The Game of Investing, Vol. 1
- Real Vision
- February 16, 2023
Welcome to The Game
The Game of Investing Newsletter…
…a bi-weekly newsletter where you learn from investing pros about how this game actually works.
Because learning about finance shouldn’t be boring.
This Week…
We’re discussing why it’s so important to develop a repeatable trading process that suits your unique personality and goals. Our expert is Real Vision’s Mike Coolbaugh, who explains why this matters more than ever right now:
- “Today’s market environment is one of the most challenging we’ve seen in decades. Even the legendary Stanley Druckenmiller recently suggested that this is the most difficult environment he’s seen in his 30-plus-year career.”
If you’re looking for a reliable way to elevate your investing education, look no further. Now you can access The Real Investing Course — part of the Real Vision Academy — without committing to an annual membership… and at 40% discount.
With thousands of hours of expert insights distilled into one 10-hour workshop, the course gives you all the tools you’ll need to navigate markets no matter the environment — with lessons from trading legends like Peter Brandt, Lyn Alden, Mike Green, Raoul Pal, and many more.
LEVEL 1 — The Groundwork
In times like this, it’s easy to become overwhelmed by the onslaught of recession headlines, complex economic data, and heightened volatility. Processing information and properly executing a trade are learned skills, so Mike shares some things for you to focus on before even beginning the game of investing.
- “If you were to ask any seasoned investor, they would tell you that 90% of investing is managing your emotions.”
Here are a few tips that have helped Mike keep his mind sharp throughout his career as an investment manager:
- Meditation: Every trader has their own process, but Mike starts each morning with Transcendental Meditation — which focuses on relaxed awareness — before heading to the office.
- Exercise: Maintaining a sharp mind is key to trading, and it all starts with good health. Exercise helps keep us alert and alleviates stress, allowing for better execution in the face of difficult decisions.
- Outside hobbies: A strong work ethic is important, but being totally consumed by the markets can be a detriment. Having a hobby that allows you to unplug will keep you feeling fresh and improve your overall happiness. According to Mike, “every mentor I’ve ever had has impressed upon me the importance of having hobbies, something you genuinely enjoy, that can take your mind off the stresses of work.”
Level 2 — Self-Reflection
Now comes self-reflection. What do you want to get out of the market, what’s your time horizon, and how much are you willing to risk to achieve those goals?
Understanding your own investing psychology — like how your emotions impact decision-making — will help you avoid those uncomfortable moments of panic that almost always seem to end in a regrettable trade.
🔑 Spend the rest of this week thinking about this, and watch the markets without trading. Try your hand at a charting tool, and study the price action of your favorite trading vehicle. See if you notice key levels and patterns, and keep track of where the opportunity to enter a trade (if any) might have been. How would it have played out?
LEVEL 3 — An Expert’s Process
Without an investing framework, you’re simply flailing in the wind — riding the emotional roller coaster of mainstream media headlines.
Of course, there are countless styles of trading that all require different types of preparation.
- For example, fundamental equity investors will need to apply much more individual stock analysis — be it corporate filings, earnings schedules, or valuation multiples — to their daily process.
- While intraday traders will focus much more heavily on things like options flow and the relevant near-term technical levels like opening range and closing price.
As a discretionary macro trader, Mike makes decisions based on global macroeconomic trends. Notice we said “trader” and not “investor”? Mike typically executes swing trades ranging anywhere from a couple of weeks to several months.
- “That’s my time horizon. But keep in mind, every investor or trader will have their own way of looking at the world, even if they operate within the same strategy.”
Broadly, Mike is focused on 2 things:
- The long-term view of where trends are and where they’re likely headed,
- and where we are in the cycle within that long-term trend.
With that in mind, here’s how Mike proceeds:
- He tracks macro trends like currency movements and economic growth on a monthly basis and constantly reads research reports and financial news.
- Once he’s spotted an opportunity within the long-term trend, Mike uses weekly charts to judge how an asset is valued relative to history. Then, he logs the promising trade ideas on a whiteboard for further investigation.
- Each morning, Mike reviews how those assets and sectors are behaving. “It might sound primitive, but I actually update these manually to give myself the best feel for the market.” If a technical setup fits within his long-term thesis, he knows it’s time to act.
- “In reality, the acting part shouldn’t take that long because I have a well-formulated plan. So when I’m not actively trading, I spend my free time researching those whiteboard theories.”
When done right, the process IS the job. Ultimately, it’s up to you to determine which process best fits your skill set, but hopefully learning about Mike’s framework will get your wheels turning.
Codebreakers
After mastering the basics, thousands of Real Vision members are learning how to solve the market in The Real Vision Academy. But don’t take it from us, listen to these codebreakers:
- “Wow — I am 3 quarters through and I feel like Neo in the Matrix when, after receiving a huge download of data, he sits up and announces to the world — “I know kung fu!” Fantastic.” — Gary W.
- “What a unique, radical way to teach this stuff. Absolutely loved it. About to do it a second time to deepen my understanding. Thanks, Real Vision. Absolute rockstars.” — @mocmatch
Next Time
Thanks for reading. We hope you found this first stage of The Game useful, and we can’t wait to continue on this investing journey together. In the next issue, we’re turning up the difficulty ever so slightly for a starter course on options trading. See you there.
The Game of Investing Newsletter…
…a bi-weekly newsletter where you learn from investing pros about how this game actually works.
Because learning about finance shouldn’t be boring.