The Irrational Trader

4년 전

Lately I've been thinking a lot about the cryptocurrency trading environment. At one point, my investments in IOTA, SAN, OMG, and NEO showed me with 5 BTC in profit. It was crazy. I should have sold. I knew I should have sold. And yet, others who knew they should have sold did sell long before that point and watched their recently abandoned coin 2x or 3x after that.

The markets, sadly, are not rational.

Or, to put it more clearly, the traders who make up the market are not rational.

2 months ago I argued for why it makes sense to not buy EOS now, but to wait. I argued the price would go down and maybe 6 months later would be a good buying opportunity. 20 days ago, I admitted I was wrong and the price of EOS was much higher than I thought it would go during the first 5 days of the ICO. Those who bought early did well.

Since then, it's been going down. Along with some of my other favorite coins like STEEM and BitShares. Maybe I was right after all. Maybe many months from now is the right time to buy EOS. Unfortunately, I didn't listen to my own advice.

A lot of traders like to share their wins and gloss over their losses. I'm not even really a full trader at this point. I still work full-time on my business FoxyCart, continuing to serve thousands of merchants around the world. I would love to trade more often because it's exciting and fun, much like playing Texas Hold'em. I enjoy the game. I enjoy trading, but I have a lot to learn.

I sold some bitcoin at $3,164. It was a new all-time-high, and I figured it was a good time to sell, wait for a retrace, and buy back in. The retrace never came. I was holding USD on Bitfinex when Bitfinex announced they were shutting down service for US customers. Not only that, they were suspending EOS and SAN trades for US customers in three days. So, I didn't listen to my own advice, and I went long on EOS. I bought some other things too and did well on those trades, but it just reminded me how irrational traders can be.

Technically speaking, BitShares and STEEM are two of the most performant, advanced, and useful blockchains in existence today. Traders don't care about that. Even huge fans of Steemit may not care about that. Why buy STEEM if you can invest in some new hotshot, yet-to-even-exist ICO and 2x, 5x or even 10x your investment in a matter of days or weeks?

Do investors and traders even care about a product delivering real value in this environment?

Right now, I think the answer is obvious. Very few people care. Many don't even read a white paper before jumping into an ICO. It's all about quick gains. Who can blame them. Rationality can't stand up against reality when the reality of returns is real in this speculative, quickly growing ecosystem.

I couldn't even listen to my own advice. Not only that, I sold my Bitcoin Cash at the all-time-low, which may be a first in the cryptocurrency world, considering how BCC/BCH was introduced. Most coins start with an all-time-low of $0.

And yet, I have hope. I recognize at some point the fever will fade and the creme will rise to the top. When the feeding frenzy slows down, this will no longer be our reality:

At that point, in that moment, people will look around and wonder, "Which blockchain projects are actually providing real value to humanity?"

The latest Understanding Blockchain Freedom video explored the real value of cryptocurrency a bit and maybe that applies here as well.

Maybe Gridcoin will get some attention for helping to fund science. Maybe those who have used EtherDelta, like I did this past week, will realize just how amazing BitShares and OpenLedger actually are (becuase when the Ethereum network is flooded, like it was last week, EtherDelta really sucks). Maybe people will see Steemit for what it is, a platform putting social back into social media. Maybe that's when rationality will return and the contrarian investors will have the last laugh. Those who buy coins everyone else is dumping. Those who know when to sell at the peak of the hype and buy what no one is paying attention to.

That's my hope, anyway.

That may also be my bias since I'm invested in BitShares, STEEM, and now EOS because I believe in the long-term value of these projects.

Maybe that's just my own confirmation bias, loss aversion, and so many other psychological mind games going on to keep me irrational.

Time will tell, I guess. In the mean time, I'm having fun and enjoying the ride. :) I hope you are as well.

We're going camping this weekend to enjoy the solar eclipse which is coming right through Nashville so my weekly Exchange Transfer Report will be a couple days late this week.

I hope you have a fantastic weekend. I probably won't be responding much until after Monday.

Steem on, my friends. As I argued recently, if you think STEEM and Steemit have long term value, maybe consider being a contrary investor and powering up while the price is declining.

Then again, why listen to me? I can't even consistently follow my own advice. ;-)


Luke Stokes is a father, husband, business owner, programmer, and voluntaryist who wants to help create a world we all want to live in. Visit UnderstandingBlockchainFreedom.com

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I am absolutely blown away that BTS and STEEM aren't in the Top 10 on CMC. I watch all these other shitcoins that don't have a product and people don't use get pumped and wonder, why is no one investing in tech that actually does something?

