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EP 017 Guest Interview - A Humble Trader

EP 017 Transcript

Tessa: You're listening to episode 17 of the affirmations for traders podcast. Back in episode 12, a fellow trader and friend of mine, whose name is Ian interviewed me. And I mentioned that I would interview him. I'm truly so excited about this interview that I'm sharing with you. I hope you find it interesting and helpful to listen to what Ian shares with us. From his perspective as a fellow trader, Ian is a successful trader and has been retired for quite a long time. Now, actually from his success in trading, he currently spends his time volunteering, traveling, hanging out with friends and doing things that are meaningful to him. And he still trades and invests, but not out of necessity, but it's more like it's because he likes to do it. He has traded stocks options, and now he's involved with the crypto markets. He had his own journey that he went through and had his share of difficult times and losses. And I think it would be very valuable to listen to what he has to share in a very informative and authentic way. And I feel really honored and privileged to have Ian on this show. So please enjoy. Tessa: Before the interview starts, I have a disclaimer to announce trading in the financial markets involves a risk of loss podcast episodes, and other content produced by affirmations for traders are for informational or educational purposes only, and do not constitute trading or investment recommendations or advice. Tessa: Hi, Ian, thanks for coming onto the show. Ian: Yes, thank you for inviting me. And uh, and now you get a chance to ask me questions. Tessa: Yes, this is the fun part. So maybe we can start off with giving the listeners an idea of how, how did you get started in trading? Ian: Yeah. How did I get started in trading? Uh, well, I, I right around the start of the internet back in 1995, 1996, it was a very quick and convenient way to look at stocks and dive into, um, looking at company fundamentals and message boards and I became addicted very quickly. So, uh, so yeah, that's been, um, what, more over 25 years ago. Tessa: And, uh, so that was during a time pretty, pretty challenging time during the, dot com days or... Ian: Yeah, it was actually, it was, it was just at the start of the dot com days. Uh, yeah, mid nineties, 95, 96, got a job with, um, with a software company over in near Seattle. And, I had plenty of time during the day to look at stocks and, when I wasn't working. So, yeah, it became, uh...I quickly got into technical analysis and looking at company fundamentals and reading the message boards, and then started the trading. It was, yeah, very addicting. Tessa: Yeah. And so, if you don't mind me asking, maybe you can give the listeners an idea of, you know, your best moments of the trading back then, and in general, what contributed to the success of your trading? Ian: Well, the success success came usually as a result of many painful lessons, painful lessons of, of, uh, greed, mismanagement, um, and watching the markets studying sectors, I should say, and getting to know all the companies within that sector and learning kind of how they trade and what have you. So, um, best moments of course is ostensibly is when you make lots of money, but the problem with that, if you don't manage your, um, your greed, you don't manage your emotions. Uh, you get to get overconfident very quickly, and that just sets you up for, for a bigger fall later on. If you don't maintain discipline, if you don't maintain a trading plan. Um, so yeah, the best moments is when you, I found is when I incorporated, uh, the lessons, the painful lessons that I had learned along the way, and, uh, achieved very profitable trades, um, throughout time by being very patient applying my strategies and, uh, then coming, having them come to fruition, that was more satisfying than the quick, um, junk food fix of a quick, um, you know, quick profits. Tessa: Yeah. And you mentioned strategies. I mean, how, how did you come up with your strategy? Was it through years and years of trial and error, or how did you finally pick the strategy that contributed to your success in trading? Ian: So the strategies I was learning, um, when stocks within a certain sector were mispriced relative to each other. So, I would get to identify like which, which stocks in a particular sector, like say was the, um, energy sector or the green, you know, um, green energy, uh, dot com, whatever. I would get to notice which ones, which companies were the leaders, which one were the laggards and notice when one company started to make its move and then you'd have a number of days before the other company started their move. So, comparing and contrasting companies within the same sector is what, yeah made a difference. Tessa: So I imagine that, of course you went through a, a lot of ups and downs in trading, and I think that's a lot of what people don't hear