A Degen’s Trading Story
tldr; I lost an entire year’s worth of college tuition in 3 days and these are some lessons I learned along the way.
Early last year (2021), I decided to try my hand at trading crypto futures after seeing insane gains from my peer. I thought that it would be quick and easy cash, earn $300 a day and in a month I would have more than doubled my capital. Unfortunately, greed and a sense of thrill kicked in…
As a result, I lost over $6000 (which doesn’t seem like much but I’m a broke-ass college student) and had to borrow money from my parents to pay my tuition fees. Here are some lessons I learned through this journey:
Invest only with money that you can afford to lose.
This is something that you have heard over and over again, yet, I cannot emphasize enough how important it is.
At the beginning of my venture into crypto futures, I told myself that I would remain emotionless and disciplined. I was willing to bet my entire college tuition because I overestimated my TA (technical analysis) abilities after watching one or two videos on YouTube. I had some experience trading traditional stocks/equities (GameStop and other meme stocks LOL). I felt like I was ready to take on the world. The result? I had to scrimp and save, work a part-time job during the semester and even borrow money from my parents (the first time after 4 years of being independent). If I had listened to the old adage, I would have avoided 3 to 4 months of stress, lack of sleep and hair loss.
Here are 3 main takeaways I had after this experience, and actionable advice that are so common you would have seen them before but yet so so important for someone planning to start trading.
#1. Always have an emergency fund.
This is the most basic practice when doing any form of financial planning. My mistake, I went all-in.
Since my time in National Service, I had a bad habit of living from paycheque to paycheque. I never had any form of real savings. Financial Advisors always preach the concept of saving at least 3 to 6 months’ worth of expenses as an “emergency fund” and I never bothered about it. Well, all I can say is that I learned the hard way.
After dumping all my money in the bank into Binance and losing it all, I had about $100–200 for at most a month’s worth of expenses. I couldn’t go out with friends, I couldn’t afford petrol and I lived my worst life for about 2 to 3 months to save and repay my college tuition. This debacle taught me the importance of managing my money and never all-in into anything.
I am glad that I learnt this lesson now, while I know that I can still rely on my parents to bail me out. Rather than 3 to 5 years later, when I could be starting my own family. And have other responsibilities, commitments and people that depend on me.
#2. Have a solid investment thesis/strategy.
My strategy — “never lose money”.
As I mentioned before, all the “training” and “knowledge” I had going into trading was from watching two YouTube tutorials on TA. I over-leveraged on almost all my trades and did not have a solid strategy to be consistently profitable.
My advice: find a mentor or someone that can keep you in check. Leverage their experiences and mistakes to become better at trading at an exponential rate. Create a trading strategy that best suits your risk appetite and your time horizon, and consult them to understand some of the potential pitfalls of your strategy. Know where to set stop losses and take profits, at the end of the day, profits are not profits until you actually cash out.
Never go full ape — sure returns may look super sexy in crypto compared to your bank account but never, NEVER, go all-in. Take the recent UST/LUNA incident as an example, so many people believed in the ecosystem and some even deposited their life savings into UST to stake on Anchor Protocol for the 20% APY. The rest is history.
I was fortunate that later into my crypto journey, I met an absolute chad, founder of Crypto Mumbles, dpycm.eth that gave me a ton of guidance and often kept me in check, preventing many apes and gamble-ish investments. Find yourself a chad.
#3. Maintain a positive mindset.
Never compromise on your physical and mental health, money can always be earned again.
Optimism is what allows you to embrace opportunity and profit from it. Pessimism is a good approach when you want to protect capital, but to make money, you have to be confident that another great opportunity is around the corner and, if you do the work, then you will find it.
A losing trade is never the end of the world, as long as you manage your risk. We’re fortunate enough to be exposed to the world of Crypto and Defi, at such an early stage, where opportunities are endless and new investment opportunities pop up every single day. I realised that some of the best trades/investments I made were those that I did proper due diligence and research. I did not have to look at charts from day to night, I had the conviction to hold because I knew that it was a solid project.
Sure, sometimes expectations may not live up to reality, but in this journey, you can’t always be right. There will be winners and losers, what matters is how we maximise our winners and minimise our losers.
Always take a break from the market, and spend time with your friends, families and loved ones. Go for walk in the park, go to a cafe for a cup of coffee or read a book. One of my principles is to only go into any investments with a clear and objective mind.
To sum it all up,
Never go all-in.
Have a strategy.
Positive mind.
I hope this $6000 lesson will help any aspiring traders gain some clarity and learn from the mistakes I made when I started out. And I wish you all the best in your journey into trading/investing.
If you have any great trading stories, I would love to hear them either to lend you a shoulder to cry on or get inspired by them. DM me @defi_ally on Twitter.