The answer is all of these new shit coins are designed to be pumped and dumped by the creators. The float volume is tiny, they hold majority, pump, sell to the bagholders and move on.

If crypto was valued on any fundamentals (adoption, transactions, hell user accounts) BTC, ETH (sorry), BTS, STEEM should be the top 4 on CMC... and not necessarily in that order

Well trading and investing are totally different games. One is irrational (trading) and one is rational (investing)... and the problem happens when you try to trade rationally and invest irrationally.

Whats the solution ? Simple and sweet. Use left brain to invest and right to trade. You have both so why not use both ? :-)

I am both trader and investor and once you know which is which its pretty simple (not easy). You don’t use logic for trading, just follow the market and you don’t follow the market when investing, just use logic.

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You make it sound so easy!

Hahah. I think the problem for me is when both sides start fighting over a coin.

Trader: "Nice! Look at that sweet profit. Sell that thing and let's move on to the next pump."

Investor: "Are you kidding me? Would you have sold bitcoin at $1? What kind of idiot are you? This is clearly a long-term hold."

Trader: "Stop bringing emotion into a logical discussion. Don't get married to a coin. Buy, sell, move on."

Investor: "Why celebrate a small gain when you could have a life-changing increase with just a little insight, patience, and long-term vision?"

Trader: "I can't even talk to you."

Investor: "You're just an idiot."

(bar fight ensues as the market passes them both by, laughing)

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@lukestokes :-)
Well, at the cost of repeating, I was trying to sound “Simple” not “Easy” ! They both have no relationship...

The key is not to let left (investor) and right (trader) talk to each other. This is the financial meditation :-)

One simple way (to start) is to keep the two (trading and investment) instruments different. For example I invest in stocks and trade in bitcoin. [Fact: I invest in bitcoin also, but just as an example]. So you cut out the news for bitcoin and cut out market info for stocks. Don’t try to find cause-effect relationships in bitcoin (news) and don’t try to change cause-effect relationship for stocks with market movement [unless cause change don’t let the effect change]

They both are Simple in the end. Its [Chaos] Trading and [Value] Investing :-)

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I don't know where from you got this. But this is hilarious.

Haha, that's so true. You really can't predict the trends of cryptos accurately. No matter which path you take, after few days you feel I could have done better. And surely people are more interested in buying new ICOs than investing in coins like steem, BTS etc. Probably because ppl know that if you get in the boat first, you will get better rewards!!

It's a shame to see, tons of alt coins getting 10x-100x price rises from just hype or social media influencers the past couple months then crash, then to the next coin. I'm long steem and EOS!

Your post reminds me of something, from times gone by, pre-crypto days. A friend of mine worked for then Dean-Witter Reynolds, the big brokerage firm... his whole thing was "KNOW who you are, as an investor."

Back then, people were chasing around after off-exchange OTC stocks referred to as "pink sheets." Most it was a big game of losing money... because everyone was looking for "the next hot thing." He refused to call these people "investors," he called them "lottery players."

Much like cryptos now... and what you're describing... the market is filled with lottery players. And that makes the market unstable... people chase the next "I heard XYZ is HOT!" rumor and everything goes sideways.

How many actual investors are in the crypto market? People like us who hold Steem because it's based on solid technology and had something potentially game changing for the world... how many are there because "I heard Steem is a hot ticket!"... till next week?

Day trading is a whole different thing... but then you're a total expert on one or two securities and know what happens to the price when it rains in Dallas.

Our memories are short. At the moment, new cryptos sound a lot like another thing that once happened... people are almost frantically buying into anything that has the word "blockchain" in the description, like they once blindly bought into anything with "dot.com."

I think it's wise to pause and look at the fundamentals.

Have a good time watching the eclipse!

You have a very serious flaw in your investment strategy.

You are human

You think logically, rationally, and expect others to be human and think logically and rationally too

After all, we all have that in common.

The problem begins when people don't think logically or rationally and make good decisions and evidence is everywhere of that...

That's kind of why I stood alone, calling out someone today on my blog who appears to be scamming the system. (2 accounts, one made June 2017 the other one July 2017)

(have to go read it, to see it)

Anyway, I admire how candid you are, and it takes someone special to admit they can't take their own advice.

Don't take it too hard though. We all saw BTC rise to $3,000 and fall to $2400 in a matter of days and less than weeks. When it hit $3164 of course it was the top... or should have been.

Except for one single issue...

