I Tried To Call A Top
A few weeks ago I tried to short the entire market. It was my first time trying to call a top and it won’t be the last. I thought I had a grasp on the Fed, the price of oil, and the crash of retail. I thought is a very key word here. The market is a monster and does not care. But at least I tried and I am convinced you should not be in markets if you’re not willing to play a little hero ball here and there.
Anyways, the market trampled all over my position and here are a few things I learned from the experience:
- You really don’t know the stock market until you’ve tried to go against it
- You will never look at the stock market the same once you try to fight its natural trend
- It’s painful when you’re long and the market drops or corrects, but it’s even more painful when you’re short and the market continues to rip higher
- You are not smarter than the market
- Writing your ideas out first and testing them in the public domain is a great way to get feedback
- You need to have a grasp on earnings trends
- You should know the the prevailing market narratives
- You need to have a network of traders, investors or mentors who you can rely on for advice at any moment
- Always define your risk before going short
- Use options to go short
- The market does not care about your position
- Never short the hole in a BTFD market
- Don’t sell rips in uptrends
- Avoid confirmation bias at all costs
- Don’t short without knowing, at least to some degree, what your counter party is thinking and why they are taking the other side of the trade
- Sometimes the contrarian trade is the popular trade
- Not sure how many times I have to learn this, but the market has plans of its own and does not care about politics
- Not sure how many times I have to learn this, but the market has plans of its own and does not care about economic indicators
- Try to be as honest with yourself and your position as you can
- If you have trouble knowing when you’re wrong, you should not be in markets
- Review your circle of competence before putting on a trade
- You need to preserve your mental capital, don’t let any one trade take you down or stress you out
- The best way to preserve your mental capital is to define your risk before going into a trade
- Having fun is everything and if you’re managing your position properly, you can still have fun with the market even when it’s going against you