as much is they hear about all these, um, traders who, uh, do really well, but maybe they're not getting the full picture of what it took to get there, or the many, many times when they lost a lot of money. Maybe you can share a little bit about that. Ian: Yes. So, a common mistake that a lot of traders make, I mean, being human, I mean, it's, it's part of psychology really is thinking that, um, especially after you had some profitable trades go in your favor E even more so if you've had some big, um, profitable trades, especially early on, as you begin to, to overvalue your yourself, you begin to think that, oh, you know, oh, you're really, you got this down and this is, and then the regrets that you have are regrets of not going in bigger. And so then that's, it creates early big successes create the problem of, of, um, going in big, uh, later on and, um, not being cognizant of the risks that you're about to take. And, uh, maybe even using margin, you know, using debt to, um, to lever up on a trade, uh, and not the biggest issue. Ian: One of the biggest issue I found it was not being humble and big losses can be often connected to inflexibility of the mind, unwillingness to change your mind quickly and get out. Um, because a lot of people, they marry, they get married to a stock and they say, oh, it's gonna go up, you know, even higher and higher and greed sets in. And then the cycle of when the stock starts to fall, they say, oh, I'll sell it once it goes back to that level, or once it goes back to that level and frequently that doesn't, it never gets back to that level. And they end up taking a round trip on a lot of their trades and even going, getting into losses. So, um, mental flexibility is one of the biggest lessons that I learned. Tessa: And, how do you improve your mental flexibility? How did you do that? Ian: Having a determination and understanding like a trading plan, you could say, uh, you know, whether it's written down or mental that you will get out of your position once it falls a certain percentage from, um, from when you bought it or if it hasn't moved, you know, above your price within a certain period of time, Tessa: Can that also mean being able to, um, adjust to the situation? Ian: Yes, absolutely. Absolutely. Yeah. Uh, cuz we all have, we all have grandiose ideas on, on how big this stock is gonna make it or how, how much this trade is gonna make you that's that's normal. So yeah. Being able to deal with our own, um, greed and fear is the big I find is the biggest, one of the biggest challenges out there, Tessa: Trading psychology and the mindset. I mean, how much of that contributed to your success in trading? Ian: Yes, it, it, it definitely played a role because, uh, when, you know, you, you have experience and you go back to your previous losses and, and uh, and uh, you start entering in a position and you have to check your greed at the door, so to speak, you have to, um, be disciplined to scale into the trade. Um, don't go all in on any one trade ever, um, try to balance out, you know, maybe a short position with a long position, um, be, be very adaptable. Um, mm-hmm and as, as humans, we don't like to be told, uh, we don't like to be reminded that we, we make mistakes or that we're wrong. And our ego is a, is a big, our ego acts to block us in a way from the procedural steps necessary to become successful. Ian: I've seen it time and time again, not only for myself, I've seen it with friends who go all in. They think this is it. This is I've got the bottom. Now, like I had a friend who, uh, um, was very conservative. He didn't never bought into uh, boom. And then, uh, March of 2000, when the stocks started falling a lot, he said, oh, this is it. I'm convinced this is it. And he goes all in and uses margin. He spends his entire life savings. And, um, a week later he gets completely wiped out all his savings gone and that's based on ego, it was ego driven, trade thinking that he knew it all. And this was, he was picking the bottom and the, you know, and I have other friends that it happened to too. It's Tessa: Mm-hmm Ian: Yeah. Tessa: And these kind of things, it's not like you just learn in a textbook and then you're able to, uh, you know, apply it right away. I mean, it, it takes time to really develop that kind of mindset. Ian: Exactly. Yes. Because one can intellectually understand something and they can take a course work and they can study that and their mind can agree to it. Oh yeah. Yeah. That's, that's understandable. I understand this. So I'm ready to be successful now, but it's not until you get your emotions involved that your emotions, uh, can, can sabotage your, um, the discipline and the structures that you agreed to follow ahead of time and, uh, cuz your emotions will, can overrule you know, your decision making. Uh, so yeah, you have to, you have to live through it. That's why I feel paper trading is really kind of a waste of time because unless you have skin in the