Remember, you are an idiot.
How being humble will make you a better trader.
In the past few weeks, I made two very good trades.
I heavily bid on Blur during phase one and received an Airdrop beyond my most optimistic expectations.
I also predicted that N/A Sewer passes were undervalued due to some market participants not reading the docs and was able to scoop up a number of higher-tiered passes for around the floor price. Later, I sold them for a more realistic valuation.
After completing these trades, I felt pretty proud of myself. I had used logic and critical thinking to look beyond the tribal consensus of most CT participants, and my analysis had come to fruition, resulting in a healthy profit.
However, pretty quickly, that sense of pride and confidence became arrogance, and my trading suffered as a result.
I was being far too laissez-faire with my risk management strategy, placing Blur bids on items I didn't really have any edge in, despite knowing deep down the market was overheated and the alpha had dissipated.
Feeling wealthy from my newfound gains, I yolo'd some ETH into random new projects that were minting out. They abruptly went to zero.
While I didn't lose any meaningful money doing this, it certainly was more akin to gambling than trading.
I found myself talking in absolutes in Discord chats and saying things with certainty that were not backed up by knowledge. Or being overly contrarian because being contrarian recently was profitable.
To be completely honest, I was mostly just spouting off nonsense and debating topics I was at best, mildly knowledgeable about and at worst, just repeating something Google told me without any real critical thinking applied.
It was at this point that I listened to Tim Urban on the Lex Fridman podcast.
I am a huge advocate for Tim and think he is a brilliant human being. I've spent so many hours reading his blog posts, and I love the way he thinks about the world.
He reminded me of something that I had temporarily forgotten.
He reminded me that I am, in fact, a complete moron.
But,
Everyone else is a moron too.
The honest truth is that I alone haven't the faintest clue if:
Blur liquidity is actually sticky or just a short-term incentivized phenomenon?
Hong Kong is actually becoming more pro Crypto, or if it is just a meme?
Inflation is persistent, or if we're over the worst?
Are the aliens in the sky real or is it a distraction?
I can speculate on what I "think" the answers might be, and maybe sometimes I'll get lucky, but without a robust framework in place, it'll lack the relevant nuance to be correct on a continual basis.
How to become less of a moron:
By applying the above structure to future decisions, trade ideas, and new projects, I can again replicate the success I've had in the past.
If I solely act based on low-level thinking and intuition, as just plain moronic me, I won't be remotely as profitable.
The graphic above does a great job of showing what I have done a bad job of explaining. But essentially, the further you get up Grown-up Mountain, the better you will do.
If you stay on Child's Hill, you might get more Twitter followers or more viral statements, but it's unlikely you will be able to perform at a high standard for any prolonged period of time.
Looking forward:
So here's exactly what I'm going to do.
I’m going to have some time away from the screens soon to reset my mental pathways and read some books that have nothing to do with markets and trading.
Return with a fresh outlook and begin hunting for the next area of the market that is being undervalued and underappreciated.
Develop a thesis and be proactive in figuring out the optimal way to profit. Then ask the smartest people I know to tear apart my ideas with intellectual honesty.
Anything that makes it through this process I’ll execute on, and maybe, if I’m lucky, make some profit.
Have a great weekend and see you soon!