Mindset #3 - Why Can't you Flip a Trade into an Investment?

If you call yourself either a trader or an investor, then you have to be able to explain what both entail and most importantly be able to understand why you can't flick a trade into an investment.

Let's explore the concept in greater detail on the blog below:

Hi to the endless stream of new traders on Steemit

As the Steemit platform is still new and there are still so many introductory posts from new traders flicking through the trading tag streams, I can't get over the amount of n00bs that I see calling themselves traders, but have absolutely no idea what the word even means, let alone what it entails to be successful.

If you're new to this game, then please read this post and let the words sink in. Heck, write them in black texta above your screen on your beautiful white walls.

You're better off trashing them with a lesson that will allow you to make more money in the end, because if they don't sink in, you're not going to have beautiful white walls to call your own anyway!

Diversification is good. Changing individual positions is not.

You don't have to pigeon hole yourself into one stream or the other. Diversification is the key to long term success in modern markets.

If you drop your entire account into a single position, then you're quite frankly a moron. Yep, there you go. I said it.

Sure, you might make an absolute killing if things go your way. But you will LOSE EVERYTHING if things go against you.

I don't care how high the odds of the position working out are. The only thing that matters is that one time you lose everything when for whatever reason, things don't go your way.

Quite frankly, if you are all in, then you may as well have gone down to the casino and put everything you own on red. At least you'd be able to pick up a couple of free drinks from a sexy bar chick!

You see new traders come into this game and think that trading/investing is about making money. It's not. It's actually about not losing money. You have to stay in the game and you won't stay in the game if you're always all in.

It doesn't matter whether you call yourself a trader or an investor, if you're all in then you're exactly the same.

Traders and Investors. They're both the same!

The term 'long term investor' can't be used to justify poor risk management. If you're successful as either a trader or an investor, then the only thing that you have in common is that you manage risk well.

Take these two examples:

Trader

If you took your position as a trade, then you took it with clearly defined risk parameters such as a stop loss level that if price hit, you knew you were wrong and therefore intended to close it out.

As a trader, ALWAYS respect your stops. It only takes one time that you don't and your account can be gone in the blink of an eye.

Investor

If you decided to invest a portion of your portfolio into an asset, then just like if it was a trade, you have clearly defined your risk paramaters for the overall invesment.

It might be a little larger, but you have defined your risk and you're comfortable with it.

Boom! That's right, they're exactly the same!

A trade cannot be flipped into an investment

The most important line in this entire post is about to come. If you take just one thing out of it, then this is it.

YOU CAN'T GO INTO A TRADE AS A TRADER AND COME OUT OF IT AS AN INVESTOR.

I want you to read this again. It has to sink in.

We've all held onto a shitty trade for too long and then justified it to ourselves by saying:

"Actually it was an investment."

"Oh I'm holding this one for the long term"

I want you to read that in the most cliché, bearded coffee shop hipster, pretentious twat voice that you can possibly come up with. Because that's what you are whenever you lie to yourself and try to justify a shit trade as a long term investment.

It is not a long term investment. It is a shitty trade. That's all it ever was and that's all it ever will be.

Conclusion

In wrapping up, this concept is highlighted no place better than in the crypto space right now.

Everyone that entered a long position for whatever reason at the peak, has now found themselves holding at a loss. But instead of executing their plan (if they even had one), they have now simply told themselves that it's an investment.

I hope some of my words sink in, because I don't care how promising this space is, you're an inch away from blowing your entire account.

Simply learn to manage your risk and then you can call yourself whatever you want. Just stop flipping between the two terms to justify your lack of discipline.