance, though we might not feel that way. We might feel that we’re up for the task of sizing up after multiple consistent weeks or months for example, to simply realize there’s another psychological roadblock with accepting $ risk. You’ll constantly be pushed and pulled by your own highs and lows, let that become normal and not some hurdle to overcome. We constantly feel like it’s only a matter of time before X happens, then we will have ‘made it’. There is no ‘made it’, there will always be another hurdle, how we deal with them is what truly matters.
I always try to advocate for the little guys, for the guys who are on their way but get distracted by all the braggarts. We really have no idea how much risk they are placing, where their emotional state is, how much capital they’re working with and the amount of work they put into their craft. This is not to say that there are not a few guys out there who are being honest and transparent and worth following, but I want to remind you readers that we get celebrated for the work we do in private. There are some seriously hard working people out there who become the top % of traders. You could be that too if you keep your head down, grind it out and focus on yourself at all times.
I try not to think too much about wins or losses. It really comes down my performance and the execution behind the trades. If I feel that I did everything I could with the best practices then it’s a win. If I win, but I didn’t follow through with my practices then it’s a loss and I need to think about how to do better in the future. If your goal is to be a career trader or competitor in anything then I suggest you always keep a long-term mindset and seek to understand yourself at a high level without letting the short-term experiences affect your emotions. Take full responsibility, focus on yourself and execute!
Sincerely,