Bitcoin never has a top, as we've learned. Even at $7500 it could grow to $17500

Why that is? I will never understand either... better technologies exist. But they were the first, and the most valued. So we have to accept it.

When you're not busy, come visit @intelliguy -- my latest post about outing a cheater... I didn't think I'd go through with it, but I did. :)

Take care @lukestokes and glad you are posting the same great stuff you did in the past. I will never unfollow you if you keep doing it.

That FUD though ;)
I've been considering posting all my trade blunders b/c you're right, there's a lot of gloss out there. I'm proud of the portfolio I've built and I'm learning more every day, but mistakes happen and happen frequently. I learned to ignore the white paper on some of these trending coins and read the charts instead. I have 11 coins im investing in longterm and the rest are pump and dump margin gains I can build my BTC nestegg with.

I ended up selling a few of my BCC for $350 and the rest at almost $800. I have promised myself I wouldn't buy them back until they fell under $100.

I love the honesty man. You're not a Bro daytrader that's only in it for the quick cash. You care about the value of the service and what it means for our world. You're an early adoptor and a block chain advocate for all the right reasons. That's your brand and that's how people percieve you. You should be proud.

Have fun with the family camping. We're headed out to White House TN soon.

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Thanks Matthew. We brought our new inflatable kayak. I'm really looking forward to trying it out. :)

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so now you have to decide whether or not to sell Ripple (currently spiking). I just sold a fifth of my holdings and will sell another fifth if it gets to $0.40 (0.000099 satoshi)

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I have yet to buy this banker coin. I know there's plenty of money to be made there, but on principle, I don't want to contribute to its volume.

I totally get what you mean, mainly because I've become somewhat your disciple in aspects such as this. I've always been a contrarian investor when it comes to stocks, so I know the risks involved. It's all too real, and while the potential rewards are high, the potential loss looms large. I really do hope BitShares and STEEM turns around in the coming months. That's in large part based on the sentiment of heavy investors. If only they could see what STEEM users are seeing.

5 BTC worth of gains?? Wow! That's very impressive, Luke! I would say congratulations, but I know that it's more calculated than pure luck :D

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Thanks Jed. It was nice to see 100%+ combined gain on those coins at the highs, but they have come down since then. Shoulda, coulda, woulda sold. :)

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With the way you think, I'm sure it's not going to be the last time you see a huge amount of green in your ledger :D

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I hope that's the case. I at least feel if I do come into more wealth, I'll do good things with it. :)

Eos is the future of smart contacts, and it will trade below 1 usd soon , glad i listened to your advice

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I wish I did also. :)

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Buying is not a 1 time event ;-). You just keep buying it until you hit the number your want. Think 10's of thousands of EOS tokens. Do I want to buy that qty at the current price of 1.30? Heck no, so I'll buy a few k here and there each month. If we get lucky and see the price of EOS spike down to say .80, then i'll get a lot closer to my long term goal with a larger purchase. Of course this is all predicated that Dan and team stay on track.

Another great and informative article. Awesome!

As you know I'm totally new to crypto currencies, and even computers to some extent! lol.

So thank you for the education! Wow! So interesting!

Maybe I'll write something similar for precious metals and mining companies. I've been in and out of that sector for over a decade now.

Keep up the great work!

-Dan "World Travel Pro!"

Very nice post @lukestokes! I agree with your analysis of the ICO situation, but I do have to say that some ICOs do have working platforms and revenue streams, including some of the gaming ICOs, gambling ICOs, etc. Also, some ICOs have a huge potential to modernize and help numerous industries, including Real Estate, Finance/Banking/Insurance, Health Care. You just have to be on the lookout for the hidden gems. And always do your homework on the project, the team, the vision, and the viability of it all.
I also think that Steem is one of those hidden gems, and that its current price is nowhere near the real value that the Steem community/ecosystem/platform is actually worth.
P.S I power up ALL my posts 100% for that reason.

It is really weird how the markets work. Most of the time you have an initial spike that people sell of at but a few days or even hours later the coin reaches a new ATH and the people miss out on making x2 or x3 your profit.

I bet you were glad that you decided to hold rather than sell off. 5 BTC looks pretty tempting but x2 x3 more sounds even better haha.

Steem has fell below $1 now and it seems like people are more interested in other coins than STEEM. I guess we just have to be patient as well as show people that steemit isn't dodgy and that there isn't anything to worry about, that DPOS works and get people to advocate the platform.

The markets are constantly changing due to news and sometimes purely hype and here you have the trade differently than with stocks.