game. Yeah. Um, you know, there's no, there's no substitute for skin in the game. Tessa: Yeah. There's, there's different, opinions on that, regarding paper trading, right. I mean, for me, myself, I'm probably a bad example, but I've never really paper traded when I first started trading, I just went for it and I, um, and I traded live, so that I can feel the emotions. Um, so then there's a lot of advice from people that you should paper trade. And I agree too. I think it's good to paper trade for the purpose of learning the mechanics of training. Yes. But knowing that it's not the full you, you're not really having the full experience by paper trading. Um, like you said, you don't have the skin in the game, but then again, it may be good for different purposes. Like, you know, learning the mechanics of trading and the technical side of trading. Right. You mentioned a little bit about trading plan, right. How important do you think it is to have a trading plan and a trading process as well? Ian: A trading plan trading process, I would say at a minimum, it's very important of knowing how to cut your losers. Um, that is probably the most important, uh, part, you know, as far as when to get out of the stock, if it's in profit, that's another category cuz you're already in the black at that point, um, can be a different, it's a different discussion. But the number one enemy for traders is knowing, being able to and willing and know when to get out of a position, uh, cuz otherwise your, your ego and your fear is gonna take over and , it's gonna rule you. So the trading plan is designed to protect you from yourself. Uh, the trading plan is designed and created when you're in a calm, rational state of mind. You use your reasoning and you create a plan before your emotions take over and you, you have that as a reference guide to go back to so that your emotions don't rule over you, Tessa: When do you kind of deviate from your, your trading plan? Cuz some people they think that, you know, if you'd have a trading plan, you're gonna follow it to the T, but should there be some degree of flexibility? Ian: Yeah, I would. I would say that the degree of flexibility is much more on the, um, profit side than it is on the losing side. So your trading plan, you may say, well, I'll sell, um, once I get a double, for example, mm-hmm but as you, as it, the, the trade unfolds or as this process unfolds, you notice that other companies in that sector are moving much more than your company is the company you've invested in and they all tend to move as, say, as a group generally, is that you, um, make adjustments to your trading plan when you see that there's more upside potential there. Um, and um, you know, you can get into other details, like the shape of the chart, you know, it's how rapidly is it moving up? Is it slowly trending up? And so that's where I think the biggest, um, where changes to the plan are most appropriate. Ian: It's most important to follow the trading plan when it comes to when your, when your position starts to turn into a loss that's when you, because invariably, most traders are gonna say, oh, well I'll just sell it once it, once I break even on it, and then they ride, write it down for 20, 30, 40% loss or more on the hope that it will get back to their purchase price. Right. Um, and so that's follow that. I would say follow that part of the trading plan religiously mm-hmm um, as far as when to get out of a stock, that can be very, you can adjust that and be flexible. Tessa: And then I also mentioned about trading process. How big of a role did that play in your, your trading before? Did you have a trading process Ian: First? I don't get into any position unless I understand the other, uh, companies in that same sector, what their what's going on, what's going on with the industry and see what's the trend of the industry. The industry is continuing to down, you know, so I don't like to buy a stock and a steady down trend and I like to wait until, uh, it shows signs of, of a bottom and a rebound. Uh, so that's why I look at all the companies within the sector. Uh, uh, and so most of the time is actually spent for me is spent on just doing research, just looking at, um, being familiar with, uh, okay. So what's going on with the market, with this company, with the, with this sector, uh, and waiting for a catalyst, that's a key thing is waiting for a catalyst either up or down, um, to take a position over trading is a big, is a big problem too. Ian: Um, for a lot of people they think just because they found something, they think, oh, I have to buy it today. It's like, no, you don't have to buy it today. Yeah. Maybe, maybe you take a position, but start off with a very small positions and then scale your way into it. Let the position prove itself first. So you add to winning positions and you cut short losing positions, so never go in. So if you say wanted to put $10,000 in a stock start off and you're not really not sure of where the