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 one is likely a psychological trader. Whether an individual is using technical analysis, going off vibes, swing trading or building long term positions it's all primarily an exercise in psychology. Much like Seldon in Asimov's Foundation founding psychohistory in order to predict centuries of behaviour, I believe it's important to consider an internal system of Psychofinance in order to understand who you are and how to best utilise your strengths and avoid weaknesses.
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 majority of the missteps we make in investing (by investing I mean broadly short term trading as well as long term HODLing) comes from within, not from the externalities of the market. 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.
In speaking to people that don't active invest I've realised that many people don't really understand risk, variance, or expected outcomes. After a successful year I was talking with someone about investing and the last year and vaguely mentioned some wins and losses against the backdrop of a highly net-profitable year. They asked how it felt to lose money on some trades and why I wouldn't just pick instruments that weren't so risky and it took me a second to actually understand the question.
I 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. The idea of seeing the possibility of losing as a reason not to play was so baffling to me. Not to mention that there is basically no risk-free option anyways. SPY has had many red years, banks can be insolvent and even if government-insured a bailout would see you 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'd taken for granted both my inherent risk tolerance as well as the effect of frying my brain in the memecoin trenches had on my ability to weather risk. It made me realise that people obviously adequately index the need to have solid information flow, an understanding of the market, etc, but we generally vastly under-index the need to understand ourselves.
Do you trim winning positions and add to losers? Do you paperhand winners and then sit on the sidelines while it continues to rip? Do you hold too long? Did paperhanding a previous position making you ignore all risk tolerance and lead you to then hold on too long? Are you better at riding momentum or seeing emerging narratives before there is any momentum? Both require very different approaches - the former you 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.
This is all an exercise in psychology and has made me think about my own approach to all of this and especially how and where I fall short. Below are a list of approaches I either currently employ or am trying to do better about. Each is aimed at helping me better utilise my own psychofinancial makeup.
My best investments have generally come either from long term low variance 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 defending against this comes from carefully allowing some degeneracy into my life.
A while ago I earmarked ~5% of my portfolio for highly degenerate undertakings. Once I allocated the other 95% I put basically all of my attention into actively managing the 5%, treating this as my entire portfolio. I wish I were someone that 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 Kwong (huang? double check) inside of me that years for degeneracy.
With this 5% I take short term plays, punt on memecoins, and try to have some reasonable Kelly Criterion-esque sizing so that I can at least not get zeroed out. The nature of this 5% so far has looked like a lot of 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 95% of my portfolio and not actively manage it as active management is the mini death (do good Dune ref here). It takes some version of auto-hypnosis to make this work but I think it's possible and having this outlet is significantly easier than not having one.
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 highest EV move is to temporarily pause risk management 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.
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 more. If you don't really believe what you're typing it's a surefire sign that you should likely exit that position.
It's also a form of feedback analysis (link to thing ben sent) and worth going over these posts throughout your chosen timeline to see if your thesis has been validated or disproven.
CBB (find tweet) said that "it's all a game of table choice" 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 a compelling narrative. 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, and vice versa. 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's 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 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).
One of my recent approaches to this is to marginally split capital 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 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 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 my initial thesis was right I have maybe only 80% of my original size, which is ok. If I was wrong, then the smaller allocation away from the incumbent is now a very successful hedge against being sector correct but individual pick incorrect.
For now my heuristic is to only allocate to one other 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 that there is actually a credible competitor.
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 :).