Painful lessons from a Bull

None of this is financial advice and I am not a financial advisor

I’m about 1.5 years into an active trading career and wanted to put some thoughts down on paper.

I quit my job at the peak of the 2019 Bitcoin micro bubble and proceeded to get my ass handed to me for over a year trading everything wrong and frankly I lost a ton of capital. Some might call this Trader School tuition fees.

I was a no-name twitter account back then. Maybe 3000–4000 followers. Today somehow I’ve amassed 17,000 followers. Get daily DM’s and questions from newer traders looking for advice.

“How do I make the big bucks?”

“What do you think of this stock/coin?”

“Are you still bullish on $xyz?”

“How did you learn all of this?”

I’ve come to both love and hate this attention because this attention means I’m getting good at something but it also means people are improperly placing faith in my opinions. I’m just another flesh pod sitting behind some monitors and mild anonymity. People look to high follower accounts for wisdom and advice, wrongly so. They should be teaching themselves how to fish.

I’d rather be honest about it than try to be a larp about it. I take big losses regularly. Larger than usual recently because my confidence has been rising and markets humble even the most experienced traders eventually. But I’m still profitable and that’s all that matters. I can pay my bills, sock money away, and continue on this adventure.

You only need to beat the market 51% of the time to be profitable. This week for example I’m sitting on a $40,000 loss on my active trading account (still up for the year) and it is causing me a great deal of stress in this moment. I got careless, and a little euphoric. Last year I stressed out about being down $1000.

Technical analysts would call this a higher low in an upwards trend. I call it progress. Hopefully next year I will be stressing out about being down an even larger size.

I’ve grown, dialed in my methods and gotten more confident swinging size. This kind of pain was inevitable and now I’ve taken mental notes to mitigate this in the future.

I enjoy charting. I enjoy trading. Trying to out think millions of other people to catch moves is fascinating and all the lessons I learn eventually teach me something even if they hurt, like this week.

This lifestyle attracts a lot of glamour and excitement. Everyone likes money. Everyone wishes they knew how to magically extract money from the markets. Their friends all do it during bull markets and make it looks easy. Sometimes, it is easy. Everyone is a genius during a bull market.

This painfully long exposition has a point.

Rome was not built in a day.

You as a trader won’t be either.

So I wanted to outline a few of the painful lessons I’ve learned this year. Maybe they will help you.

• Risk management

Pretty much every professional level trader will tell you that risk management trumps any chart setup, option size, or anything else. They’re right. This could be setting a reasonable 3–5% stop loss, or hedging an obnoxiously large long position with puts. Your goal as a trader should be to live to trade another day.

Some would argue that traders are not traders, but professional risk managers.

If you’re long 5 SPY calls and happily in profit, there’s no shame in hedging with some deep OTM puts that are cheap. You might lose the option premium on those, but the profit from your calls (if the upwards trend continues) will make that irrelevant. If the market nukes and you have no short side protection you will be staring at a red candle and watching your account bleed out wishing you did.

• Learn to short

I still struggle with this. As most of my followers know I am the permabull. I hate shorting. I’d rather stay long and add on dips and build positions out than close positions. I hate acknowledging that “only up” has a lot of sideways up and down and volatility between the entry and the destination.

But every time the market tumbles I wish I had shorted or at least taken profits. Finding methods to help you identify short setups is at minimum a key to protecting profits and staying in the game.

• The charts will not tell you everything

A chart will not always tell you about a direction a stock is about to swing. Most of the time, they can. But you must also be aware of the macro landscape. Is there news for a stock? What does the option flow say? Is the dollar going down? What are the 10 year t-notes doing? What’s the put/call ratio at? For Bitcoin, what do the exchange inflows look like? What are funding rates on perpetual futures contracts sitting at?

News events, black swans are unpredictable. A market can get good news and bad news in the same 24 hour period and whipsaw wildly thoroughly screwing over traders.

• Lottos are gambling

Lotto options are addictively fun. They pay out well. They are cheap. But recognize that anything you put into them can go to zero quickly. Manage your risk. Adding to long term leaps can pay you in a much safer fashion.

• Support and Resistance are King

I think a lot of people have heard of this but ignored it. I spent the first 6+ months of trading looking for the god tier indicators the things that truly signal bull or bear. Over time I regressed back into price action and S/R more than anything. Breaking or loss of key levels can predict movements more than anything else.

Drawing “shapes” is a very nice way to add some kind of structure to future projections of price action but ultimately this is all sentiment, price action, and liquidity. Some shapes work better than others. Ascending triangles and broadening wedges are my favorites.

Today all of the indicators I use are price action/history based. VWAPs, fibs, sometimes short term moving averages. Indicators that interact directly with real time price action will tell you more and give you spots to bid more than most premium indicator scripts. It’s good to have trend following tools but just because something has a golden cross on the daily chart doesn’t mean a bullish movement is coming.

• Leverage

Don’t touch leverage until you can trade spot consistently and well. Or you will end up unhappy. I chose to do this in reverse and in retrospect I wish I had not.

• Accumulation/Distribution

Markets have cycles. Learning about these different phases in assets can teach you how to recognize when something may be bottoming or topping.

• Stay humble

The sooner you recognize you know nothing and wish to know more is when you start to listen to others and make progress in your own trades.

Happy trades stay safe out there.