Plato’s Cave and How I Lost $127,562.06

Last housekeeping note: Fall enrollment for our Collective closes tonight at midnight. We won’t be opening our doors again until sometime early next year most likely. So if you’re interested in joining the team, make sure to click the link and sign up. Shoot me an email if you’ve got any Qs. Looking forward to seeing you in the Comm Center! Are you familiar with Plato’s allegory of the man in the cave? It’s about a man deep in a cave who’s been chained to a wall his entire life. He’s never seen the light of day and doesn’t know there’s an outside world. In this cave, out of the man’s purview, there’s a fire with people moving statues in front of it, casting shadows on the wall which the man sees. The man believes these shadows are real things. He sees shadows of lions and thinks they’re real lions, he sees shadows of people and thinks they’re real people… you get the idea. The shadows are his reality. This story is meant to show the natural state of ignorance man is born into and in which most live — where they spend their days looking at shadows thinking they’re real… This is exactly how my trading career started out. I was that ignorant bastard chained to a wall ogling shadows. I didn’t know jack. But because of my professional background and my previous successes, I thought I was pretty smart. I was even a bit arrogant. This arrogance, mixed with my ignorance, cost me a LOT of money. $127,562.06 to be exact. Here’s the quick story of how it happened. This is how I hit rock bottom, plunging to the darkest depths of the cave of ignorance… and how this painful failure pushed me to discover the key to beating markets going forward. Let’s go back in time to two years before I lost the $127,562.06 gambling in markets. I had been trading for a number of years by that point. I worked a full-time job in an unrelated field but spent nearly every minute outside of work on markets. I was hooked. I read all the classic trading books you’re supposed to and scoured the farthest reaches of the internet for anything that would give me an edge. Through all this work and study, I became decent… or at least I thought so. I only lost a little bit of money while occasionally hitting winners when I got lucky. But like I said, I was arrogant. Every win, no matter how small and infrequent, sparked grand visions of me soon being praised as the next George Soros… but with Ed Thorpe’s quantitative know-how and Dan Loeb’s jawline. I’m not joking. I really believed Market Wizard status was right around the corner, even though I had barely made a penny trading and was by no means consistent. I figured the only thing holding me back from becoming a trading legend was the size of my stake. I needed a real bankroll. I mean who can be expected to do anything amazing when they’re piking around with $15K. That’s play money. If I could get a six-figure line, then I would really buckle down and make a killing. So I went to the Middle East. A war zone in the Middle East to be exact. Not a normal place to build a trading stake, but with my background, it made sense. To quote Liam Neeson, I have “a very particular set of skills. Skills I have acquired over a very long career. Skills that make me a nightmare…” You get the point. Certain companies are willing to pay people with my skill sets buku bucks to operate in a warzone (all perfectly legal, above board, and in support of the US of course). So I packed my backpack along with a 120-pound trunk full of trading books (Kindles weren’t really a thing yet) and set off to the other side of the world. I spent a year working 12+ hours a day, 7 days a week, in a hot and shitty desert, only to go back to my trailer and study/trade markets for another 4-6 hours. I was dead set on becoming the next PTJ. After the year was finally up, I came back with the six-figure trading line I always wanted. I was 100% ready to fulfill my “destiny”. It was finally time to become the next Market Wizard… And then the absolutely worst f*cking thing happened to me. I started winning. And I mean A LOT. I was minting money on nearly every trade. It was ridiculous. I made more than my previous annual salary in just a few months. And in less than six months, I had more than tripled my money. I was like the guy from that old E-Trade commercial getting wheeled into the ER with money coming outta my wazoo! It was the worst… Now you’re probably wondering why the hell this is a bad thing. Well… remember those visions of grandeur I had before? They multiplied 100 fold. I began believing I was the love child of Livermore and Buffett… the living, breathing trading Jesus born to bless markets with his divine mouse click and great hair. Every time the phone rang I fully expected it to be Jack Schwager asking for an interview. Maybe you can see where this is headed… Anyway, after all that winning, the tide eventually began to turn (as it always does in markets) and I started losing. At first, it was just a little bit. But then it became alotta bit. It just didn’t make sense. Trading Jesus didn’t lose… how was this possible? So, of course, like a jackass I upped my risk and started trading more. I NEEDED to make back the money I lost and do it fast. This is when I began my journey to traders’ hell, where I visited all of Dante’s eight circles, enjoying each as much as the original protagonist. Every day I woke up to my P&L bleeding red. And as the losses kept piling up, I felt more and more physically sick. After my legendary year, it took me just THREE MONTHS to give back $127,562.06 in profits. This was no small beans for me. I was a 20-something