When you put on a trade, it's fair to assume you've done at least some homework beforehand. Some traders rely purely on technical analysis, whether that's through a gazillion indicators or simply price action. Others dissect financial statements company by company. And then there are those who blend both approaches.
What happens after you click that buy button is total mystery — a walk into the unknown…
Or, perhaps more accurately, a dive into the deep ocean.
If neither metaphor resonates with you, then I can only assume your crystal ball is still working. Mine stopped a long time ago and has been collecting dust ever since.
I remember it vividly.
It was early 2022. My previous, and second real year in the markets, had been memorable in my own humble terms, and my confidence was running high. High enough that I decided to shift gears, moving from an energy-focused leveraged ETF into a technology-heavy one.
Then the descent began.
The Federal Reserve pulled the monetary policy lever and interest rates started climbing. Shortly afterwards, the war in Ukraine broke out. My position began to sink.
And sink.
And sink.
That was my crash course in leveraged ETF psychology.
You tell yourself you're prepared for volatility, but once the water becomes so deep that sunlight starts to disappear, you realise this time is different. You are in for quite a dive… or rather, a heck of an emotional experience.
I still remember the number.
Roughly an 80% drawdown from my entry.
Do the maths and you'll realise how much oxygen it takes to climb back from those depths. And it did indeed… it took about twenty-four months before that position finally resurfaced above water.
The companies inside the ETF were solid. Their fundamentals hadn't suddenly evaporated.
The problem wasn't the businesses.
It was the macro backdrop.
Rising interest rates dragged almost everything lower, especially the instruments most sensitive to them.
As red candles were served daily for breakfast, lunch and dinner, I kept repeating the same thought to myself:
"You don't need the money. You'll simply have to endure this, whether you like it or not."
I remember joking about it with a close friend of mine who also trades the markets. This was ultra-deep water, where anything alive tends to glow. A strange, almost mystical place — somewhere a trader only ever imagined existed, and even prouder to have made it out alive.
That was my introduction to leveraged ETF psychology, and I knew the tattoo parlour was waiting for me, with plenty of red ink.
As I approached what felt like the ocean floor, I began deploying fresh capital into the same ETF, in waters that looked considerably more promising.
That decision mattered.
The tattoo was already there, but I still had enough ammunition left to do what I enjoy most.
To test my homework.
To test my intuition.
To test the markets.
And to dive into the unknown.
Because that's where the fish start to glow.