$GME - Lessons For A Lifetime
GME was, is and will forever be a major cornerstone of my development as a trader. Perhaps even the most important. Let me tell you why.
Technical analysis is nowadays a widespread subject. Good material teaching is nowadays readily available. Books are abundant. Naturally, unless you're making a conscious effort to avoid learning this very effective tool, the odds are you know by now or you have heard of a "Bull Flag" pattern, a "Head & Shoulders" a "Hammer" candlestick pattern and whatnot.
It's fantastic that you can recognise these patterns. They have always been printed in the price and will always be. Command them and you are one step closer to becoming a profitable trader.
However, I must argue that you won't truly understand them until you experience them. Yes, you read it right.
What do I mean? One thing is knowing that a head & shoulders is a reversal pattern formed when an uptrending asset, after peaking, fails to make a new higher high on its upcoming swing and eventually the price breaks the uptrending structure by making new lower lows.
Another is understanding why this tends to happen. Over and over again.
Throughout my trading journey I've come to find that the why is routed into two main foundations.
GME was so important to me, to my journey as a trader, because it made me experience and deeply understand the forces that shape technical analysis and price action contents.
The concepts immediately popping up in parallel with how I experienced them:
1. What FOMO feels like;
Do you remember how it felt to see "apes' ' getting rich, the stock "going to the moon", the frenzy around this stock. I mean, not being part of the movement was deeply painful. How could you afford to miss the move? How could you live with the regret of missing the move in case it did go to the moon? The greed was real.
That's the power of FOMO. It is a tsunami.
Sounds familiar?
2. What Fear of Losing feels like;
Do you remember? What did you feel once you stepped in late and repositioned and saw your PnL displaying bright red colors?
I certainly do remember how I felt. It didn't take me long after I stepped in to realize it had been a bad idea. Once I was looking (blindly) at GME like a once in a lifetime opportunity, now I was just afraid all my money got lost.
Eventually, the price did decline steeply, if you remember and my emotions evolved from fear of losing to a mixture of excruciating pain, regret and depression. I couldn't sleep for a few nights.
Rings a bell?
3. The importance of position sizing;
Of course being so confident that that was a sure thing made me take way more risk than I normally took.
The feedback loop for that decision was immediate. I will never do it again.
4. The importance of risk management;
Same as above. No stop loss, position size grossly neglected ... I mean, deliberately disregarded. It was just a mess. The exact opposite from sound trading decision making and execution.
Guess what? The feedback loop for that decision was immediate. I will never do that again.
5. The importance of thinking for yourself;
r/wallstreetbets was flooded with bro science theories about what was happening and what was about to happen. By the time I considered myself and the number agreed, I was a consistently profitable trader. I had my own system devised by then. I still took the bait for all these theories. Of course GME would go to the moon.
Immediate feedback loop.
6. The importance of staying away from the noise;
On the sequence of the above. This is pretty much one of the lessons that arises from the above mistake.
7. The importance of creating your trading system;
By the time I went through this experience, I already had my trading system. I still fell for this trap and allowed chaos to express itself. However that experience made it clear that having a full strategy with buy, sell triggers and risk management objective rules was of the essence. With the right discipline to execute the plan one knows what is not the plan. GME was not the plan that my system created.
8.The importance of cultivating the discipline to follow it no matter what;
The key after having your system laid down is to cultivate, nurture and enforce the discipline and required state of mind to execute your system ... systematically. You ought to function like a casino, whose only preoccupation is to keep the wheel spinning and trusting the edge the casino knows it has over the long run.
This was a lesson I knew already, theoretically. This experience was the ultimate test. I failed. It won't happen again, I promise you that.
9.Why resistance, support and chart patterns are formed;
Remember that moment when I was feeling panic and depression when I saw my PnL in the deep red? Do you know what else was going through my mind?
I was praying to all the known Gods there are for a second chance. For a chance to get to breakeven, cover my position, learn my lessons, lick my wounds and move one.
They must have been listening. I got that chance. I sold it. Do you know what I helped to create as a seller in the market? Resistance. That's right. Look at the chart. It shows. These feelings and prayers were common to a lot of investors, you bet your ass, and this is part of the explanation for the downward sloping yellow trendline you'll see right in the first chart below.
These are the most remarkable and extremely rich lessons I ultimately learned from GME. I was lucky enough to have paid close to nothing for these lessons.
Having this said, GME keeps on trending, triggering investors's curiosity and capturing their attention.
