The Comfort Trade
Try this exercise:
Take a minute and think about the 3–4 biggest decisions you made in the last year. It can be something like:
- You left or took a new job
- You moved somewhere new
- You changed your relationship status
- You had a life changing trade or investment
Anything that had 1) a hard decision and 2) a dramatic impact on the direction of your life.
When you do this exercise you quickly realize that most of our lives come down to a few key decisions. Those decisions change our trajectory, compounding into new memories and experiences. Tony Robbins talks about this a lot — being able to make a few important decisions is usually more impactful than trying to make 100 small decisions when it comes to improving your life.
What you will also notice is that these decisions are not easy. Even if you hate your job and are leaving to start a new career that’s already lined up, stepping into the unknown is always scary.
Great decisions will always feel uncomfortable at first.
We are built to live in comfort as part of our survival instincts. Once you find safety, your brain wants to keep you there. This is why consumer technology is so profitable — it monetizes the reptilian pathway. Why would you work on that side hustle each night when you could drink a few beers and watch TV?
As we live comfortable lives and manage comfortable portfolios we, by definition, limit the chance of unknown outcomes. If you want to meet your wife but are spending your time scrolling Twitter and playing video games because dating is uncomfortable, you are limiting the chances of anything changing.
But life is not about comfort, it is about progress. It is about living up to your potential, whatever that is, and experiencing all the greatness that is available to you. It is about being a great friend and having high self esteem. It is about being healthy and active, sleeping deeply and smiling often. It is about making millions of dollars so you can take care of your family and donate to those less fortunate.
It is about thriving, not surviving.
On March 12, 2020 the crypto markets experiencing a black swan event when MakerDAO’s oracle system broke the peg for its DAI stablecoin. This caused widespread liquidations across all exchanges and almost a 50% move in less than an hour.
I remember sitting at my computer in Austin at around 8pm and watching everything melt down. The exchanges barely worked, gas was 1000 gwei and Twitter went from “wow what a selloff” to “yo wtf is going on.”
We were near the bottom of the stock markets first capitulation and the VIX (volatility index) was ramping to historic levels. Everything was collapsing. The world was in a free fall and I was watching it happen in real time.
BTC was selling the way it does when players are deleveraging with constant sell pressure and no relief bounces. Then, all of a sudden, shit broke.
The market snapped down to 6k, 5k, 4k, bottoming at around 3700 in a matter of minutes. It was truly wild to watch. In this moment I remember thinking to myself that this might be the end of crypto. As the 25 year old technical analyst reminds us, “Lose this level and it’s lights out.”
As a trader, I experience a wide range of emotions but this was next level. It was scary because it was so unknown. How would we ever recover from this? What the fuck is going on? This this how it all ends, my journey to financial freedom? Max fear, max uncertainty, max doubt.
When something like this happens you need to think about something other than the price action, namely first principles. For me that was reminding myself to:
- Buy when fear is at it’s highest
- Buy when volume is highest at the lowest prices (capitulations)
- Buy when other people can’t buy bc they will be forced buyers when they can
Objectively these all make sense but in the moment it is EXACT opposite of what I wanted to do. I decided that you only get a few moments in life to roll the dice and see what you’re made of, so I pushed in 75% of my net worth into a market order, tweeted out “Backing up the truck at 4400” and prayed to all things holy.
A few minutes later, after watching price move 10% every 30 seconds, the DAI peg came back on and the market stabilized. The bounce was epic — up 50% in under an hour and the beginning of the fabled golden bull run.
I learned a valuable lesson on that day — our emotions are the best tool we have. We are all the market and all experience the same thing. What makes someone a pro is their ability to make decisions in spite of those emotions.
Buy when you think it’s going down forever. Sell when you start to believe you’re actually going to get rich.
While that was the best entry of my life it was not the best investment or trade from a P&L standpoint. I sold the core position around 25–30% profit and kept the rest in BTC profits.
But the experience changed my life as a trader.
In many ways, in changed my life as a human. Where else in my life have I let emotions of the moment dictate a decision that will last forever? How many times has my brain created a reality to trick me into staying comfortable and safe?
I will probably not experience stakes that high again but I will experience emotions like that again.
If I had stayed comfortable, my life would be so different today. Doesn’t mean it would be better, it would just be different. I would have have continued to wait for “things to settle” and for the clear, easy trades to come my way not realizing how much opportunity I was giving up.
Discomfort is a prerequisite for positive change in our lives.
There is a term in markets called the Pain Trade. This refers to the market moves that would cause the most pain to the most people. It’s when the bottom falls out at big support after most people buy in. It’s the market going parabolic after most people have sold or started shorting.
The thing about the Pain Trade is that it doesn’t happen to everyone else, it happens to us. Each of us. Individually. We are all the market.
The Pain Trade is the delta between how you feel in the moment vs what you would do if you had no emotions at all.
Being aware of the Pain Trades and counter trading the Pain Trade is a huge edge in markets and in life. Mind over matter when everything feels like it’s running at 9000 RPM.
We often try to find out what everyone else’s Pain Trade is but fail to see our own. You can do this right now — what would be the maximum pain move for you in crypto right now? Aside from black swans, the chances are that’s what will happen next. The higher the pain, the more likely it will happen.
If you’re in stablecoins, the Pain Trade is that crypto absolutely ramps to all time highs leaving you sidelined. If you’re fully allocated the Pain Trade is losing support and seeing another 15% down move.
In other words — someone out there who has a better edge than you is trying to force one of theses situations to cause YOU pain. They are making the Pain Trade, you are taking the Pain Trade.
The Pain Trade is shorting at support because you know the Comfort Trader is going long at support (and you have the data to prove it). The Pain Trade is going max long at the top of the range when the Comfort Trader is taking profits. The Pain Trade is buying the OHM and BTRFLY capitulations yesterday bc the Comfort Trader puking his position to relieve the agony.
As you start applying this to your own life you see how many similar traps we fall into. The Comfort Trader makes decisions based on how they feel right now, the Pain Trader makes decisions on what will make money.
The Comfort Trade is awash with moving averages and easy, clear directions. The Comfort Trade is scrolling social media instead of learning a new skill. The Comfort Trade is digital Soma, lulling you into a Brave New World where you don’t have to be scared and all your dreams will still come true.
The Comfort Trade is a guaranteed way to experience existential stagnation. Living outside of your comfort zone is the only way to get all the things you want in life. You must be uncomfortable in the short term to get the upside in the longer term. You must learn to take the Pain Trade.
Once you experience a successful Pain Trade counter move, you never look back. You’re always trying to find ways to fade the biological system. This is what edge is all about.
Today, take a few minutes and write down all the things you want to happen this year. Then write down all the emotions + limiting beliefs that you think stand in the way. Notice the Comfort Trade that you feel about small ambitions and the fear, pit-of-the-stomach anxiety that comes from big ambitions.
This is your pain trade — doing what needs to be done because the greater goal is more important than the immediate emotions.
Easy decisions, hard life. Hard decisions, easy life.