I've invested into Steem and BTS for the long term and I'm planning to pick up EOS in the coming months while it goes lower and lower. I guess we all have to wait and stay patient and hopefully if all goes right we can be looking at some great gains @lukestokes! :)

I agree with you and wrote a blog post few hours ago about steem being undervalued (feel free to see it). Unfortunately vanities rule our world and many people rush to make big and fast money without thinking if the product creates value. The value of steem will be seen probably from next year and now is time to buy and power up. Thanks , upped as always.

Cheers for the read, i thought about day trading but in the end I am a long term holder in coins i beleive in...i will sell when the time is right and i am satisfied with gains. EOS in a year or 2 ...thats a winner in my book, now its time to stack...

I'm long term. In the short, I'm trying to make nice profits so i can spread around my portfolio without putting in my fiat. This rise in BitcoinCash is doing wonders for that plan and I bought at $500!

Once I have the coins I want, I hold and drop in any additional profit I

Steemit may have some structural issues that may hamper growth in the long run. For example, Supply (writers) vs. demand (readers/curators). Since most users want to earn (main advantage of steemit), we may have more writers than readers and curators. Therefore, it will be very hard to keep new bloggers who may be decent writers. New bloggers may not stay long enough to relevant in steemit. Without significant monetary advantages to readers and curators, new users may feel it overwhelmed and may not be active after few days. It takes significant time and energy to read and even make a good comment that can earn a vote. Since there are other sources where they can get information (e.g. better answer in Reddit or Quora, or better social interface), they may not be interested in steemit in the long run. However, someone with big stakes (e.g. can invest thousands of steems) can earn something through curation (e.g. delegation to bot) or blogging. It would be interesting how steemit can overcome these structural issues?

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The problem is in how people approach this site. When money is involved it's all they can think about. If we can get users to enjoy the experience as it is and have the money as an added bonus, Steem will succeed.

Even earning 1 cent from your first introduction post here is more than what 99.9% of users have earned from sites like Reddit,Facebook or Instagram after YEARS.

It's kind of illogical to go back to Reddit or Facebook while complaining of low rewards on here ;) We are seeing new services built using Steem reward system that mimic sites we have grown used to. DTube is new Youtube, SteepShot will be our Instagram, Zappl is Twitter and so on. So why go back? You can make others rich from your work and data, or do the logical thing for long term.

If it's hard to start earning money here, people should try to do same on Youtube and Twitch or anywhere else on the internet. They might be surprised.

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This is my outlook exactly. I'll be posting later about the huge gains in downloads and plays my podcast is getting since joining Steemit. I post 4-5 times between episodes (including a preview posts), and I could see $0.01 on those posts. That's still more than I was making on FB or Wordpress. And the exposure is incredible.

There is also a difference I believe between the type of reader on Steemit. The attention span is larger, so the more effort I put in, the more I know someone is going to appreciate it.

The money comes later, when I have a larger follower base and have gained trust.

Just having that as an option is a shot in the arm. At least to this author/podcaster.

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Don't take me wrong, I am a big supporter of steemit and thinking for ways to make it better. I think most people are not aware if they are making other people rich or not. Even in steemit, due to DPoS people with higher stakes will be easily richer (e.g. delegating SP to bots similar to dividends from a public company stocks ). But big stake holders can do better by improving steemit.

If steemit has to be better than other social-media sites, other than reward it has to fight with other socia media with good services (e.g. better user interfaces, celebrity users). It is synergy among reward, information and services. Without proper amount incentive, people looking for better information and service can go elsewhere. Good bloggers who can earn better per hour may go somewhere else or pursue other jobs. It is not just about the reward, it is about well compensated reward.

However, steemit is a good experiment, still in beta. It is still in exponential growth trajectory and things should be sorted out with experimentation.

I think Steem will be my long term investment. I have fun on this site, so much so that the Steem is a side benefit.

I like your openness, exposing your bad decisions as well as the good. Have fun watching the eclipse.

The market is irrational and manipulated so if you are a small potato, learn to spot megatrends and stick with investments that ride these trends.

I just bought some more STEEM today and powered up. Not a bunch as I wish I had the extra funds to put in more in the dips. (Always buy some on the dips). I fell STEEM has a ton of potential and are in for the long haul.

Good experience. Thanks a lot for sharing with us. Good luck in future trades.
P.S. keep an eye on IOTA

Traders are not necessarily investors in technologies and their humanitarian applications, at least not consciously, but they are.

Good share Luke. Remember - "the market can stay irrational longer than you can stay solvent."

And I hears those sentiments. Sold some BTC at the crack of 2k earlier this summer and used a good chunk of the rest to buy LTC, STRAT, ETH and NEO.

