I was a trader for about six years. Toward the end of high school and throughout college, I spent almost all of my time in front of an array of computer monitors, studying charts. I was watching the psychology of the world distilled into little movements on a monitor.
I was trading commodity futures contracts based on a proprietary formula (and some gut instinct). I made a bunch of money, raised a bunch more and then lost a bunch. This cycle continued cyclically like this for some time.
Alarms went off in the middle of the night because certain price targets were hit. I was staring at a chart on my phone while my sister won some volleyball championship.
If you want to make money in the trading market, you have to be obsessed — all day, every day. Even then, you’ll probably lose. I quit because I lost my edge against the big guys. Now, you’re even harder pressed to find a competitive advantage.
Now I think business is a better investment. And, as it turns out, so does Warren Buffet.
1. Warren Buffet Is Not A Trader
From the beginning, Warren Buffet made money decisions based on his valuation of a company. His focus has always been to study the fundamentals of a certain business.
At first, he used this information to just buy stock, but as soon as he had the opportunity, he put his management chops to use. He buys companies (or large portions) that are undervalued and then makes management changes or leverages the resources of Berkshire Hathaway to make them more profitable.
When Warren Buffet makes a move, there are special shares, promises, politics and other companies involved. He’s not playing the game you are.
2. Ph.D Physicists Rule The Trading World
Almost all the daily trades are made by supercomputers programmed by the smartest people in the world. Arbitrage opportunities are now virtually nonexistent to any individual trader.
Your charts won’t save you and your homespun algorithm might last a week. You’re trying to play the most profitable game in the world — and it’s you versus a massive team of the very best. Unless you’re going in all the way, don’t play.
3. “But This Newsletter!”
The bottom line is this: if someone is selling you moneymaking methods for trading, they are making more money selling you the method than they are by trading the method.
Let’s rephrase that: YOU CAN’T BUY A GREAT TRADING SYSTEM.
They’ve played with their numbers until their track records look great. They’ve written great stories about the big trades they made back in the day. Their ideas seem so airtight. They’re voting for the same president you like. They are also scared of inflation. The promise!
Bullsh*t. Somewhere, some way, they’ve fed you some bullsh*t.
Just consider the basic incentive: to make more money. They're making more money talking about the walk than taking it themselves.
There are other reasons not to trade: the emotional chaos (“I’m God!” can turn to “I should kill myself” in minutes) caused by losing and winning, the lack of value creation and the fact that your chance of maintaining a normal relationship is slim are just a few.
But, some people beat the game — some people hit the lottery. A friend of mine turned $30k into $1 million in three months. I watched it happen and it was invigorating. It was straight up like “The Wolf of Wall Street.” Losing it all in a month was just as exciting, but a lot less fun.
If you’re going to play, flay f*cking hard. Play smart. Play safe. And know the game inside and out before you bet a single dollar.
But, do us all a favor and invest in companies instead. The JOBS Act is opening up investments in startups to everybody. It allows you to put money into a team of people who are creating a product that will make the world a little bit better. You’re investing in a better future. (And the founders won’t call you in the middle of the night.)
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