Why do you trade stocks?

When I first got into trading, it was all about making lots of money, with the intent of quitting my job and earning a living from markets.

This was pretty naive, since I was under-capitalized, had no trading experience, and zero edge or strategy to speak of. I jumped into the fire and learned how to day trade by trial and error.

I had no mentors. I bought books and joined Stocktwits and Twitter, following traders that made sense to me.

As you might imagine, it was a messy first couple of years.

I blew up two accounts and rode through lots of ups and downs. I learned a tremendous amount about myself but I was still crazy enough to push forward. Around year five, I started to settle into an end of day swing trading approach and found some consistency.

By this time, I had learned most risk management lessons the hard way. My trade size was much smaller and my account moved around a lot less. This also meant my total returns were much lower. My initial goal of making a living from trading seemed far off.

Finding the right fit

After years of aggressive trading, both in terms of the sheer quantity of trades I was placing and the number of hours I was physically glued to my monitors, my priorities began to shift.

I no longer wanted to chase every intraday wiggle in the market. I preferred to trade less and focus on longer-term moves.

It also helped that I had scored a few large wins from conviction bets I placed based on fundamental (really, leap of faith) analysis — owning Apple stock, buying Tesla shares, and being early to Bitcoin.

These outsized returns required no trading. Just some dead simple trend following rules and, of course, the tailwind of a beautiful secular bull market to power them higher.

This taught me that more trading ≠ more profits.

The more I learned about markets, the less active I wanted to be and, most importantly, the less time I wanted to sit in front of the screens.

Why I trade stocks in the year 2022

When I ask myself the question today, why do I trade? The answer is to manage risk. I’m not trying to double my account year over year or become the next market wizard.

My trading goals are modest compared to most: beat the market (net of taxes and fees) and do it with a heck of a lot less volatility and drawdown. It’s also very important to me that my strategies are streamlined, rules-based, and automated — topics discussed in more detail here and here.

I trade to consistently grow and preserve my account year over year, and when the macro opportunities present themselves, I’ll move a portion of my funds out of my trading accounts to take concentrated bets in individual stocks, crypto, NFTs, etc., where the goal is to capture outsized returns over a multi-year period.

I’ve found what works for me. It fits my beliefs, goals, and outlook, but it’s obviously not for everyone.

Why do you trade?

Does your current investing approach match those goals? And are your goals realistic given your specific circumstance and skills?

Trading is a very individual endeavor, so focus on finding what’s right for you.