Trading Currencies and Commodities is Harder than You Think with David Stein

 

Background: David Stein

David’s worst investment ever

  • Occurred during the transition before retirement
  • Visit to hedge fund awoke interest in trading
  • Being a trader – way harder than expected
  • Stopped trading but forgot to close a trade set to buy silver when it fell to an arranged level
  • Price kept falling; when he realized what had happened he had lost around US$25,000
  • Sting of loss: ‘I should have known better’

David’s takeaways

  • Good decisions are built on processes not based on outcomes
  • No one should trade commodity futures or Forex; such instruments are speculation
  • Speculation is disagreement on whether the return will be positive or negative
  • Individuals should focus on investing
  • Investing has a positive expected return

My takeaways

  • Investors in individual stocks must ask:
  • “What do I know that the market doesn’t?”
  • Most of the time, the answer is: “Nothing!”
  • Investing in commodities or Forex is a bet against the balance sheets of banks, political whims, and the central bank’s balance sheets
  • These factors are overpowering and can shift the market in a minute, which is frightening

Actionable advice

  • Don’t be a trader
  • But if you do, start off with very small amounts and be prepared to lose it all
  • Because trading is speculation
  • Use shadow portfolios, don’t risk real money, until you fully understand the market

My Worst Investment Ever six main categories of mistakes:

  1. Failed to do their own research
  2. Failed to properly assess and manage risk
  3. Were driven by emotion or flawed thinking
  4. Misplaced trust
  5. Failed to monitor their investment
  6. Invested in a start-up company

DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.