I leave you with some insights on the chart after this bulky development.
Technical analysis is nowadays a widespread subject. Good material teaching is nowadays readily available. Books are abundant. Naturally, unless you're making a conscious effort to avoid learning this very effective tool, the odds are you know by now or you have heard of a "Bull Flag" pattern, a "Head & Shoulders" a "Hammer" candlestick pattern and whatnot.
It's fantastic that you can recognise these patterns. They have always been printed in the price and will always be. Command them and you are one step closer to becoming a profitable trader.
However, I must argue that you won't truly understand them until you experience them. Yes, you read it right.
What do I mean? One thing is knowing that a head & shoulders is a reversal pattern formed when an uptrending asset, after peaking, fails to make a new higher high on its upcoming swing and eventually the price breaks the uptrending structure by making new lower lows.
Another is understanding why this tends to happen. Over and over again.
Throughout my trading journey I've come to find that the why is routed into two main foundations.
GME was so important to me, to my journey as a trader, because it made me experience and deeply understand the forces that shape technical analysis and price action contents.
The concepts immediately popping up in parallel with how I experienced them:
1. What FOMO feels like;
Do you remember how it felt to see "apes' ' getting rich, the stock "going to the moon", the frenzy around this stock. I mean, not being part of the movement was deeply painful. How could you afford to miss the move? How could you live with the regret of missing the move in case it did go to the moon? The greed was real.
That's the power of FOMO. It is a tsunami.
Sounds familiar?
2. What Fear of Losing feels like;
Do you remember? What did you feel once you stepped in late and repositioned and saw your PnL displaying bright red colors?
I certainly do remember how I felt. It didn't take me long after I stepped in to realize it had been a bad idea. Once I was looking (blindly) at GME like a once in a lifetime opportunity, now I was just afraid all my money got lost.
Eventually, the price did decline steeply, if you remember and my emotions evolved from fear of losing to a mixture of excruciating pain, regret and depression. I couldn't sleep for a few nights.
Rings a bell?
3. The importance of position sizing;
Of course being so confident that that was a sure thing made me take way more risk than I normally took.
The feedback loop for that decision was immediate. I will never do it again.
4. The importance of risk management;
Same as above. No stop loss, position size grossly neglected ... I mean, deliberately disregarded. It was just a mess. The exact opposite from sound trading decision making and execution.
Guess what? The feedback loop for that decision was immediate. I will never do that again.
5. The importance of thinking for yourself;
r/wallstreetbets was flooded with bro science theories about what was happening and what was about to happen. By the time I considered myself and the number agreed, I was a consistently profitable trader. I had my own system devised by then. I still took the bait for all these theories. Of course GME would go to the moon.
Immediate feedback loop.
6. The importance of staying away from the noise;
On the sequence of the above. This is pretty much one of the lessons that arises from the above mistake.
7. The importance of creating your trading system;
By the time I went through this experience, I already had my trading system. I still fell for this trap and allowed chaos to express itself. However that experience made it clear that having a full strategy with buy, sell triggers and risk management objective rules was of the essence. With the right discipline to execute the plan one knows what is not the plan. GME was not the plan that my system created.
8.The importance of cultivating the discipline to follow it no matter what;
The key after having your system laid down is to cultivate, nurture and enforce the discipline and required state of mind to execute your system ... systematically. You ought to function like a casino, whose only preoccupation is to keep the wheel spinning and trusting the edge the casino knows it has over the long run.
This was a lesson I knew already, theoretically. This experience was the ultimate test. I failed. It won't happen again, I promise you that.
9.Why resistance, support and chart patterns are formed;
Remember that moment when I was feeling panic and depression when I saw my PnL in the deep red? Do you know what else was going through my mind?
I was praying to all the known Gods there are for a second chance. For a chance to get to breakeven, cover my position, learn my lessons, lick my wounds and move one.
They must have been listening. I got that chance. I sold it. Do you know what I helped to create as a seller in the market? Resistance. That's right. Look at the chart. It shows. These feelings and prayers were common to a lot of investors, you bet your ass, and this is part of the explanation for the downward sloping yellow trendline you'll see right in the first chart below.
These are the most remarkable and extremely rich lessons I ultimately learned from GME. I was lucky enough to have paid close to nothing for these lessons.
Having this said, GME keeps on trending, triggering investors's curiosity and capturing their attention.
I leave you with some insights on the chart after this bulky development.
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