Meanwhile, STEEM is 90% of my portfolio (due to SP) and it's the biggest dog of the bunch. That's a long term investment though.

  ·  4년 전

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I think trading business is the best for All because in the short period or time you will be Rich but for your luck. @lukestokes your this post very Informative and Nice to sharing this post. I was enter in trading business in 2016 .i was buy 900$ bitcoins in 2016 and now is the rate of Bitcoin is More than 4500$ so i expected its more than 5000$. so this is best opportunity to All.

True that. I am powering up on Steemit it as I feel there is lot of unrealised potential in Steem. I am holding my Steem for the next one year irrespective of the outcome.

Cryptocurrency market is very speculative as of today and it might get less volatile over the next couple of years.

Take away from your post "Traders are irrational" but we should still thank them because they provide the much required liquidity.

thanks to share,,,,

The business processes of the attractiveness of each market segment and the choice of one or more segments to be served, strategic strategies for building the right relationship with the right customer, or a large company may be for a variety of complementary products. All of its market segments, mostly companies that are being built new markets by serving a single segment, and if this proves successful, they add segments

Great, it is all believe in word of mouth.

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Poloniex
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Be patient and maybe buy more EOS?

When a good time to buy steem sir? Would I still wait? I need to power up but it seem like steem still going down.

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Yesterday. Don't get fancy, buying and selling.
Just buy and hodl.

Price prediction is very difficult because no one knows what will happen tomorrow.

Truly informative & stimulating. Thanks!

The steem will be able to make progress soon, an investment is necessary but on what cryptocurrencies !! Remains to be seen !!

EOS is a great coin , is a geant sleeping we should invest now , it will be huge

haha spaaaaamers!!!! its like an infestation these days eh!!
Anyways... the irrational trader, that kinda sums me up in a nutshell lol. I am very new to the game, and I love it just like yourself! I find myself sometimes so immersed in the stuff I find I lose all track of time and come out the other end hours later with a smile on my face, ready to share what I just learned with the world!!
Its so hard sometimes to find the correct entry and exit strategies on alot of coins because and IMO, crypto hype is so new, and so many new players are following old rules with lots of well versed crypto players taking advantage of their ability to do so... I find myself thinking im somewhere in the middle :)
You also hit it when you said long term value! I think we should all be playing the trading game (if that's your poison) with full knowledge that it is the long term gains that are the real winners. In saying that, I also think that with good research and proper investment strategies, one can do alright trading **and ** playing the long term game...
Have fun at the solar eclipse!! I hear its supposed to be a real gooder from what I've read :D

This is why when I'm trading I'm setting boundaries. If I reach a set profit margin, I exit from that position. No hard feelings if the value increases afterwards :).

My sojourn on steemit exposed me to bitshares and i think i am in tune with it. I will get my first bitshares this weekend. Thank you for making to believe in the long term value of bts.

I think now is a good time to power up and be patient. I believe in steemit and honestly think it will be worth a lot more in the future.

MadBitcoins Mad Bitcoins tweeted @ 19 Aug 2017 - 01:27 UTC

People are passing around white papers like scripts. #SanFrancisco

Disclaimer: I am just a bot trying to be helpful.

I knew I had an irrational liking of you @lukestokes.

I am right there with you on taking bad trades, but hanging on for dear life on BTS and STEEM!

Good stuff.
Thanks for sharing

Great article.

Love to see you at the SPL poker tables.

Thank you for the insight. I'm just beginning my venture into crypto, and feeling my war around. I have a few shares of EOS and STEEM. STEEM actually makes up the largest position in my portfolio ($50 of less than $250 invested)

I'll also be checking out the Eclipse. We're neighbors apparently. I look forward to seeing more of your takes on Crypto!

Have a great time on your camping trip. Enjoy the solar show!

I've had conversations about this market unpredictability, or irrationality. It's impossible to tell what it will do, but we can make good guesses based on research and then take action.

Right now, I've put a lot into Steem Power, so it's disappointing to see it go down. However, I've already reaped rewards from being able to upvote things I like and getting curation and author rewards. Not many crypo-currencies have benefits like that (in fact, none others that I know of).

  ·  4년 전

Hey @lukestokes, thank you for your honest post. Nice write up. i've been trading for twelve years and the only thing you can be certain of is that your profit&loss only depends on your personal fear&greed. That is all. I believe the money will always reside with utility in the long run so BitShares, Steem and EOS are all healthy candidates which display that metric. not investment advice.