How To Become a Better Bitcoin Trader [Interview]
Brian Beamish is a professional trader, educator, and market commentator. He has over thirty years of direct experience as a trader, industry worker, and advisor. He has held licenses to advise on stocks, commodities, derivatives, and retirement planning and holds the designation of Fellow of the Canadian Securities Institute.
Brian was a funded proprietary Crude Oil trader through TopStepTrader.com but left that industry in 2013 to pursue a career within the cryptocurrency space. Brian demonstrated to the public how to take $500 and turn it into $100,000 in a little over two years using some very basic low-risk concepts learned through his career.
While Brian does currently trade his own personal accounts and those of The Rational Investor, he spends most of his time helping people new to trading set themselves up for success and has proudly taught hundreds (maybe even thousands) of people how to achieve their desired goals from trading over the past five years through TheRationalInvestor.com website and public offerings.
Bitcoinist recently caught up with Beamish to pick his brain on what it really takes to be a full-time trader in an unforgiving market.
What are the biggest mistakes and false assumptions new traders have about trading?
The biggest mistakes new traders make is that they think they will get rich quick or make unrealistic profits in a short period of time. Of course, this is not true. The amount of time needed to set oneself up for success in the world of trading is significant and cannot be understated.
The key is to forget about making money. Rather, new traders must concentrate on the process — which is usually not the case. The public tends to focus more on results and less on how to achieve favorable results. In doing so, they fail to learn about what is required to be successful.
How did you get started trading, initially?
It was a High School summer job. I caught ‘the bug’ way back in the 1980s.
How can someone manage to wait for a trade to come to fruition when, in reality, you have to pay the bills?
Well, there are some simple rules to follow in this case.
- One’s trading capital should not be part of one’s living expense capital.
- One should always have three months of living expenses in cash reserves.
- Get a part-time job to pay the bills, if you must.
What sort of capital does someone really need to succeed in the markets?
It really depends on how one defines success.
Because of the low barrier of entry, cryptocurrency portfolios can start very small. To trade larger markets — futures, stocks, commodities, options — one should have a larger account.
People discount the power of compounding returns. One can start with a very small capital base and, if you continually re-invest and let your capital grow, it can turn into a very sizable sum over time.
How long do you need to be a successful trader before you could realistically consider quitting your day job?
I would recommend only considering ‘quitting your day job’ if you have at least one year’s income already made and in the bank ready to pay for next year’s salary. That might happen very quickly, but most of my students require at least one full year of training before they are ready to risk large sums in the market and begin working on building that following year’s salary.
Humans are emotional animals. How can you remain emotionally unattached to a trade to ensure you don’t sustain unnecessary losses?
One good idea is to practice journalling — essentially downloading your emotions — and tracking your behavior closely. This is usually where most fail, actually, as many people are impatient and have a lack of discipline.
Crypto markets are 24/7. How do you manage to have a good work/life balance?
To keep the balance, it is important to outline clearly in your trading plan when you expect to participate in the market. At the same time, outline clearly in your trading plan how/when you can disconnect from your trading and enjoy social activities, sports, time with family, etc.
How do you manage to successfully add structure and discipline to a career choice that is essentially about being free to do what you want?
It’s true that we are, by definition, ‘discretionary traders’— but that does not mean we can trade at our discretion. This career choice requires even more discipline then a 9-to-5 ‘job’ most people have.
A ‘trader’ is really a small business owner/operator, so what are the common characteristics of successful small business owner/operators? If you can answer that question, you’re on the path to being a successful full-time trader.
Being a full-time trader can be a lonely job since there often times isn’t much interaction with others — like in a traditional workplace. How can full-time traders balance this out?
To help offset any potential feelings of loneliness, one can participate in a robust community of peers — like The Rational Investor! (.#ShamelessPlug)
As mentioned previously, it is important to build incorporate support systems into you plan and budget in time for leisure, fun, and a personal life.
One can also become a mentor to others and/or volunteer in their free time. This really does help keep things in perspective.
How do you manage all of your transactions and wins and losses — what system/journals do you need to use. Is a journal/ tracking system paramount to success?
There are many products out there to help with journaling and the tracking of behaviors, as well as trading activity. I recommend taking a very manual approach, to begin with — such as using a word processor or even handwritten journaling — as it will force you to take personal ownership of your actions.
Once you have a trading plan in place and setups that have been fully vetted, one can move on to more automated data tracking — but journalling never really changes. The more you write, the better!
