Personal

‍

What attracted you to trading?

The inefficiency of markets. A finance professor once tried to teach me that markets were efficient. This made so little sense to me, that I started investigating the markets that I felt were least efficient - crypto markets. Back in those days, the inefficiencies in crypto were astronomical. Then Tether grew in popularity and solved the main inefficiencies: price differences between exchanges. But still today, there are lots of opportunities in form of inefficiencies, especially in the market microstructure.

‍

How long have you been trading?

I started trading in 2013 after I discovered huge price discrepancies between exchanges. I also quickly learned through Mt. Gox that there's a good reason for such a price difference: counterparty risk. This was a reason that became even more apparent later with QuadrigaCX or Cryptsy for example. Seeing those exchanges go down without paying out their customers made me realize that a Bitcoin on an exchange is not a Bitcoin, but a claim towards a Bitcoin. The value of that claim depends very much on who the counterparty is. Since then I try to avoid an exchange whenever I see even minor red flags. 

‍

Seeing those exchanges go down without paying out their customers made me realize that a Bitcoin at an exchange is not a Bitcoin, but a claim towards a Bitcoin.

‍

‍

How long did it take you to become profitable?

My trading was profitable from the first day. Apart from the alpha I had from exploiting market inefficiencies, I also profited a lot from the price increase of Bitcoin and most of crypto. However, there have always been some complete losses with a couple of coins that simply dropped to zero. 

‍

How much of your trading is directional rather than simply exploiting an inefficiency?

Today, most of my trade volume comes from chasing very tiny edges in form of market inefficiencies. My directional positions are moved rather rarely. But I hope they pay off at least as much. 

‍

‍

Do you have a daily routine?

I wake up without an alarm, briefly check the market on the phone and then either head to the computer right away or exercise first. I then have breakfast and continue with a long work session. After that, there is not much of a routine anymore.

‍

What's the worst thing about trading?

Being proven wrong very often. It is often said that good traders have a hit rate of a mere 51%. Depending on your style, this can even be much less, if you bet on asymmetric payoffs. But in any case, you can expect to be wrong very often. While this is humbling, it also always hurts – especially if you could have known better but were too lazy or comfortable to realize.

‍

you can expect to be wrong very often. While this is humbling, it also always hurts

‍

‍

Do you think it’s better to be comfortable or uncomfortable in a trade?

I think that you should exit any trade that makes you uncomfortable (or reduce the size, if the size is the reason for the discomfort). It is a signal from your subconscious that something is not right. That does not mean, however, that you should close your eyes to avoid getting uncomfortable. The exact opposite is true: seek information that could make you uncomfortable. If you indeed get uncomfortable: react – but never out of fear, only out of reason. 

‍

If you indeed get uncomfortable: react – but never out of fear, only out of reason. 

‍

‍

Tell us about your most memorable trade.

I sold tons of Ethereum at $1 since it already appreciated so much in price. That said, I still do not think of it as a mistake. Back then, Ethereum was just one of a handful of altcoins that all seemed to not have any real purpose. Granted, Ethereum was the first with a grand vision, but it was very hard to tell if that was just some story spinning without much substance. After all, colored coins were already possible on Bitcoin.

‍

Crypto is prone to maximalism - do you think this helps or hinders a trader?

Maximalism is either harmful or neutral. It is neutral if it makes you choose the asset you like to trade and neglect the rest. In all other instances, maximalism hurts a trader.

‍

What’s the best trading advice you’ve been given?

I think the by far most important trading advice I’ve received was to minimize losses. This cannot be overstated. While it intuitively always made sense, its exceptional importance only struck me once I fully understood the idea and power of geometric growth. Returns are multiplicative: if only one payoff is zero your end result is zero. 

‍

Returns are multiplicative: if only one payoff is zero your end result is zero. 

‍

How do you balance minimizing losses with the need to take risks?

The best way to manage and reduce risk is to have an edge. The larger the edge the more risk you can take. This is similar to the profit margin of a company that Benjamin Graham referred to as the “margin of safety”. 

‍

Trading:

What's the most important quality in a trader?

Detachment. You need to detach yourself from lots of things. First from money, but also from ideas, concepts, people, companies etc. It is important to always question what you deem right and wrong and be ready to change not only your opinion but also your position. This requires you to detach yourself from your position to prevent yourself from falling for confirmation bias. 

‍

‍

Why do you think you have success trading?

I think my main edge still comes from understanding market microstructures and tools to exploit these. 

‍

What's something you've learned in the last 6 months that has made you a better trader?

You do not only need to learn fast, but also faster than the market and other traders. Otherwise, you get left behind. While I think that my absolute skill has improved, especially on the technological side, I think that I lost in a relative sense compared to my competitors and the general market. 

‍

You do not only need to learn fast, but also faster than the market and other traders.

‍

Is there anything you are doing to remedy that, or are you satisfied with where you are in your trading journey?

Tinkering. Try new things and learn from it. Never be satisfied.

‍

What does making it look like for you? What do you ‘get’ from trading outside of the financial?

I see trading as a sport. You want to score and win for the sake of scoring and winning. Any prize money is a nice side effect (in trading this prize money is also the scoreboard). For me, “making it” means an ongoing process and not a status that you can reach.

‍

For me, “making it” means an ongoing process and not a status that you can reach.

‍

What's the mistake you find hardest to avoid when trading?

Falling in love with a position or a project/coin/company. When I get enthusiastic about a vision I have a hard time letting it go, even when there is contradicting evidence. 

‍

Do you network/chat with other traders to help expose these biases?

I chat with other trades from time to time, but usually only on meta aspects. I found that I trade worse when I am exposed too much to the ideas of others. 

‍

I found that I trade worse when I am exposed too much to the ideas of others. 

‍

If you could give someone starting trading tomorrow one piece of advice what would it be?

Minimize your losses. Start out with real money, but with small money. And then first try to not make any losses. Forget about profits in the beginning. The first lesson is to not incur any losses, or only minor ones. Write down why you make a specific trade and check that reasoning every day until you close the trade. Reflect on the results and try to improve.

‍

‍

Fill in the blanks

• Most traders would be better off trading less

• What separates the pros from the rest is dedication

• A good trader should never build too large a position

• The biggest misconception about trading is that most traders win

‍

Any other comments you'd like to share:

Choose your game wisely. As much as you cannot compete at all sports, you cannot beat all markets. Look for your niche. That can be one specific market, one specific asset or also one specific method that you use. 

‍