direction's gonna go, but you think it's good company to invest in, start off with a thousand and then wait till the stock starts to move up in a good trend line and maybe add more, uh, as you go in. So Tessa: That requires practicing a lot of patience. Yes. Right. Um, the waiting part waiting for yes, yes. The right moment. Um, and, and having discipline, having self discipline on, on waiting. Yes. And doing your research. I mean, all of this is part of having a trading process that I think, um, it's part of practice. I view trading as, um, a practice because no one, I don't think any trader actually graduates from it. There's always something to learn. Even after years and years of trading. Ian, in your case, do you feel like you are always learning something new? Ian: Yes. I'm always learning something new and it will, let me say it's, it's not that I don't know these. It's not like I'm learning something totally new that I've never learned before. But I'm almost having to relearn it because again, the ego takes over and it's easy to forget the lessons you've learned in the past, especially when things are going well. And it's easy to go back to old mistakes because your ego takes over and you say, oh, well, I've got it down now I've refined. And, and you you'll, you'll come up with amazing number of excuses to tell yourself what a great, you know, how well you're doing. And, and, uh, and so people it's easy to get sloppy. Uh, so, so yes, getting relearning that, which I've learned before. Yeah. Uh, it's very, it's humbling, you know? Tessa: Yes it is. And um, I like to bring up the, the topic of yoga because you, you practice yoga. And so even just yoga, they use the word practice, Ian: Right? It's a practice. Um, it's getting your mind into a, a, into a mental state free of, um, disturbances from the mind, right. Where you get into a flow state where you're not ruled by your ego and your emotions, but, um, you get into kinda like a, a type of bliss, state. And so by practice that it's a practice, it's like a discipline, it's a type of discipline. You keep yourself on the straight and narrow and, uh, um, you follow certain practices, um, discipline practices that, that help keep you outta trouble. And if you can just keep yourself outta trouble, the profits will take care of themselves. Tessa: Yeah. Yeah. And I like that analogy and because I don't do yoga as much as I should, but, um, you know, practice, I think it's like a lifelong thing is practice practicing and learning is lifelong. Right. And so how I think about that and trading is like you mentioned, I mean, you, you, sometimes you have to relearn things and you have to practice to get better. And even if you've maybe one day you did really well, like let's just say in yoga, one day in yoga, you can do the headstand pose. Ian: Right. Tessa: But it's not...Even the yoga gurus... they have their days where maybe the next week they just can't do the same thing again. Ian: Exactly. Um, Tessa: Because their body changes or something happens where they're not able to do that. Ian: Exactly. So like in yoga and like in trading and don't get married to the past of what you did or could do in the past, each day is a fresh day. Tessa: So like in trading as well, I mean, don't get married to it. Um, but keep practicing practice, uh, developing your mindset to be able to handle, uh, the ups and downs of trading because yes, it's part of trading. It will come, Ian: Right? Tessa: Yes. Losses will come. Gains will come. Ian: Right. It's interesting. Cuz uh, studies have been done on what kind of traders, uh, who are the more successful type of traders and it's, it was, it was commonly found in studies done that, that, um, the successful traders, very rarely, I mean, do they go all in on one company, they will have a mixed positions, you know, and have proper positions sizing for, for example, maybe, um, they put in, get into 10 different types of positions, some longs, maybe some shorts, but that they don't, um, they, they, they swing for, they try to aim to get to first base instead of always swinging for a home run, they go for high probabilities instead of, you know, the big payout. It's all, you know, it's sexy to think about, oh yes, I, I bought a stock at 10 bucks and it went to a hundred or, or a thousand or something like that. Ian: But in reality, the real successful traders concentrate on getting reliable returns, um, consistently. Um, and yes, many of them do lose money, but the thing is they keep their losses short. They keep it, keep it small, keep their losses small. So, uh, and uh, another study was done is interesting. I read, uh, some years ago about how a group created a trading platform or trading strategy, cuz they had access to, um, uh, traders who lost a lot of money and they identified key some key characteristics of what happens to a trader just before they blow up their account and how their mindset takes over. Uh, and they start doing things like revenge