How isn’t technical analysis like astrology?
It might be very much like astrology. In fact, some of the most famous traders in history used astrology to help them time their transactions! But comparing one to the other is missing the point of why one would use technical analysis.
One should come up with reasons for acting in the marketplace, then try to replicate that behavior repeatedly using those same reasons over and over again. Some use Fundamental Analysis. Some use Technical analysis. And yes, some even use astrology.
Mr. John Bollinger coined the term ‘rational analysis’ decades ago as the intersection of fundamental and technical analysis — where we as ‘rational’ investors only act when both fundamental and technical reasons agree). We use these ‘reasons’ to better the odds of seeing our desired outcome (profitable trades), but that’s all they are. Nothing more.
Could we incorporate astrological reasons to act in our setups? Absolutely! The only thing that matters is that, when we trade with those reasons, they are consistent and they produce desired results more often than not — ideally, better than 60 percent of the time.
How you get your reasons is entirely up to the individual. Being professional and acting when you see those reasons — that’s what separates the amateurs from the professionals.
Many believe that the Bitcoin and cryptocurrency markets are manipulated by whales and exchanges, and there have been recent reports to back up the latter. What is your take on this?
It makes little difference to those who trade setups and follows their plan. If the conditions you require for you to act present themselves, as laid out in your plan, then, as a professional, you must act. If those conditions do not present themselves, then you must have the professionalism not to act.
We have to ask — what are your long-term predictions for Bitcoin?
I can absolutely tell you without a shadow of a doubt. What will happen will be more bizarre and more unpredictable than anything we could come up with here — you can’t write better fiction than reality!
Having said that, my personal feeling is cryptocurrencies will, at some point, replace the ‘fiat currency’ model. What that implies for Bitcoin is more demand (yes, higher prices) but, at the same time, it implies many many more types of cryptocurrencies will come to market. This will increase competition as technology evolves.
The question for bitcoin at present is; does it remain a ‘store of value’ story? If so, then I would expect a sideways market for the next fifteen years. Or can it evolve into a utility and thus increase adoption as a usable asset (via the Lightning Network, for example) and, thus, become a growth vehicle? If so, prices could get astronomical. (Get it?)
Do you have any parting wisdom for our readers?
It is my firm belief that we are all great traders. We all have good ideas and, generally, we all have the best intentions. The problem is we make mistakes! Most of the time, those mistakes come from being either too impatient or lacking discipline.
Since we humans are emotional creatures, we tend to take failure personally — which leads to frustration. This leads to more emotional behavior, which ends up turning into an endless loop of anxiety that most often culminates in erratic and illogical activity based more on desperation rather than logical, well laid out planning. The novice often ends up ‘blowing themselves up’ and losing a lot of money in the market out of the expression of those frustrations. Sadly, our capitalist machine actually depends on that emotional activity.
Additionally, we are social creatures, which means we seek validation for our actions from our peers. Unfortunately, doing what is ‘popular’ and ‘making money from trading’ are almost polar opposites. Because of this, to be a good trader, one often must do what is unpopular amongst the herd — and this can be difficult for many.
To overcome those human failings, we must plan and hold ourselves accountable. One must look in the proverbial mirror and commit to making the necessary changes in our behavior if we see we are making those mistakes mentioned above. This isn’t easy and is often the reason why so few of us can actually do well from trading.
The Rational Investor’s whole mission is about helping people do exactly this. Through our education programs, we teach people how to take responsibility for their actions and put into place the supports needed to make the necessary changes that are required to evolve from a typical public market participant to a professional. These include (but are not limited to) building and vetting your trading plan, as well as building the necessary supports for you to be able to follow that plan.
We help with the understanding how to construct higher probability ‘setups’ and appreciation/identification for the type of risk taker you are and, thus, build risk management strategies around what type of market participant you have identified yourself as being. Furthermore, we assist in building a framework of market expectations so your profit objectives are clearly defined and realistic.
As I repeatedly say to the public, judging The Rational Investor based on what I say is meaningless. Listening to our students and the change we have effected in their lives is priceless.
Thank you very much for your time and I hope I have helped you understand both myself and what The Rational Investor does as professional educators a little better.
(and the whole TRI team)
Stay tuned to Bitcoinist, as we’ve partnered with The Rational Investor to giveaway one 12-week trading course for free — valued at $1195. Details will be coming shortly!