Whether it’s in trading or in life, our losses, especially when we tried hard and still came up short, can teach us valuable lessons about winning.
Lesson 1: The Stonk L
When fooo was 22, fooo inherited a fairly modest Vanguard account from fooo’s Dad who gave it to fooo as a jumpstart. fooo had been fascinated by markets since fooo was very young, and fooo was eager to prove foooself and grow that account.
fooo was intelligent, but also arrogant (“I’m surrounded by fucking RETARDS out here”) about fooo’s strategic capabilities, and felt that shimmery invincibility-mirage of youth.
fooo did a deep dive into the stonk market, and eventually found a certain company that fooo was convinced was extremely undervalued.
fooo was not foolish enough, even then, to go all-in, but fooo had contempt for over-diversification, so fooo decided to invest all-in to two stonks.
fooo was 2/3 into a particular, obscure stonk about which fooo had strong conviction. Over around 6 months, fooo’s investment thesis mapped out very well onto reality and this stonk hit crazy multiples (this was before crypto was well-known, when such things were practically unheard of), outperforming pretty much everything else in the market.
fooo quickly grew the modest account past five figures towards around $250,000, which, for a 22/23 year old who hadn’t grown up rich or anything, was a fuckload of money, especially since fooo wasn’t overly materialistic. A few more multiples from here and fooo could literally just lift weights, play music with fooo’s band and flirt with cute chicks for the foreseeable future! Then after fucking around for a few years, focus and do something good and impactful in the world. It was all setting up right before fooo’s eyes.
Then one day fooo woke up and checked fooo’s phone to see what fooo’s portfolio hit that day, and saw -90% ish on that stonk.
Boom.
Apparently the company hadn’t been what they’d said, and wasn’t doing what they said they were. And it had just been discovered.
fooo remembers not feeling anything. It didn’t hit fooo immediately.
fooo went about fooo’s day pretty normally.
Then a sinking feeling crept into fooo’s gut that evening. And it got worse. fooo was banking on a deadcat bounce which never came and fooo lost everything fooo had in it. fooo’s other stonk hadn’t done much, so fooo was to about 1/3 of where fooo started.
To have risen so high, and to have lost so, so much, especially when fooo was “waiting for another 4x ish to a million” began to really hurt.
Really hurt.
A daily ache. Not a crying type of pain, just a dull ache in the gut that drained fooo slowly every day and never abated.
fooo knew the value of money, how difficult it was to get it snowballing when you don’t have much. fooo was nearly ruined now…
fooo had a strong urge to cash out fooo’s other stonk and diversify it or put it into a basket of mutual funds.
fooo reflected on it for a long time.
fooo realized fooo made a mistake in only buying 2 stonks, when 5 or 6 picks would probably have offered much less downside risk while still being concentrated enough
fooo also realized that very few companies in the history of markets lied like this company had, and that fooo was objectively talented at evaluating undervalued companies, and had just gotten massively unlucky.
fooo decided to take $5,000 out into cash and let the remaining stonk ride and to trust the plan and let the thesis play out — trusting the RR again, despite having gotten black swan’d and the RR not playing out as planned on the black swan stonk.
The other thesis also played out very well, and unlike the first company, this company is still considered legit today. fooo made the money fooo lost back and cashed out just above square one.
if fooo had panicked or overreacted after that big loss; if fooo had lost trust in foooself and blamed foooself for something that fooo literally could not have known and given up, fooo wouldn’t have made the money back…
fooo took that last 5k out to make sure no matter what happened, fooo had something left in that account (fooo was also making money to re-supplement it)
fooo learned to always, ALWAYS survive
there was a strong urge to find a very risky play to try and make it back to $250,000+ quickly, but instead fooo chose to re-acclimate fooo’s psychology to being poorer for awhile, which was the reality of that moment, and fooo trusted fooo’s other thesis.
In the end, retail will never have perfect information. This is an RR game. Losing is always possible, and not even by doing anything “wrong” necessarily. This was a huge test of character for fooo. If fooo had let this massively unlucky black swan event destroy fooo’s drive to win and fooo’s confidence, fooo would still be poor now probably.
Instead fooo eventually went into crypto and, after many, many more lessons, is very well-positioned now.
Lesson 2: The Crypto L
fooo first *really* found bitcoin in 2014 sitting in a cafeteria at 5:30 am, studying for a post-graduate education exam in finance
fooo stumbled upon a website that talked you through how to buy it and spent a few hours pouring over it. fooo got to where fooo was 1 click away from buying like 50 bitcoins as a hedge against stonks in case it blew up
then a shmexy female widda big booty fooo had been flirting with entered the cafeteria. fooo gave the website a final once-over and decided, eh this website will probably steal my credit card number or something, and closed it to go flirt. Could have had 50 cones no problem, no trading. lmao
but whatever…
That wasn’t the real L
fast forward a few years:
it’s 2016 and fooo is more battle-tested in the markets at this point. fooo remembers watching bitstamp’s price action on one screen and playing mass effect 2 on the other screen.
bought about 5 btc and like 10 eth.
then some alts as everything pumped through 2017
then didn’t sell the top
then fooo fell into the trap of trading alts in 2018 to try and increase fooo’s btc
fooo decided fuck it
time to go all-in to a crypto on Binance and bazooka fooo’s bitcoin and retire in one trade
basically fooo said to foooself: whatever, it’s not a leveraged trade and this shit will all eventually moon anyway so why not? worst that can happens is a 50% drawdown in btc terms after which fooo cuts the position and shrugs.
it drew down 50% and fooo cut the position
then fooo went and puked
fooo had violated every single one of the rules that were slowly forming for fooo.
fooo vowed that evening that from now on, fooo would 1. create ironclad rules, and 2. never break them, no matter what
fooo did.
fooo no longer held less than 5 coins, with roughly equal allocations as well as some cash.
fooo decided never to try to scalp with the majority of fooo’s net worth ever again
fooo never broke the code fooo created for foooself to trade well
what mattered most was the trust fooo built with foooself
fooo was also curious about why fooo had ape’d so degenerately, and read a ton of neuroscience and psychology about it — this was very useful: to look at oneself objectively as if one was an animal, and to understand how our animal brain functions and drives our actions. Puts things in perspective and instills humility too.
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Ultimate takeaways
fooo learned never to go into less than 5–6 assets so if there’s a massive nuke black swan, fooo draws down at absolute most 20% ish from it.
fooo learned to cultivate an iron will and discipline and keep to fooo’s code (anytime fooo gets the urge to be degenerate fooo focuses on remembering the absolute listlessness and emptiness of the feeling of abject failure after getting demolished on those drawdowns).
fooo learned about foooself through reflecting on what worked and didn’t work: fooo is bad at scalping; fooo is good at macro, swings, trends and deep-dives theses into why a project can do well.
fooo learned to never give up. Ever. Where there is a will, there is a way.
fooo learned to survive always and never be in a position to get defeated by going broke.
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Maybe these will help you, maybe not
Some people aren’t cut out for trading; there is a certain “whether you believe you can or you can’t, you’re right” ness to it all though.
If you just suffered a massive loss — Do not let that pain and emptiness get away from you. Meditate on it, focus on it and remember that feeling forever, because it will serve as your memento, like a talisman for discipline to stay away from degeneracy and self-betrayal.