trading or trading, much more rapidly trading in bigger positions thinking that, oh, they gotta get back to where they were because if only they just get back to where they were. So they take on these much bigger positions and riskier situations that they normally would never take on. Right. So, uh, it was um, anyway, so this group basically traded against that whatever the risky traders were doing just before they blew up their account and they made a whole investment strategy of when risky trader, uh, goes long, a particular stock, they will short that stock. Or if they risky trader goes short that stock, they will go long, do the opposite to generate good returns because of the common characteristics that are displayed right before, uh, an account gets blown up. Tessa: So it's, it's pretty predictable of what they would do. Yes. Ian: Uh, those exactly certain patterns, certain patterns that they kind of, you say they lose control over, over themselves. And you know, it's an aspect, it's a frailty of, uh, human psychology really. Tessa: So we talked a little bit about, uh, you know, your success in trading. Do you mind sharing a little bit about the, the losses that you faced? Ian: Yes. Uh, yes. They're all painful. We've we we're all going to experience them at some point. Um, yes. Uh, certainly had plenty of losses, uh, along the way. And you know, one of the biggest ones that I had, uh, was back, um, this company called KTel International and they sold music hits of the seventies and eighties, you know, get your CD, you order it on online and they actually had a website. Right. So, um, anyway, long story short is, uh, quick look at the financials saw that this company is a joke. And so I shorted sold short, the shares expecting to profit from the fall in the stock and things were going well, uh, shares were falling and falling and falling steadily over a period of, uh, of a few months and looking at the financials, I say, this, this stock should go to zero. Ian: And so, but then they announced a deal with Microsoft to put their website logo on some as part of Microsoft site, right? Just that alone. This is back in days sent the stock rocketing, uh, it tripled in price in 15 minutes. And so I get to work and I'm horrified to see that my position I'm I'm way down on my, my position. And uh, then I get a margin call from the broker and then I had a little voice popped in my head from memories of reading, a book called market wizards. And many of the traders in these are successful traders throughout, uh, history. And they interviewed what mistakes they made and what they learned. And they shared is never answer a margin call, always get out of your position if you get a margin call. So I was fighting between my greed of like, I know this is gonna go down. Ian: I know this is gonna go back down. And my fear of, oh my God, I got a margin call. I should do it. And, and I listened to my training. You could say, and I got out of the position and reluctantly, but I got out. And then literally the next day they announced another deal with, um, some other company to put their website logo on their company. In, in today's terms, it is a total fluff. It means means almost nothing. Anyway, the stock went back to its all time hive around $40. You know, I tried shorting it then again, but there was no shares available to short. Uh, and I was correct in that it did end up going to zero about a year later it went bankrupt so my prediction of, um, long term was correct. It was go to zero, but if I didn't listen to the short term indicators, if I hadn't listened to that, I would've been wiped out. Had I had I put in money to meet the margin call to hold on the position, convinced that this stock was gonna go down to zero, which it did. I would've had my entire account blow up because of short term, uh, a short term situation that was beyond what I could have imagined being willing to cut your losses. And that saved my account. Uh, even though I was right in the long term. Tessa: Yeah. Be willing to cut your losses. Um, that's, that's a challenging part because we tend to, uh, like you said, it has something to do with the ego to, and you're thinking, no, this is, or, or just, um, denial denial of what's going on and you just hang onto it. Greed played a big part in it. How do you overcome the greed? What helped you over the years to, to manage that? Or does it still come from Ian: Time to time? Oh God, it comes all the time. I mean the greed, it's a rush. It's like a drug hit, you know, I mean it's, it's hits the pleasure centers of the brain and, and you feel so good and, and you think that you, you know, you're smarter than you are and the greed will just set you up for, um, future mistakes down the road. If you don't learn how to control it because, uh, you will take on positions that are bigger than they should be, uh, and getting into stocks that you probably shouldn't get into, not just stocks, but anything. I mean, this all