In India, there's an ancient tale of a king who became a sage in order to assuage his ego. King Vishwamitra coveted a cow belonging to sage Vasishta. When the king asked the sage to hand over the cow, the sage refused saying the cow wasn't his property to hand over. Being a king and all, he attempted to take the cow by force and was defeated by the cow's army. Humiliated by the defeat and consumed by his quest for the cow, he spends several years acquiring a powerful weapon from the gods. Part two is a repeat of part one; he is defeated again and is left feeling even more humiliated. By now, his desire to extract revenge is all consuming, and he forsakes everything in order to become a sage exactly like Vasishta. When he finally gets there, Vashista initially refuses to acknowledge him as an equal but finally relents and does so. The entire story is quite worth reading - their rivalry and how they go about it puts the plot of Mean Girls to shame.
I've not had a good year in the market. Every day on Twitter, I see folks bragging about their performance and their amazing trades with no drawdowns. I covet those returns, much like the king coveted the sage's cow. But is it worth my while to try and mimic their trading style in order to get there? Not in the least! First of all, those returns are probably fake. Maybe they had one good trade out of ten and are bragging about it. The folks who are up 50% ytd may have been down 50% in 2021. I don't know their history. FinTwit is a lot like Instagram, you are constantly exposed to the best side of the people who are temporarily successful. Real, successful traders only post occasionally; they are too busy making money (when they do post, they talk about setups and risk/reward in particular trades).
Everybody wants a butt like Kim Kardashian, but all we do is look at it and then go about our lives. FinTwit should be no different. Sticking to the analogy, the boastful tweets are actually not even as good as Kim's butt. At least you know that Kim has to put in the work to consistently look glamorous. FinTwit posters will keep rotating, as one style goes out of favor and another style comes back in favor. That's why you see the energy bulls staying quiet now, while the traders on the short side have made a comeback. Before energy, it was shipping, and before that it was commodities, fertilizers, NFTs, crypto projects, the exponential age, uranium, the gold miners, and so on. Peak boasting nearly always coincides with a top for that particular style of trading/ positioning.
Don't be a Vishwamitra; don't covet what the posters have; don't go on a fruitless quest out of a false sense of ego; don't change your strategy or trading style just for the sake of Keeping Up with the FinTwit-ians. Vishwamitra forgot that he was a king, forgot everything he did to get there, forgot the power he wielded, forgot his people, all his wealth and property, all that he had acquired until that point in his life, and changed his life completely just to acquire a cow and some peer recognition. The story doesn't make a moral judgement on whether the quest was worth it, but try asking a successful trader if it would be worth their while to forsake everything that made them successful in order to revenge trade and mimic a different trader's style.
The best traders stay true to their style even amidst drawdowns - that's how they get out of those drawdowns and continue to compound at a high CAGR over the long run.
Next time you're feeling performance pressure based on what you see in the media, just spend some time watching reality TV instead.
Pic courtesy of Jason. Every strategy, even wildly successful ones, have drawdowns. They are unavoidable. Not a reason to switch styles mid-stream.
Ridicule follows fame just as panic follows euphoria.
Good Trading!
Kashyap