The Age Old Question: Is there a RIGHT Way To Trade?

























"There is only one side of the market and it is not the bull side or the bear side, but the right side."
- Jesse Livermore 


























Disclaimer: This is my opinion on a number of things, including whether or not one way to trade is right or wrong, better or worse, morality in the game, agendas, groups of people in the space, etc. It's not meant as an open discussion for you to send your refuting points flying back at me - I'm not arguing with anyone in this post, and it's not directed specifically at anyone. I won't read or engage with them, I'm just sharing my thoughts on the matter here. If you don't like it, then don't read it. This is a free country - you are allowed to call me an asshole, X out of the blog, and leave if you so choose - because I'm going to be pretty raw and honest in this one. Some of the things I say may come off as emotionally driven, but I want you to actually think about it before blurting out the first reaction you have, and you should (I hope) see that it's logically derived.



I'm very open about the fact I much prefer the short side to the long side. This is nether right nor wrong, just what I learned when I came up in the trading biosphere. I will be the first to tell you that this is a close-minded approach, and I am an active work-in-progress to open it up more. I have been longing more stocks over the past few months, and will continue to grow that style and incorporate it into my arsenal more effectively. But as of today, the reality is this - I am good at shorting. Shorting stocks is what makes me money and where I've found success, so that is what I have been doing. Plain and simple.

People will say "But but...you're forgetting about so much money elsewhere!" Yeah, I am. There is money all over the place. Long. Short. Daytrading. Swing Trading. Long-term investing. Options. Forex. Futures. Crypto. Hell, why stop there. Why trade at all? Why not just go open a small business, there's money there too. Why not get into Real Estate, there's even more money there. The list is endless, my point is...you can not do everything all at once. If you plan to tackle many different challenges in your life, it must be done in stages, not simultaneously.

One of my favorite Bruce Lee quotes is this:

"I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times."

Now I'm not saying you should only be doing one thing, and one thing only. Don't take that too literal. It's meant to represent a bigger ideology - that those who find massive success in anything, are usually obsessed and hyper focused on their craft, not trying to stick their hand in every cookie jar and every opportunity out there. Spreading yourself too thin in the name of diversification will just dilute your sweat equity, not strengthen it. So if anyone tries to tell you that you are doing something wrong, or trading the wrong thing, or you aren't accessing the full potential of the market, well, no shit Sherlock. You can make that argument for almost anything in life - that we're missing things. 

What does this mean for you? It doesn't mean to only do one thing, because I believe as humans we are capable of far more than that. It means try to focus on just a few things. For example if you are a small cap short seller, perhaps that is too limiting. Try to get the most out of your respective area of choice - in this case that would mean learning how smallcaps work, and how to capitalize on both sides of the trade, long on the way up, and short on the way down. Throw in learning how to play the options on the ones that have them, and now you're really getting somewhere. 

While all of that may seem like a lot, it's really not. It's still all a very small subset of a subset of a much larger market. The entire goal here is to not bring a knife to a gunfight. Markets fluctuate and cycle through phases. For example, over the last month, this Blockchain and Cryptocurrency market has come out of nowhere and rocked the small-cap equity market like none other. If you were a short seller during this time -you were not having fun for a majority of it. If you were a long trader - you are deciding what color Lambo you wanted and whether you want diamond or gold veneers. That's how it goes sometimes. But for every market cycle that is extremely kind to one side - there is an equal and opposite reaction and it will soon be extremely kind to the other side. So naturally, in a perfect world, you'd like to be well-versed in both - and carry a gun, not a knife. If you're an accomplished short seller, say you make 1-2M a year. Think about how much you could have made if, instead of watching them go up, and then shorting, you were long all the way up, then flipped short all the way down. Maybe that number would be closer to 3-4M. Or if you are a long trader nailing all these crypto-related run-ups, why stop there? Why not short them on the way down too? Right? 

So to the point now. 

Is short-selling evil? Absolutely not. Is it better or worse than longing? Absolutely not. People who long trash stocks, well knowing what they are, and making money on "the pump" - are they wrong? Absolutely not. Is shorting "the dump" wrong? Absolutely not. I think you see where I'm going with this. 

If you are an individual trader, on the outside looking in, all of this is completely fair game. It's simply a stream of opportunity for you to seize, long, short, red, green, blue, purple, who cares. The market needs both to function. 

In regards to morality in this space, and why it's not evil at all, listen to this next paragraph very closely.

