Trading; Guts or Nuts

The world of trading encompasses the full spectrum of personalities. Conservatives who buy and hold for the duration. Gamblers who run to the next derivative to get their fix. Mixers who mitigate risk with hedging in some form. And second guessers who always seem to close their position at exactly wrong time. You can also find each of these trading styles on YouTube which is fun to watch. Sure, they may not come right out and say it, but sometimes you can really get a sense of how someone trades and carries themselves by how they act. Those personalities come out in force on a platform like YouTube or even the dump that is Twitter. I could spend a full day typing about Twitter and how disgusting some of the posts are. I am by no means a perfect trader or even person for that matter, but I can tell you that some of the things I see on that site scare me. How do people even come up with these things? Or is it just AI taking over the world one social media fight at a time?

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Gambling is where I first started building predictive algorithms. It’s funny to me to think about the similarities between predicting the outcome of a game and the next trend for a market. If you are new to investing, it will blow your mind how close they are. Each having their own pros and cons. When I buy a share of company x, I know their CEO, their market cap, their demographic, and even their book value. But when I am betting a game, I know the coach, the players, the ones who are sick or hurt, the track record on this playing surface, and if their girlfriend spent the evening before out in town with someone else. I once heard a casino CEO boast that he could set a line on anything even someone’s next move if he was given the right data. That’s right, he was talking about predicting if someone would scratch their head or their head…. next. All he needed was to know a little bit of history on said person. So many of the things we do every day is repetitive. That isn’t any different in how people run a business or trade their portfolio. Trends are exactly that, trends and if you can get a feel for the next move, you will be ahead of the game.

So, when someone risks a larger amount than usual on the next move, why? Are they doing it because they have an edge and know some material fact that the majority of investors don’t? Is it because their needing to chase a prior loss?

You probably know by reading this that I am a nerd by heart. I love numbers and spreadsheets almost as much as I love myself. Numbers don’t lie and if a trend or projection can be made, I want to be there to make it or recognize it. Those things don’t always jump out of the screen until you find that missing key information. Or in my case most of the time, that missing comma in the formula that ties everything back together. I cannot stress the importance in having a plan and if you think back to the beginning of this blog, I mentioned just a few of the personality types that go along with trading, not all of them have a plan. The single best thing about a plan is that it can be tweaked as many times as you need it to be. Plans just like most things can be liquid. So, I invite you to think about which type of trader you are and what type of trader you want to be!

Until next time, keep swinging and never stop chasing. And Happy Fourth of July!!!!