applies to every stocks, commodities, crypto, you name it. Mm-hmm. Tessa: What would you say, would be the biggest mindset related issue that you currently still maybe struggle with? Or maybe you, you're not struggling with any of those, but, um, what, what do you think that is probably the biggest challenge that, uh, needs a lot more practice, Ian: Uh, over enthusiasm. about, uh, I'm I'm doing, uh, cryptocurrencies right now and it's easy to get SW swept up in the over enthusiasm that, uh, oh, this is, this is gonna be the next big thing. And it is turning up to be a growing, um, you know, uh, a growing new financial system. Uh, but it, it, it reminds me quite a bit of the dot com era in that, yes, you had a lot of companies that come out that rocketed to the moon and everybody thought this is gonna transform everything. And the internet did transform us, but in the process, there were hundreds of companies that went, that blew up and we haven't seen that, uh, went bankrupt. Tessa: Yeah. I'm glad you brought up cryptocurrency at, is this what you're into right now? Ian: Yeah, I'm, I'm not doing as much trading as I am. You could say more investing cuz the crypto markets allow us to get involved with investing strategies that were not available that are not available to us in the regular stock market. So in the regular stock market, you have, uh, what's called market makers and they facilitate trades when buyers and sellers come along to provide liquidity. Well, you can now in the crypto markets, you and I, and everybody can do the same thing, providing liquidity for traders, um, every transaction. And so, uh, there's a lot of lucrative ways within cryptocurrency where you don't need to bet on the price direction of the cryptocurrency. You can just collect fees from every transaction fee that goes through. Uh, and so it's a great way to earn income at level that is not available in the regular stock market. Um, Tessa: That's an area that, um, I, I think a lot of, uh, it's still kind of new territory, well, not that new, but um, it's something that I'm, I'm curious about learning more about and I'm sure a lot of, uh, trades are too. How did you transition into this? Ian: I, I knew about cryptocurrency as long before I got into them, but I thought they were just, you know, just pure speculation on, okay, well, if I buy Bitcoin when it's low and then it goes up and I sell it and I can make money. And I said, well, and I asked myself, well, what's the difference between that and just buying stock. So I never bothered to get in until I heard a great, um, interview with one with a stock market guy named Jim Bianco. And he said, no, it goes way deeper than that. It's involving these things called smart contracts that allow, uh, decentralization allow for transparency, um, and automation and efficiency where, um, we get to participate in a, like a new type of financial system you could say. So it goes much more, it's much more than just speculating on whether a coin will go up or down, but that we can generate yield by loaning out our coins, for example, to other traders. Ian: And we can collect some very, very good interest rate yields on them. Uh, and we can, um, do what's called like being a market maker for, for these transactions where we don't have to, again, we don't have to bet on whether coin's going up or down. We can facilitate transactions for both buying and selling. And for our willingness to deposit our coins into a pool, we collect transaction fees every minute. Uh, and the yearly annual yields on those are much, much higher than you could get in the regular stock market. So, uh, it's a new frontier and the reason why a lot of people say, well, how can you get these, you know, like peoples ask, well, what, what kind of yields are we talking about? And I commonly see yields between 20% and 80% annualized paid out hourly. Uh, and they say, well, it sounds too good to be true. Ian: How is that possible? The reason why it's possible is because of the number of people that providing this liquidity is relatively small to the transaction volume of people buying and selling. So the bottom line is that institutions haven't yet gotten into this in a major way. It's still early on in the process. And so, because it's early, we get to take advantage of a market that's relatively small. I mean, it's 1.8, um, 1.8 trillion, the whole market cap of all the coins, approximately, but you compare that to $9 trillion worth of gold, you know, dozens and I dunno, 30, 40 trillion or more, uh, in stock market capitalization, the bond market. And so it's relatively small compared to all the other areas. And so, uh, um, yeah, we get to take advantage of being early. Tessa: It does sound too good to be true. Uh, you know, for, I think a lot of people, um, a lot of people are still wishy washy about it, not sure if they should get into it. Uh, and maybe that has a lot to do with just not understanding how it works yet. So, uh, can you go into a