Status: in a relation with money

Morgan Housel best-seller author of "The Psychology of Money" says

Financial success is not a hard science but a soft skill.

This means that the way you behave with money is more important than what you know about money management.

I used to be a heavy spender. I was so demotivated with my so-called career that the way I found to endure was to tell myself that I worked to earn money to pay for a better life. And so, I begun to collect bags, shoes, clothing, fine dining and traveling… But then COVID-19 came and suddenly I found my self in a lockdown situation, unable to keep spending all the money I was making.

When 2021 started I had already decided I didn’t want to continue faking a fulfilling career and a happy life. I discovered trading by accident, through my stepson, and started earning some money with cryptocurrencies. I quickly moved to other markets and begun to develop my skills on technical analyzis.

By the end of 2021, I quit my job and decided to make a living from trading.

I am in a healthy relationship with money, built over?respect like any other successful relation.

From what I’ve learned so far, I can tell you that to start trading you must first respect money. There are some insights I can share and, for amusement, I will call them commandments:

1.?????You will pay a price

When you buy something, you pay a tangible price.

When you trade you also pay a price: the price of learning (you will lose money, for sure) and the price of volatility (you will keep on losing money since prices move up and down every day, all day long).

If you learn your lessons well (and I suggest you start with a demo account) you’ll find a way to control your losses and earn more money than you lose. But be aware that losing is a part of the business (not a part of the game because trading is not gambling).

2.?????You shall avoid greediness

One of the things that happens when you realize you can make money, sometimes too quickly, is that trading can become an addiction. When you see your account growing you will want even more and such ambition will make you risk higher amounts on riskier deals.

To keep your mind still you must decide how many hours a day you will be dedicating to trading and never trade beyond that limit (I’ve exchanged a 10-12 hours a day work schedule for a maximum of 5 hours a days trading routine). Additionally, you’ll set realistic goals for profit and potential loss and you’ll stick to those KPI’s regardless of whatever happens in the markets or in your head.

3.?????You shall act accordingly with your risk-profile

People have differentiated risk-profiles: some people are willing to undertake a greater amount of risk because their focus is on getting rich; some people won’t accept a high amount of risk because their focus in on not becoming poorer. Either option is valid. You must make a self-assessment to determine the type of investor you are and then chose your markets, your entry and exit prices correspondingly.

4.?????You shall be humble and accept that you can’t control the markets

Unexpected events can occur regardless of your analysis, predictions, and feelings. The past 2 years gave us a pandemic and a war, with consequences that changed the shape of global society, and an unforeseen impact over financial markets. Nassim Taleb calls such events as Black Swans and it’s very interesting to understand his interpretation of such occurrences.

Apart from these macro extreme events, every day a headline, a tweet or a speculative movement from a hedge fund can induce hasty reversals in price patterns. You must be mentally and financially prepared for such turns. Don’t blame yourself and don’t blame the markets. Accept changes as a part of the business and continue trading.

5.?????You shall not be biased

Normally we have a bias towards optimistic people: we see them as na?ve or irresponsible. Contrariwise, we look at the pessimist as intelligent and prudent.

This asymmetry in perception is brilliantly explained by Daniel Kahneman is his book “Thinking fast and slow”. This Nobel prize winner defends that organisms normally handle threats as more urgent than opportunities and such behavior is, in fact, an evolutionary feature that enhances chances of survival.

Although the tendency to listen to pessimistic forecast lies within our nature, we must not trust in all conspiracy theories that revolve around markets, otherwise we will be paralyzed by fear.

Warren Buffet, one of the richest men in the world, says we don’t need a great IQ to earn money; we just need emotional stability.

Create, develop and work every day for a sound intellectual framework that enables you to make decisions, combined with the ability to keep your emotions from interfering with the process.

You should have a healthy relation with money but the nature of that relation is not love; it's pragmatism.