July 15th 2026
To me there are two broad categories of investing: mathematical and psychological. Unfortunately the class of mathematical investors is vanishingly small. Unless one's name is RenTech, SIG, Jane Street, or one of the other quant shops you're likely a psychological trader. Whether an individual is using technical analysis, going off vibes, swing trading or building long term positions I posit that it's still primarily an exercise in psychology.
In Isaac Asimov's Foundation, Hari Seldon created a system of "psychohistory" which posited that individual variance completely smoothed out once sample sizes were large enough and as a result he could predict civilisation's evolution and crises hundreds of years in advance. I believe there is a financial application to this and that one of the most important things any non-quant needs to consider is the idea of "psychofinance", especially with regard to understanding their own psyche. The millions of impulses and lifetime of influences manifest as repeated financial behaviour and if we don't understand it we'll continually run into that wall.
This isn't to say that there's no fundamental analysis when it comes to individual trading, but I now believe that the majority of the challenge in non-quantitative investing is psychological. The missteps primarily happen after the fundamental analysis, and the analysis is much simpler than overcoming our psyche. To be sure many positions are inherently mistakes and even a perfected psyche would lose money on them but a lot of that is just due to the nature of variance.
A while ago I was talking with a friend about a very profitable strech for me and they asked why I'd play these games if I could lose money doing so. I realise I now see the world of investment now through variance and expected value. If someone gives you 50/50 odds on a 90/10 coin flip you take that every time and if you lose you have to just shrug it off - it was still a massively +EV decision. I believe this is one of the first psychofinancial steps we all take when getting into this game. It's important to realise that there is basically no risk-free option anyways. SPY has had many red years, banks can be insolvent and even if a bank collapse is mitigated via a government-insured a bailout, you woild lose money via debasement.
Even more fundamentally the question of "what if you lose" reveals a myopic view of risk. The only way to get outsized returns, or returns at all is to take some amount of risk. All that matters is if you think the market is mispricing the risk and it's +EV to play, as well as having some modicum of bet-sizing/portfolio management.
This question led me to think about the nature of investment a lot more and realise that I hadn't truly considered how I approached financial markets initially, which was likely how my friend approaches them now, and how that approach has changed as a result of the covid crash, 2021 GME and NFTs, 2022 Luna/FTX blowup and 2024/25 memecoins, etc. It made me realise that I index the need to have solid information flow, an understanding of the market, etc, as this need is pretty static. I have have been vastly under-indexing the need to understand myself though as my psyche is both what has changed the most and also much harder to understand than the idea of comparing a company's earning with their price.
Do I trim winning positions and add to losers? Do I paperhand winners and then sit on the sidelines while it continues to rip? Do I hold too long? Did paperhanding a previous position make me ignore all risk tolerance and hold on too long to the next position? Am I better at riding momentum, or at seeing emerging narratives before there is any momentum? Both require very different approaches - the former I need tight risk tolerance and shorter timeframes but possibly higher bet sizes as the market has already shown its hand. The latter requires more patience but more tolerance for positions bleeding out and having multiple losses before hitting one outsized winner, and as a result smaller bet sizes.
Below are a list of approaches I either currently employ or am trying employ in order to both understand myself and to improve my own psychology. Each is aimed at helping me better utilise my own psychofinancial makeup.
My best investments have generally come either from long term lower volatility holds or short term insanely risk-on plays when the market conditions are just right. Something I've struggled with in the past is slowly cannibalising long term positions in order to continually move further down the risk curve. One of my current approaches to defend against this is to constantly expose myself to continual low-grade and safe degeneracy.
A while ago I earmarked ~5% of my portfolio for undertakings of a highly degenerate nature. Once I allocated the other 95% I put basically all of my attention into actively managing the 5%, treating this day-to-day as my entire portfolio. I wish I were someone who could simply allocate 100% to long term plays and log off, and I do think I'm slowly moving closer to that archetype, but for now there's a Bill Hwang inside of me that yearns for degenerate bets.
With this 5% I generally take short term plays, slide up leverage bar, and punt on memecoins while aiming to have some reasonable Kelly Criterion-esque sizing. The nature of this 5% so far mostly looks like hitting some trades, running it up, giving it back, etc. Classic market tings.
The huge benefit here is twofold. Firstly, it lets me ignore the long-term 95% of my portfolio and not actively manage it. Active management is the mini-death that brings total portfolio obliteration. It takes some auto-hypnosis to make this work but I think it's made possibly by still having an outlet for financially degenerate impulses.
Equally important for my investment style is that is helps me keep my edge. It helps me continue to see the financial world through the lens of probability. It helps deaden my feelings towards win and loss and accept that sometimes you're at the mercy of variance. This isn't suggest blindly believeing you're always +EV, self-reflection is still required, but the nature of crypto and increasingly markets in general is that when market-conditions are right the move is to temporarily go fully risk-on and go nuts. In these conditions that 5% can quickly become the majority of your portfolio, but for me without some constant low-grade degenerate stimulus I'm likely to miss these conditions and am even at risk of sizing in way too late.
