Written by Reinard Bekker
Take note: On this blog we share stuff that we are excited and enthusiastic about. Just like you do not drink your grandma’s medication just because she’s doing it, you shouldn’t do something just because we are doing it. If you were wondering, no, we are not financial advisors and none of the content should be seen as financial or investment advice. Now that you have read that, please apply your mind, this is after all the internet where anyone can write anything and only some of it is beneficial. You are a free agent so grow your knowledge and learn to discern.
Did you ever play with Marbles? I had a bag or two. They were great, not the best but I didn’t mind. My brother had some fancy ones. I wonder what he did with his…
It was some time ago whilst I was talking to a friend when Marbles struck an interesting resemblance to cryptos. At least in the way I was trading with them.
When I was more involved in Forex Margin trading (that account almost liquidated when the S&P hit a dip a few years ago) I always found it difficult to explain how margin trading worked. Especially the part when the market goes against your analysis and expectation. If you don’t have a good stop-loss strategy built into your plan, your account will hit zero faster than you can say “gone”.
Please don’t confuse margin / leverage trading with what I call classic crypto-trading / direct trading.
What is leverage / margin trading? In very short: When you trade on margin, you actually borrow money from the broker to place the trade / buy a position. Important note: At this point you are taking a risk and your account should have enough funds to carry that risk. If you are successful, you get the gains and the broker gets a fee. If you are unsuccessful, you loose the trade, the broker gets his fee and your loss realise – your account balance drops by the amount of risk you took. If left unchecked you can loose it all on a single trade. (I’m not an accredited trader and this is very simplified for illustration purposes only. Read this article for a more formal explanation.)
Direct trading, is different. It has a different risk to it. It is not without risk, the risk is different. Personally trading this way is much more in line with my appetite for risk than leverage / margin trading. I do however enjoy both, I have different levels of exposure that I put in place.
Let’s bring in the Marbles. If you buy 10 Marbles for $10 each, you spent $100. It’s your Marbles. You have them. You can put them anywhere you want.
So let’s make this interesting:
Scenario 1: A month or a year from now you find out those Marbles can be sold for $5 each. Did you loose anything? No. You still have 10 Marbles. They may only be worth half of what you paid for them, but you still have them. 10 of them. If you sell them all, you will “realise” the loss of $50. You will have no Marbles and just $50. You started with $100 and having half of it sucks.
Scenario 2: A month or a year from now you find out those Marbles can be sold for $20 each. Did you gain anything? No. You still have 10 Marbles. They may be worth double what you paid for them, but you still have them. 10 of them. If you sell them all, you will “realise” the gain of $100. You will have no Marbles and $200. You may feel like a rockstar.
Scenario 3: A month or a year from now you find out those Marbles can be sold for $11 each. Did you gain anything? No. You still have 10 Marbles. They may be worth a little more than what you paid for them, but you still have them. 10 of them. If you sell them all, you will “realise” the gain of $10. You will have no Marbles and $110. You may feel like, meh… BORING. Until a while later you hear that the price is down to $10 each. According to scenario 1 it can drop to half that. But if you buy now you will 11 Marbles and considering that you started with $100, it’s a good buy.
If you get 10% interest per year you may be considered lucky. If you learn to play with Marbles in such a way that you have more at the end of the year than what you started with then you’re on your way to master a new skill.
The secret is not to be greedy.
This is my opinion: I want to grow my Marbles. If I can find a way to get more Marbles and turn my 10 into 11, into 12, into more. That sounds like fun. There is also an underlying assumption you need to be aware of: I want to have Marbles that has the potential to rather grow in value than decrease in value.
Sounds like a job for something that looks like a big Marble, also known as a crystal ball. No, I don’t have one. If I did I would have… Fill in the blank with whatever we now know to be something that made a lot of other people gazillions.
That is why we want try and learn and personally grow. Any business is about this basic thing: Don’t loose your Marbles, rather grow them. Read more about whatever you see as the Marbles you have. It may be a crypto coin or Apple stock or believe it or not an ice-cream cone!
Wait? You don’t believe me about the ice-cream cones? I once attended a wedding where the guy getting married was a multi-millionaire. Asked how he got there? He had a factory that could make ice-cream cones for a few cents cheaper than the competition. He sold more volume and dominated the market.
Back to the Marbles. I’m of the opinion that the crypto market is still very small and underdeveloped. (Compare 2017 to 2019) It poses huge potential for growth. Enough so that I want to constantly educate myself in leaning about it and the possibilities it poses. It will be more than just another form of electronic transactions. It has the power to automate smart contracts and transactions in amazing ways.
How do I know I’m doing well?
Keep in mind, this is what I do and this is not financial advice. I’ve found that I need to adjust my perspective to thinking in Marbles aka my strongest asset/currency.
What does a good base currency look like? Gold tend to be the go-to when the markets seem to go south and people are spooked. They like the safety and stability that gold represent. Just watch the price go up in times of fear. Some people have likened Bitcoin to gold as some sort of a digital version of it. Though more volatile than physical gold, it is more stable in the crypto arena. But just like Quality Street chocolates, everyone seem to have their own favourite. (Please note having a favourite does not make it a good choice – don’t underestimate the value of researching coins.) I digress, how do I know I’m doing well? Personally I want to know if I was able to grow the amount of Marbles I have during the past year. It’s that simple for me. The dollar value may have gone up or down – but my mindset has shifted to counting my Marbles.
How to grow your Marbles?
I kid you not but some people call it “farming with cryptos”. It’s a great place to start swinging your mindset. But like farming anything else you can’t just run into the field and start planting stuff hoping to be successful from day one. Surround yourself with people smarter than yourself and learn. You can never learn too much! Learn by watching successful people and develop yourself by growing in your understanding of what they are actually doing. Gain insight into the why behind their actions and strategies. In this sense a whole new world opened up for me by watching these people on a weekly basis. You can also do training from beginner to advanced and get access to proven strategies.
As a final word: Don’t loose your marbles, grow them, farm them and learn as much as you can about them. If you have any crypto-related questions, e-mail me now.
The price of Bitcoin when this article was written: $11 705/BTC