When trading cryptocurrency, a notebook is my best friend. It is my little black book. I know that when I ignore my friend I will pay a price later. In fact, my friend requires very little maintenance. I can record a few lines about why I bought or sold when I did. I can learn from my mistakes and maybe even repeat my gains. At the end of the day simply trading on a gut feeling is not repeatable. I can say from experience it does not work well every time. In fact, my friend is eager to remind me that I tend to forget about my mistakes, but I remember when I make profits very well. My friend is a big proponent of tough love.
When looking at charts and plotting out the behavior of the market, it is so easy to get detached. In fact many investment gurus suggest that the market is rational, at least in the long term. Some even sell elaborate winning secrets about how the market works. Many of these secrets delve into cold mathematical theory. However, there are some party-poopers who point out that in fact the market is far from rational. According to them professional traders are subject to the same emotions that everyone else has (or maybe even worse). Anyone who needs a refresher can read When Genius Failed by Roger Lowenstein. It is one book I re-read every so often. I usually read it after I lose some money to make myself feel better. Even super-genius level investors can get caught out. I think the reason I fail sometimes is straightforward psychology.
It is more comfortable to take the observer (me) out of the equation and stand above the market. By looking at a chart I can imagine that the same forces that control the market do not control me. After all, I can understand when someone writes a puff piece for something they have invested in, right? I think I can see if someone has written a hatchet job, even an idiot can see that. And after research, I am certainly not scared of a little dip in the market! However, my friend the notebook says that I am all too fallible. In fact it is very difficult for me to look at the market as a neutral - much less an informed - observer.
Delphi was the holy island for the ancient Greeks. There is a famous phrase on a Delphic temple: KNOW THYSELF. The ancient Greek writer Pausanias (2nd century AD) said that in fact the aphorism came from the Egyptians, Luxor in particular. The temple at Luxor had, according to tradition, areas that were for beginning students, while others were reserved for adepts. According to legend KNOW THYSELF was written in the inner temple. I suppose that after some losses I can consider myself an adept. According to many later philosophers, the proverb can apply to people who exceed their station in life. It can also serve as a warning to ignore the actions of the multitude and pursue your own course. The films The Matrix and The Matrix Reloaded have the phrase in Latin (temet nosce) over the oracle’s door.
My little black book reminds me of my high risk behavior, like assuming the bull’s run will last just that little bit longer after I have bought my coins. There is such a sea of information out there, some of it conflicting, that emotions are an important part of the equation. It is all too easy to get caught up. In order to know myself I have to quantify what I want to do. Sometimes, after I record my thoughts, my friend even talks me out of a trade. Good examples are when I might feel I am missing out on an opportunity. Another is when I have bought coins at a low price, and after I see it go up, I refuse to buy more at a higher price, even if I know it will go higher still.
Someday, I hope to understand my motivations better. Maybe after many more years I can finally enter the last most secret part of the temple and finally invest like an Egyptian. I know that if I make it, I could not have gotten there without a little help from my friend.
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