little bit more of, uh, what I think you mentioned the finance, uh, sorry, uh, decentralized finance and yield farming. Can you just explain a little Ian: Bit more about that? Yeah. Okay. So centralized finance is the finance that we know about banks, brokerages houses, TD Ameritrade, Charles Schwab fidelity. Those are centralized. You gotta have your name and address and all that stuff. Government track, decentralized finance is anyone anywhere in the world can create, um, can create sites that offer trading opportunities, yield farming opportunities, liquidity opportunities that, uh, that don't require they're not regulated. They don't need to get permission to set it up. It's relatively inexpensive to create these right. Uh, and it allows actors from all over the world to participate. So, uh, people can create sites that, um, uh, where you get to buy and sell stocks or mirrored assets, they call it. So let, let's just say the nature of the technology is such that, uh, there's a lot of innovation going on in the space on lending, on, um, you know, borrowing on what's called stable coins, um, coins that produce real, tangible value in the real world. Ian: And I'm able with my stable coins, which are always at a dollar, uh, I'm able to generate yield, or I earn 19% on the coins that I deposit into the account. And I'm also able to buy products on I'm able to buy, um, gift cards, uh, from whole foods and, and home Depot and a whole bunch of companies. So it's the cryptocurrency universe is transitioning into a new type of payment system that will make Western union and visa and MasterCard obsolete. So what Uber did for tax did to taxis, decentralized finance is going to do the same to centralize finance. Tessa: What kind of risks are there in, in this space that you're in now? Ian: Oh, okay. So the risk, I mean, you have, what's called smart contract risk, um, which doesn't happen too often, but, uh, it can happen and people have been scammed out of their coins. Like they'll click on, they'll get, receive a message from somebody or they see it on a link that says, oh, get your free this, or you're free that. And they click on it and they don't pay attention to what they're clicking on. And then they end up authorizing a transaction that is really going to a scammer. So they have, there are risks in cryptocurrencies that do not exist in the regular stock market because we've, we're not used to being, you know, we're unprepared for these kind of risks because when you, we log into our trading platform, uh, our stock trading platform, we don't have these kind of risks. They've been engineered out of them. Ian: So, um, yeah, that's the biggest, the biggest risks are from, you could say kind of carelessness, uh, and being too trusting another risk, um, for the cryptocurrency markets, because it's so new, uh, the governments are governments around the world, but especially the us government is trying to get a grasp on what kind of regulations they need to apply to this. And you have factions, you have the pro cryptocurrency faction, you have the anti, uh, cryptocurrency faction within governments and they're battling it out. And, uh, they're pretty extreme on both ends. And they're trying to come to some sort of, uh, compromise, uh, and that is in my view, the 800 pound gorilla, uh, that's due to be solved this year, uh, from Biden's executive order that gives agencies 180 days to come up with a plan. So we should have this hopefully mostly done and wrapped up this year. And, but we don't know what the, the shape of the regulations are gonna take place. So I definitely have to say that is a risk factor. Um, Tessa: So let's just say that, that, that does happen. Regulations come in. What does that do to, to traders or people in the crypto market? Ian: Well, it, what it could do is it, it, it may, um, restrict people to trading only certain types of cryptocurrencies only on the centralized exchanges that you had to give up your name and your phone number and your social security number to, to get an accounts created. Uh, so there may be that those kind of restrictions. So those yield opportunities that I was mentioning earlier, uh, those may be heavily, um, restricted or, or blocked in some ways. Now there's technological limitations on what they can do, cuz this is not like this is the cryptocurrencies are all over the world. So it, it's not like one, one government can control everything but they can make, they can definitely make life more difficult for us. So it's kinda a we'll wait and see what comes out of these regulations. Tessa: Another thing is what kind of edge do you need for this type of market? Is it just being, being there at the right time, getting in early, or is it more than that? Ian: The edge would be, is being, I mean, if you can see where, um, where a particular protocol has real use cases, like how is it being adopted? Because this is a, this is an adoption. This parts of the cryptocurrency universe are being