As primarily a smallcap short seller, you'll sometimes see me tweet about a company I'm shorting, mocking them, or poking fun at what they're doing and what their PRs say. Does that make me an asshole, or evil? Do I take pleasure in people losing money when they go down? No. Why not? This is often misconstrued as "I am laughing at the people who are losing money when it tanks." I get these comments all the time, trust me. "Why are you laughing dude? There's nothing funny about people losing money." I could not agree more. There is absolutely nothing funny about traders losing money, long or short, I hate to see it. I am mocking the company, their management, and the disgusting morality clauses they bypass as a means to make quick buck. Fooling unsuspecting buyers into thinking they are buying something of value and promise - when in reality, the reason most of these companies exist is solely to create illusions of promise, drive their stock price up, and then raise money through stock offerings and dilute shareholders to high hell and leave them holding the bag. It's not right, but at the same time, it's a reality of the game. That is just how the game is played. While I don't agree with it, I am grateful it exists - all of it. The sleazy management teams who sell their souls and companies to the Crooked Capital Firms who run the books for them, the algos that sometimes squeeze me to Mars and back, all of it. Because they are what make this market tick, they create the volume and volatility, and they are the reason I am able to pay my bills, quite literally. By capitalizing on the opportunity at hand created by stock promoters, HFT algos and deceptive management. I am not morally invested in what is going on behind the scenes, it just is what it is, and your job in the markets is to find an edge, and exploit it to the best of your ability to make money. 

If you say you hate shorts....why? If you say you hate longs.....why? I know people who make tons of money shorting. And I know still others who make tons of money spotting short squeeze opportunities and going long. Kudos to both of them! Congratulations on finding an edge that works and makes you money, good for you. As long as they're both making money, they're both right.
Whether you are buying into the pump, or shorting into the dump, it's the same exact thing. You are exploiting the current opportunity at hand. That's it. Don't bring any other questions, comments or concerns into it. Just shut up, and make some money. 

Another common argument: "Shorts are killing these smallcap stocks and forcing them lower, screwing over good people who don't know any better and bought into the PR or promotion!" You see this one all over StockTwits - where all the real geniuses are, obviously.

Listen. The market is not a charity case. Just because you are a good person, or because you invest in some smallcap stock in the hopes of hitting it big - does not mean you deserve to make money. Shorts are not "screwing you" when they short the stock and it tanks. You came unprepared, you probably didn't do any research past reading into the companies' verbal diarrhea PR language, and if that is the case, well guess what.....you deserve to lose your money. And I'm not coming at that in a strictly trading light either - that goes for any investment, anywhere in life. Business, real estate, anywhere. If you make poorly thought out decisions, or rash decisions, you're going to "get exactly what you paid for", so the saying goes. 

The same exact thing applies on the short side. If you are a short seller, and you are running rampant blindly shorting everything in sight "because it's up a lot" without doing any research or putting any thought into it, well guess what.......you deserve to get squeezed and lose your money too. It's that simple. 

I don't hold sympathy for either side, long or short. The common denominator is usually a lack of preparation & a plethora of greed - and these folks will always lose. I'm never happy to see it on either side, losing money is not fun or funny of course, but I don't feel sorry for these people either. Not because I have a cold heart - I don't at all - but simply because that is the way the game works. If you want to play, know well ahead of time what you are getting yourself into. The market favors the prepared and the patient. This is an absolutely brutal, cutthroat dog eat dog world we operate in. If you come unprepared and want to do minimal work and still reap rewards - I wish you luck. It's not going to happen. This is true for all things in life, not just trading. If you try to do anything ill prepared and uninformed - you are going to fail. This is no different. 


I could beat this into the ground using more examples and more words, but it's not really necessary, I hope you are seeing my thoughts clearly. There are ample opportunities on both sides of every trade, that's what makes the markets so great. There are a thousand ways to skin a cat, and everyone does it in their own way. Which is right, which is wrong? As far as I'm concerned - the right way is the way that makes you the most damn money, that's it. 

There is an endless amount of manipulation, fraud, and horrible, horrible people who control much of what is going on in the investing world, and those people have to live with themselves and what they're doing - but for you and I, the retail traders simply caught in the middle of it all - it's one giant opportunity for us to go and figure out, and we should look to capitalize on as much of it as we can, on either side of it.

So that's where I stand. To anyone who says either side of the game is wrong or evil - no it's not. There's arguments and opportunity for both sides, so rather than wasting your time lobbying for the side you prefer, try to  see it from both angles, learn the other side, and maybe even capitalize on it. That's the best path in my opinion.



Hope you enjoyed the read! See you out there.

- D

Comments

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