Finding the Groove. . .
In my last shorty I outlined the two kinds of successful traders: position traders and swing traders.
These two types are not locked in stone. They can be. Day traders are by definition swing traders.
I tend to be a position trader. But I am not adverse to swing trading. Especially after I find the groove . . . and by that I mean getting in step with the market. And this can take time, especially when you are out of step like I am now.
In trading being off a little bit can be worse than being off a mile. Nothing is more frustrating than to take a position, get stopped out, only to have a market immediately reverse and prove your original strategy was correct but your timing was a little off. Can you do this with a smile? If not, you must change your thinking.
Remember, so long as you can play the game your day will come. It is not luck. You cannot be lucky if you cannot play the game. If you can play, luck will come your way. It is money management and developing trading skills that prepares you for luck when it comes your way.
The worst thing that can happen is to get lucky right away. Let me share my personal experience.
When I was 23 years old I become a registered commodities broker. (Later I became a Series 7 securities broker.) In April 1973 my father opened an account of $5,000. By the middle of June I ran the account to over $350,000, figured I would be a millionaire by September, and retire in December at the ripe old age of 24. Well, come September I was completely wiped out. Gone. Not just REKT, but ruined!
This is a lesson that a lot of young crypto-traders have learned and many more will likely learn.
But my point is that it is possible to turn 1 bitcoin into 70 bitcoin. Essentially I did it at the tender age of 23. I got lucky. I thought I was sooo…. smart.
I did it again at the tender age of 68 years. . . now knowing I have no idea where the market is going . . . . after being locked away for 11 years, after creating an entirely new life and business ex nihilo beginning in 2002, after being instrumental in the take-down of my prosecutor who was now Attorney General of my home state, and after buying my first 10 bitcoin under $100 via Coinbase ACH with an overdraft protection credit card in August 2013.
Life is not easy. Trading is not easy. Yes, you can get lucky first and hope you acquire the necessary skills. But a more sure foundation requires a great deal of study, work, patience, and experience. A more sure foundation is that the rewards come slowly, at least initially. A more sure foundation is built on humility. And a yet more sure foundation is built on a life apart from bitcoin. A more sure foundation is to hodl and sayvv.
Many, many large traders become small traders and eventually non-players. The skillset I am attempting to share is how as a small trader you can be a very successful and large trader. And more importantly how to use bitcoin as a productive citizen and entrepreneur. This is the audience I am attempting to reach because you are truly teachable and hopefully will gain insight from my story.
But I am off point. Finding the groove. . . . that is the topic.
Again, I am primarily a position trader. I believe in bitcoin and its long term prospects. That means I am a hodler. I go short bitcoin at times, but never more than what I hodl. I go long at times, sometimes with a sizable position but with a small risk of no more than 5% of my holdings. And when the position starts working I will use technical analysis and pure money management to trim my position.
If you do not know what trim is neither did I until I read The Art of Execution: How the world’s best investors get it wrong and still make millions by Lee Freeman-Shor. This is a must-read for any trader and you can support this blog by purchasing it through this link.
The Art of Execution: How the world's best investors get it wrong and still make millions
Over seven years, 45 of the world's top investors were given between $25m and $150m to invest by fund manager Lee…
Little did I know that there is a term coined in the financial world describing a technique I have long used. Its called trim.
Essentially, trimming is taking money off the table in the midst of a long term profitable position. Or trading against the box. Or swing trading with a portion of your position once you are in the money. I saw the same thing by the smart craps players in prison.
Trimming will help you find the groove once you have a profitable position. I guarantee you there are a few out there who caught that low under 7100 with a sizable position and wisely have been using swing trading techniques to increase their bitcoin holdings. In a trending market, it means you will likely give up a portion of your potential profit. But it provides peace of mind and great opportunity when your position has short term adversity in choppy markets.
When you get in the groove you will know it. The hard part is to stay humble and recognize your success is not because you’re so smart or that you know where the market is going, but because of the habits and techniques you have acquired. The hard part is also recognizing when you fall out of the groove and to step aside from all trading for a time.
The next the hardest part . . . . Establishing a position.
Hope this helps. If you like this series of shorties, please clap a few times.