adopted in the real world, um, designed to, you know, replace, uh, Western union visa, MasterCard. Um, so the, the edge would be, you're just simply gonna have to invest the time to see the new, uh, opportunities coming out, cuz there's a lot is this space is changing so rapidly. It's not like in the stock market where a company has to go through, you may, you know, fairly long IPO process and then you have all these documents and it takes time and, and, and the, the stock market is much more matured obviously because he has over a hundred years of, of trading history. Whereas the crypto markets, it is a little bit like the wild, wild west in a very exciting way, um, full of risk and great opportunities. Uh, and, uh, so, um, there's something for everyone. The cryptocurrency universe can be very conservative, moderate risk, or super high risk. So you get to pick which area that you want to focus in on. So there's something here for everyone, Tessa: You know, uh, I really appreciate you taking the time to, uh, share a little bit about what you're into now, which is in the crypto markets. What advice would you give to someone new in the crypto markets? And what's the best way to learn about it? Ian: Uh, the best way to learn about it is to get on YouTube and just type the word crypto. And I learn so much. There's, there's people who have a lot of different channels that they come out with videos, uh, every day, every few days. And they'll go through the different protocols and show you the pros and the cons and how much you can earn from each of 'em. And I've learned tremendous amount, um, from these videos because these people it's like they eat, sleep, drink this stuff 24 7. And so, um, it's a big time saver to watch these videos. Tessa: That's, that's great to know. YouTube is amazing. You can learn everything on there regarding the mindset in, you know, the trading psychology, um, behind trading stocks or options, forex, futures, and crypto, especially with crypto. Now it's just a totally, almost like a totally different world, um, because it's still very new to many people. What would you say about the mindset that's necessary for that type of trading? Ian: Yes, I would say going to this market understand that many of the, uh, coins that are available today may not exist 10 years from now, just like during the dot com boom days. Many of the companies that were available to purchase in were no longer around, um, five, 10 years in, in, in the future. So the mindset is, um, stick with well known quality names. Uh, you could say like blue chip names and being willing to, um, have flexibility of mine being willing to sell your position. If, if the position does not move in your favor within a certain time, period is like having to regulate yourself from marrying any particular coin or whether stock or what, what have you uh, cuz even though the company may be good or the coin may be good and they may survive long term, Amazon is a perfect example of this. Ian: Amazon went to dizzying Heights during boom, uh, uh, rose rocketed to the moon and then it came, crashing down, fell over 80% fell as low as $5 a share back in 2002, $5 a share. And then here we are at, you know, multiple thousands of dollars per share. So that can happen with crypto two. So, uh, no matter how good it sounds is have flexibility of mind, no matter what position you're in, being willing to get out. And maybe you come back in months later, but flexibility preserving your capital is the most important rule. Tessa: Yes. Preserving your capital is probably the most important thing. Well, there's a lot of important things, but that is super important as well. Preserving your capital so that you can still be in the game to continue trading and learning and improving. Ian: Yes. Tessa: Well thank you, Ian, for taking the time to sharing your trading journey and a little bit about what you're into now with the crypto markets and, um, and also just adding your perspective and insight on the mindset and trading psychology behind all these types of trading. So anyway, I really appreciate it again for you to be here with us. Ian: Yeah. Thank you for inviting me. Happy to share. Tessa: Thank you. Tessa: Hi there, I have a quick update to this interview that I did with Ian. It was actually recorded before the recent crypto market crash in early May. It was just about the time when I published this episode. Many, especially in this market were caught in it and lost a lot of money. And it's just a humbling reminder that we need to continue to do our due diligence and apply and practice risk management, self discipline, as well as other important aspects of trading, no matter what type of trading that you do. These are universal concepts that are important to pay attention to. Tessa: You were listening to Affirmations for traders. Thank you so much for listening. Have a wonderful day, have a wonderful week. Take care.


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