at the time and this was by far the most money I’d ever had. The fact that I felt like a market god after my astounding year made this fall all the more painful. That’s why I said winning like I did was the worst thing that could’ve happened to me. At some point, I finally hit rock bottom — total utter despair. I realized my Market Wizard year was just a lucky streak and that I was still a shoddy trader. I can’t remember exactly what did it, but I eventually called my broker and had him send my remaining balance back to my bank account. I was done. This experience was more than humbling, it was downright brutalI mean it was knees-to-the-mat-delusion-busting-4am-wakeup-call kind of brutal. The emotional rollercoaster rocked me. And I don’t get rocked easily. I’ve been in some pretty sticky situations overseas and have been trained to handle my emotions. But this was something completely different. I was honestly shocked by the effect it had on me. And that’s when it hit me. Markets are nothing more than a bunch of people like me, trying to manage their emotions. And these emotions are really just a result of their beliefs. Together, these beliefs and subsequent emotions make up the pricing mechanism we call the “market”. So really, if I wanted to succeed in markets, I didn’t need to worry about finding the “correct” price of an asset. I just needed to understand the other emotional sons of bitches I was trading against! It was so damn obvious once I realized it. The majority of my professional training, whether as a spec ops sniper, military interrogator, or government counterintelligence specialist, all focused on psychology over everything else. It wasn’t just about managing my own psychology, but understanding the psychology of my opponent as well. The goal was always playing the player. Hell, even outside my military experience, anything I ever strived for, whether it be a new job, a lovely lady, or even a discount at the car dealership… it was all about playing the player. And if the market is just a giant version of these one-on-one interactions, with beliefs and emotions all mixed in, then what was the difference? It was this realization that helped me finally break the chains keeping me inside Plato’s cave of ignorance. I finally learned what it meant to be a contrarian. And not a twittering holier than thou trend fighting finger missing knife catching “contrarian”… But an actual Keynes' ‘Beauty Contest’ fourth-degree playing patient salmon type contrarian — you know, the kind that actually makes money. I had to earn this realization, with plenty of blood, sweat, and tears — on top of a pile of lost money. But it was necessary. Necessary because that is part of the Trader’s Journey. The trader’s journey is a lot like Joseph Campbell’s Hero’s Journey. We go out into the world and venture into the unknown, accept challenges and stare into the abyss, make discoveries, learn from our mistakes and return a better person with newfound knowledge and skills. That’s what the Macro Ops Collective is all about, facilitating this Trader’s Journey. If you choose to embark on this journey and do it well. You have to step off knowing there is no there there. It’s an endless spiral of growth and evolution. There are always new challenges to tackle, problems to solve, mistakes to be made, and goals to strive for. This is why the MO Collective is not just another newsletter giving stock picks. Yeah, sure, we provide regular research from Brandon (value investing focused), ChrisD (systems+technicals), and myself (a bit of everything). But that’s just a small bit of our value proposition, to be honest. I mean, show me one person who’s become rich after signing up to a newsletter? Exactly… Do you want to know why that is? It’s not just that most newsletters are really disguised investo-tainment. Services that spin good yarns but are only as valuable as monkeys throwing darts when it comes to  your P&L. The bigger reason is that newsletters are all — and I mean all — focused on the wrong thing. Wanna know what that is? Stock picks and market predictions — the same damn thing that every other trader and investor focuses on. The funny thing is if you talk to any pro - and I mean a real pro, not some guy who wears a necktie and regularly appears on CNBC but somebody who actually consistently carves out profits from the market for a living. They all say the same thing: “trade picks are maybe 10% of the game, predictions are detrimental to your bottom line, and trade management is EVERYTHING”. Trade management is about having a watertight process. One that you follow day in and day out. It’s position sizing, risk management, and entries/exits — and more position sizing. That’s it. Nothing flashy or glamorous. The truth is successful trading and investing is fairly mundane. At least it is if you’re doing it right. And that’s why we not only give you fish but teach you how to do so yourself. If you want to join us on the journey, learn to fish, and hopefully catch a few whoppers along the way. Then go ahead and click this link and sign up. You can come in and try us out for 60-days risk-free. If you realize it’s not for you, no hard feelings, we’ll give you a refund in full and hope you continue to enjoy our publicly available work. Simple as that. No downside, life-changing upside potential = a very asymmetric trade. I hope you enjoy the rest of your Sunday. If you’re interested in joining our group of macro traders and investors then sign up for The Macro Ops Collective before this Sunday, October 13th at 11:59PM!

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