I’ve been trading for quite a while now. Almost 4 years actually. However, within these 4 years, I haven’t had the chance to experience all parts of the cycle yet. I started my trading career in 2018 when the infamous Crypto Winter hit the markets. I’ve learned how to buy good setups and take profit fast, as it never lasted. Then, we had a sort of mini alt season and I continued doing what I’ve learned. I took profits way too early even while buying great bottom setups and I ended up leaving a lot of money on the table. Bear market PTSD is no joke and I quickly understood that I have to change my strategy.
Introducing buy gem/hold gem, another strategy that appealed to me, as it solved the core problem I had at that time. The pitfall of this strategy however is the HODL aspect of it. Once again, I fell into the trap of fully committing to it and I held my positions even through bloodbaths. Today, I’ve officially lost more than 50% of my portfolio within a week and I’m frustrated as fuck.
This makes me think. We as people often jump from one extreme to another. The grass is always greener on the other side. The benefits overshadow the pitfalls and thus it is quite easy to make the move from one end of the spectrum to another. Over time, as I’m getting older, I’m starting to see this pattern all around.
The problem with this approach is simple — it’s too easy. It’s so easy to just resign and jump ship. Not much thought has to be put in. It’s a reduction of a problem into just two possible scenarios — extreme A or extreme B. And we all know life isn’t that simple.
The true art of anything is finding the right spot. Striking a balance. A problem is a spectrum of often two or more opposing forces and our goal is to find the right spot that fits our needs and our “style”. Every single solution will have its pros and cons, but some will inevitably be better than others. The lifelong quest then becomes finding that sweet spot that provides us with good enough perceived pros and tolerable cons.
In order to be able to find this balance, however, we need to understand the spectrum itself. Problems are often far more complex than we initially thought they would be, as our understanding of them is limited.
I think I now understand why people tend to make all the extreme mistakes before eventually achieving mastery in any discipline. While extreme points of the spectrum don’t necessarily offer the best-perceived combination of pros x cons, they are vital in understanding the spectrum itself. By knowing what awaits us at any of those extreme points, it is easier for us to then understand the in-between.
I’m at that point now. I feel like I’ve understood what it’s like selling as soon as possible to lock in profits and then seeing the market run further. And I also understand what it’s like holding my positions and seeing them tank. Both very unfortunate situations that can become fairly stressful and affect a person’s mood and life.
So now it is time for me to start finding balance. A balance is achieved by mixing elements of both of these extremist strategies and hopefully finding an approach that works for us. There are most likely infinite amounts of possible solutions to the problem, ranging in their overall score. And I do not expect to immediately find the holy grail of balance (if anything like that even exists). This is yet another tough quest that will take time, effort, and a lot of experimenting. I fully understand that this will cause further pain, but pain with meaning. Pain that is required for learning. Not meaningless dumb pain of doing the same thing over and over and expecting different results. This is a pain for order. Pain to fight chaos.
I’d imagine this magical point of balance will be one that fits our personalities. An individual approach that puts our strengths to good use and limits the potential of failure. One that will be the manifestation of our own style. After all, having an edge in the markets is not only about knowing what we’re good at, it’s also about knowing what we suck at. That way we can comfortably stand on the sidelines during periods of such market behavior and patiently await our chance to strike.
For me, I’ve always felt like trading is my kind of thing. It is important to me having a setup that has an invalidation point. This way I can calculate my risk and I can go into trades knowing exactly what happens in the worst-case scenario and that gives me peace of mind. Seeing a position tank below an obvious invalidation point that I would have normally respected if this was a trade and not an investment, is very painful to me. And it’s the stupid meaningless kinda pain. However, as this text proves, even this pain shall serve me as a lesson.
So which way am I gonna go?
I want to implement an element of trading into my investing approach. As I am really good at understanding transitions from accumulation to trend, I’m still going to pick the same setups. I shall practice what I preach and I need to get better at selling. Right now, my selling approach consists of selling triple-digit % pumps in 1/3 — to full position increments. For now, this should suffice, but I MUST be able to act when these events appear. And most importantly, I shall incorporate an invalidation point to my investments. A price level at which my idea no longer makes sense due to the structure of price action. Not every investment will be a winner, that is an obvious truth to which I need to adapt.
Overall, I think this is slowly manifesting into a swing trading approach. And I shall be open-minded about that and give it a fair chance. The hunt for meaning and order continues.