Betting Against the Market: Trading Lessons from The Big Short

_{image byPexels from Pixabay}

Recently I watched "the big short" a film to understand how US housing market collapsed in 2008 and while I saw the details of that historic event I've also learnt so many other things about trading.

There's only few finance related movies that are outstanding and big short is absolutely a masterpiece for any trader and those interested in finance.

I'll share the lessons I've learnt about trading after watching the big short in this post ahead. So, it will be worth to read till the end.

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Make Up Your own Thesis Behind every Trade

Michael burry did a lot of study and research to find his reasons why he's going to short housing market when it was literally on the top and strongest one at that time.

First he studied alot and did research to convince himself this trade make sense meanwhile we take trades and we don't have idea why we're taking that trade other than "oh this line is support - I'll buy".

_{image by Melissa_BP from Pixabay}

Instead, look for the reasons like I was doing previous year. I searched for events and bought AI coins before conference and sold after event that's the way to make up your own thesis.

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When your conviction is High - believe in it till any results

The wall street guys laughed at him when he went to short housing market because he was betting against the economy at that time.

So, wall street guys laughed and thought yeah we'll take your money happily.

That trade size was around $8billion and Investors money was on stake. he was called to cash out and drop that trade when it went down.

It went down more and more, he took that trade in 2005 means he was the first one to take it and than in 2006 he was in unrealised loss, but he did not closed that trade.

_{image by Pexels from Pixabay}

Took another year and in 2007 the bank did collapsed and he made a fortune for his investors and himself.

3 years into a single trade with that kind of size tells a lot about the conviction you need to make a perfect trade.

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Take less trade, do more research

Some people wake up and start their day by taking a trade and keeps on taking trade after trade instead of doing research.

So, this one guy in the big short movie came up to other investors "this is a trade of a lifetime, just buy it".

If it was someone like us we would take that trade on spot just as we do when influencers post a trade or any paid signal groups you follow blindly.

But the fact that those investors have billions was because they put time on doing research so to find out if there's a bubble in housing market they went to door by door to make up a decision about it.

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Wrapping Up...

In the end this movie was full of lessons for a trader and I already knew some of these things but have to make it more better which I think after watching the film, I can apply on my trades for better outcomes.

I hope you found this interesting and would love to know your opinions on this in the comments.

fin.

Your support is much appreciated. Don't Forget to hit Upvote, Comment and Re-blog.

_{Thanks for reading.Greetings.}

All the content and images are mine except indicated. No copyright infringement intended. 06/07/2024.

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