In 2021 when I first started entering into riskier markets my initial impuse was to spend months watching from the sidelines and only entering once the meat of the move had already concluded.
My previous post of "A portfolio for the future" was part of me formalising my trades. Writing down timelines, entries, theses, and even possible exit signals is something I'm starting to introduce. If you don't really believe what you're typing as you're typing it, you likely should exit that position.
It's also a form of feedback analysis (an idea introduced here) and worth going over these posts throughout your chosen timeline to see if your thesis has been validated or disproven.
I remember a tweet (I think from Cbb0fe) along the lines of "it's all a game of table selection" which I believe to be incredibly true, especially for the small degenerate % of a portfolio. When the market is in flux, narrative rules all around us and fundamentals largely only matter insofar as they can be spun into compelling narratives. In these financial zero-gravity conditions the most important thing is to consider who is on the other side of the trade and act according to how they'll act.
It sounds zero-sum and predatory, and maybe it is, but that is often the nature of the game and if you choose to play you can't ignore it. In 2024/25 memecoin mania every dollar you made came from someone else losing a dollar as the underlying was always going to return to 0. Inherent in this is the need to do something productive with money you make (care for those around you, charity, etc - very important) but to also take losses on the chin and type gg in all chat.
Philosophy aside, it is worth considering who else is in the trade and how they will act. Is it a news-based play that has a lot of short term rotational capital or are your counterparties diehard hodlers who'll ride something to zero? Both require very different approaches.
This one is nuanced and I'm still figuring out how to navigate it. On one hand, some of the biggest winners of the last decade were members of tribes. People that bought BTC 100x ago and did nothing. Ethereum ICO participants, people buying Solana or Hyperliquid at $3 and then sitting on their hands.
On the other hand some of the biggest losers are people who drank the Hoskinson koolaid and are still holding ADA, people that bought ETH in 2021 and then coped while Solana's chart did something alien (went up). People that bought NANO. I guess in summary - people who frequent r/Cryptocurrency.
One of my recent approaches to this is to marginally split capital between the top 2 major tribes when opening positions. Below are a few examples:
Doing the above will in some cases reduce profit, but it also reduces your variance within the sector and therefore is often a better expression of a thesis. Most importantly though it avoids tilt, and tilt is the portfolio killer. If you sized into only Eth on the belief that the world's finance will start coming onchain and then saw Solana take off you're liable to start tilting and coping, shitting on Solana's occasional downtime, validator reqs, whatever. There are valid critiques of Solana's centralisation, or Ethereum's block times and lack of revenue, but the most important thing is to be able to engage with them dispassionately. This is best achieved for me by holding a portion of both. If I've split my capital and my initial thesis was right I have maybe only 80% of my original size in the winner, which is 80% ok. If I was wrong in picking the absolute winner then the smaller allocation to #2 is now meaningful and I'm still probably 80% ok. Whereas in a tribalistic world if your original thesis is wrong you could be 80% rekt. ETHBTC devalued 75% from 2021-2025.
For now my heuristic is to only allocate to one additional position in this way. Ie if you hold ETH, allocate to SOL. Don't start spreading into INJ, SEI, APTOS, whatever. I also try to wait for some amount of market confirmation to tell me who the credible competitor is.
A simple one I'm sure we've all experienced. Especially after winning a big trade, don't re-enter. Be brutally honest with yourself about whether you can handle the position with an even keel or if you're liable to double down if it goes red and give back everything and more.
I find I'm a lot more successful on fresh trades because I can approach them neutrally. Any profit is a net new impulse in my brain and cutting at -20% is relatively easier. Alternatively if you have a high water mark you're way less likely to act rationally and are going to have this completely arbitrary number sway your decisions.
It might sound facile but it's worth drilling down even a bit more. If you were to go to the public library to start trading a coin and I told you that the person who sat there before you hit 50x on it, would that change your decision at all? It shouldn't - everything in your thesis should have been from narrative, the chart, etc. Yet if it's you who hit the 50x and is now re-entering you're invariably going to factor that into your trade. The high water mark is a purely emotional construct but a very powerful one and the whole core of growth as a trader for me is avoiding emotions like these, and emotions in general.
Don't re-enter.
I struggle with this often, specifically on perps. There's something about seeing the live updating PnL of a position that creates tuis struggle. I'll enter a trade, have some coherent timeframe and profit taking level but if the trade starts moving against me I'll continue moving the goalposts from my vague stop loss until I become a permanent community member.
As part of my exposure to continual lowgrade degeneracy I'm actively trying to force myself to setting a maximum $ risk when opening a position and ruthlessly following it.
Most people act too quickly when generating wealth and too slowly when preserving it.
— Cobie or someone, idk, I vaguely remember seeing a tweet along these lines a while ago
My personal study of my own psychofinance is ongoing, as it should be forever. Above are a few of the techniques I'm playing with at the moment to become more even-keeled in such an emotional endeavour. Hopefully this is helpful for others, at the very least it's been very helpful for me :).