This article marks the launch of a new Tribune on Bitcoin! The Trading Tribune, which I, Cryptodidact, would have the honor and pleasure of building alongside you during the weeks to come. The objective, week after week, will be to introduce the different elements necessary for understanding and practicing trading. The concepts that will be discussed will apply as much to the Bitcoin and crypto-assets environment as to that of the more traditional stock market. If you are thirsty for knowledge, you have come to the right place!
Introduction to trading
A world full of clichés
The trading is often the source of all fantasies. It must be said that film culture has not helped us on these points during the past years … An example? The wolf of Wall Street.
Take a good look at this picture. And burn it in your memory. It is done ?
Very well. Because this image is the cliche perfect of what Is NOT the trading ! Yes yes, I give myself the right to learn absurdly.
- Peripatetician (here on Bitcoin, we speak well!)
- More money
- Always more silver !
Indeed, I can understand that The Wolf of Wall Street made many people want to dive in cocai … er in the trading !
And yet, if you are there for that, run away. Flee quickly. Close this article right away (oops, my editor is not going to be happy…).
For the others, let’s try to understand what it is Actually trading.
Beyond the clichés, the reality
First, I think it would be interesting to go back to fundamentals. And start with a definition.
The trading is an English word commonly used in France to designate buying and selling operations carried out on the financial markets.
The Net Journal
This definition is simple and effective. Trading is a practice involving buying and selling assets. The goal is to make capital gains by this process.
In the end, it’s simple then. It suffices to successfully predict the movements of an asset to get rich, buy drug, recruit peripatetic, and all the rest ? Hmm, humm. I thought we were done with the Wall Street Wolf myth?
In reality, the trading represents an activity trying and complex. A number that often circulates is that 98% of traders are losers.
Trading is a art. And as you wouldn’t improvise as a guitarist for a solo in front of the Stade de France, improvising as a trader can play tricks on you …
Between loneliness, inner demons, headaches, stress and long learning, welcome to the world of trading, the real one!
“Uh Cryptodidact, you know that you don’t make me want to discover trading anymore?“
Come on. You will see that despite its drawbacks, the trading it is also a world of freedom, where everyone can do it, and it’s as exciting as it is multifaceted !
What is trading?
Trading and math
When you type “trading” on Google, here is the first image that appears.
And … it fits well with the primary aspect of trading: mathematics.
I’m sure if you were to be trained in trading, the first thing you would expect is to learn to read these famous graphics, to trace technical analyzes, and decrypt the patterns (read “patèrne” which corresponds to a chartist figure) known.
EMA, MMA, RSI, MACD… All these terms represent indicators constructed mathematically from prices.
Trading is seek to sell more expensive a previously purchased asset. And of course, math is closely related to this.
However, don’t be afraid, forgetting your courses on integrals and derivatives of functions will not prevent you from discovering trading!
On the other hand, to be a minimum armed in terms of probabilities and statistics, it’s primordial.
Besides, it represents one of the most powerful weapons for anyone who wants to practice trading!
The human side of trading
An old saying that I like to repeat is that 70% of trading is happening in the head.
Accumulate mathematical knowledge, know how to read a graph, learn about the geopolitical world that surrounds us … Yes, all of this will be useful to you.
But trading is not just that. Far from there.
Alexander Elder describes perfectly this human and psychological aspect of trading. He makes an exceptional comparison which I unfortunately find in too little presentation of the subject: a trader is like a alcoholic.
And throughout the book, he uses this parallel between trading and meetings of anonymous alcoholics, to explain the emotions who are at stake and how to learn to tame.
But in addition to these emotions that we will have to learn to manage (and that we will discover together throughout this Trading grandstand), trading also has complex human aspects.
Working alone, at home, facing numbers all day, is not necessarily given to everyone.
Or on the contrary, it can make you addicted (we come back to anonymous alcoholics) and then it will be complicated to detach yourself from trading, at the risk of committing big mistakes.
So during this Trading grandstand, we will discuss the aspects practice and mathematics of trading, but we’ll also cover all psychological aspects !
Why go into trading?
Difference with investment
First of all, it is not so obvious that perceiving the differences Between investment and trading.
For many, investing is just a very slow form of trading, or trading is just a very fast form of investing.
And in the middle, the border is done very fuzzy to find out if you are doing trading or from investment…
Generally, the notion that takes you to one side or the other of this blurred border is temporality and management.
I think one of the easiest ways to understand this difference is to take examples.
Example 1: I bought 10 bitcoins in 2014 and I sold them in 2020 after spending 6 years without caring.
Here we are typically in investment. Why ?
- The temporality is long (6 years)
- There is not had Management of assets between buy and sell
Example 2: I bought 10 bitcoins in January 2014, I bought 2 bitcoins four days later and then I sold 8 bitcoins at the end of the month, and the remaining 4 in February 2014.
In this case, we will talk more about trading. Why ?
- The temporality is short (a few days / month)
- There was a surveillance and an management of assets
Example 3: I bought 10 bitcoins in 2014, resold 3 bitcoins in the same year, then I bought 2 bitcoins in 2015 before selling everything in 2016.
And there? We are approaching what we talked about above: the sometimes blurred border between trading and investment.
And for once, the answer here will depend on the sensitivity of each. So I let you make your own opinion.
Advantages and disadvantages
Now let’s try to see the good and bad sides of trading. As a sort of personality test, let’s find out if you are made for this!
FREEDOM. Perhaps this is THE word that comes to mind when we talk about trading. Indeed, this activity allows you to manage everything on your own. No hours, no office, no boss, no obligation. Trading only requires a computer and an internet connection.
RIGOR. Trading is an activity that will ask you a lot of effort on yourself. If you are not able to be disciplined, or if you tend to be too emotional, trading may not be for you. Or in any case, it will be necessary to work on this point.
FLEXIBILITY. Trading adapts to you. As we saw above, you are free. Particularly in the way you practice this activity. Indeed, you can make trading a professional activity, full time, as well as an ancillary activity, in your spare time.
SILVER. So don’t make me say what I didn’t say. No, trading is not the easiest route to wealth. And besides, repeat what I wrote in this article: 98% of traders will lose. However, there is no point in hiding it, if you are a good trader, you can do this activity a real income generator.
We are coming to the end of this first Trading Tribune. I hope you liked this article. Above all, I hope it has informed you about my vision of trading.
Finally, trading is a concept very related to our intimacy. Everyone will see noon at their door, or, rather, each will have a different way of living trading.
This is why, inevitably, my future forums will be colored by my experiences, my experiences, and my personal vision of trading.
However, it is with pleasure that I will share this with you all in the weeks to come! A sacred program awaits us, be sure and certain!
Bitcoin, cryptocurrency and Blockchain influencer and popularizer. My goal: to make these complex concepts accessible with passion on a daily basis on my networks.