Lessons from a Fun(d) Guy
When the going gets tough, the tough get going. Overall morale might’ve been deep in the gutters yesterday, though there were still a number of folks out there providing value.
In the wake of a slower than usual media day (most headlines were focused on the real-time Armageddon), we’re going to dial in on trading lessons shared by Marc Dietsch, a 6-year hedge fund manager who managed $100 million in futures, options, and FX.
Appropriate position sizing. Traders don’t go bust from losing with proper position sizes – they go bust from losing with too much in the pot.
Leverage is not your pal. Don’t let the grandiose payouts distract you – most people that trade using leverage see their holdings go up in smoke. Stay in your lane, or better off – stay off the Autobahn.
Don’t trade illiquid assets. Same song as leverage. Less liquid projects move faster (i.e. higher volatility). If you haven’t traded illiquid tokens before, keep it that way – stick to those with more volume.
Use the Sharpe ratio. For those at home, Sharpe Ratio = [(average return) – (risk-free return)] / standard deviation. Portfolios with high volatility and high returns (low Sharpe) are easy to stumble upon. Ones with low volatility and high returns (high Sharpe)… not so much. Strive for the latter.
Trend or mean-reversion: Is the market trending up? Down? Or is it “sideways”, aka mean-reverting, aka “range-bound”? Different strategies can be applied to each. If it’s mean-reverting, know what “cointegration” is – more on that here.
Take profit (actually). Set targets at the beginning and stick to them. And if you think you have too much money… it’s probably time to sell. Shoutout to January and an $832 million total cap.
Do your homework. Trade setups that worked in the past aren’t entitled to future success. Map out the setup and make a call from there.
Beware of the HODL. Great for fostering community, not as great for making money. The art of the HODL applies well for bull markets but can steal your gains faster than a scamcoin pump and dump if you’re not cautious.
And if you haven’t already… read Market Wizards. You can thank us later.