Life is inherently uncertain. So too are markets. On any given day, prices may go up, or they may go down -- and it’s impossibly hard to know which in advance. Trading is thus ultimately an art of dealing with uncertainty; of making decisions amidst the face of uncertainty, of reckoning with the unknown. To anyone who’s ever paid it any mind, this should be self-evident. The question, then, is what to do about it? Given that noone can ever truly Know, with anything like certainty, what the market will do -- especially over the short-term -- how is one to find the conviction necessary to make a bet, one way or the other? Well, the first step is simply appreciating this intrinsic uncertainty of markets and the finite, fallible nature of the human mind. No matter how smart you consider yourself, it’s essential to appreciate that you’re always liable to error and that anything can (and often does) happen. As such, you never want to think in binary certitudes. Instead, adopt a probabilistic mindset, assigning some level of (albeit mostly arbitrary) probability to anyone of your trades / investments / bets, and size them accordingly. For example, if there’s even a 10% chance you could lose it all on a given trade, don’t bet the farm. Further, always prepare for the 10% outcome so that, should it transpire, you will live to fight another day. While it’s a subtle shift in thought, this probabilistic approach to making bets is a way of keeping yourself honest (and hopefully, away from financial ruin).

Another way of reckoning with uncertainty in this context is to simply zoom out. While predicting the movement of markets over the short term is notoriously difficult, by adopting a longer time horizon you have a far better shot at being directionally right. Instead of having to predict the precise daily or weekly movements of the market, by zooming out, you can ride the tailwinds of certain larger and more fundamental forces that might be at play. And ultimately, it’s these larger forces that matter. Take investing in crypto, for example. While the volatility is immense, if you zoom out far enough, what you see is an economy and asset class that’s been growing rapidly (> double digit KAGRs) since its inception. As a result of this growth, so long as you held long enough (and picked the right coins), even amidst the staggering volatility, you’d still be in the green. That’s because, on a long enough time frame, the random noise and consistent and often horrendous drawdowns pale in comparison to the might of the generational, socioeconomic trend that is this new asset class.

Life is inherently uncertain. So too are markets. On any given day, prices may go up, or they may go down -- and it’s impossibly hard to know which in advance. Trading is thus ultimately an art of dealing with uncertainty; of making decisions amidst the face of uncertainty, of reckoning with the unknown. To anyone who’s ever paid it any mind, this should be self-evident. The question, then, is what to do about it? Given that noone can ever truly Know, with anything like certainty, what the market will do -- especially over the short-term -- how is one to find the conviction necessary to make a bet, one way or the other? Well, the first step is simply appreciating this intrinsic uncertainty of markets and the finite, fallible nature of the human mind. No matter how smart you consider yourself, it’s essential to appreciate that you’re always liable to error and that anything can (and often does) happen. As such, you never want to think in binary certitudes. Instead, adopt a probabilistic mindset, assigning some level of (albeit mostly arbitrary) probability to anyone of your trades / investments / bets, and size them accordingly. For example, if there’s even a 10% chance you could lose it all on a given trade, don’t bet the farm. Further, always prepare for the 10% outcome so that, should it transpire, you will live to fight another day. While it’s a subtle shift in thought, this probabilistic approach to making bets is a way of keeping yourself honest (and hopefully, away from financial ruin).

Another way of reckoning with uncertainty in this context is to simply zoom out. While predicting the movement of markets over the short term is notoriously difficult, by adopting a longer time horizon you have a far better shot at being directionally right. Instead of having to predict the precise daily or weekly movements of the market, by zooming out, you can ride the tailwinds of certain larger and more fundamental forces that might be at play. And ultimately, it’s these larger forces that matter. Take investing in crypto, for example. While the volatility is immense, if you zoom out far enough, what you see is an economy and asset class that’s been growing rapidly (> double digit KAGRs) since its inception. As a result of this growth, so long as you held long enough (and picked the right coins), even amidst the staggering volatility, you’d still be in the green. That’s because, on a long enough time frame, the random noise and consistent and often horrendous drawdowns pale in comparison to the might of the generational, socioeconomic trend that is this new asset class.