Today I am studying the difference in the information sources traditional traders use in Investment Banking to take their investment decisions and how it differs dangerously to Web3 investors.
First, let’s talk about why information and timing are key when trading. Good and reliable information, at the right time, gets you in or out of a trade at the right moment, setting you up nicely for some gains or preventing you from losses.
The wrong information with good timing, or, right information with bad timing, are both detrimental to your investment strategy, putting you at risk of making a mistake if you do not have targets on, discipline in your strategy and regular cash out.
How were we getting the information when I was trading in Investment Banking?
I had to be sitting at my desk by 5.50/6am maximum. Had roughly 45 minutes to research the latest news using the Financial Times, Bloomberg, Reuters, chart analysis, starting a few chats with fellow traders from other institutions via BBG IB chat.
After that, every morning we had a morning meeting. Analysts & Research teams were giving us their latest forecasts or news from the previous day that could impact the coming day. We were being reminded of any important dates or announcements/events in the market (non farm payroll numbers, inflation, Fed chat, new issues, corporate events…)
Then our offices in Asia were telling us about their trading day which was roughly half way through, and things that could have an important impact on our day (I was trading out of the City in London, so European markets). After that, strategy and targets were discussed before sending us back to our desks like a military squad ready for a fight.
Come mid-day, we had an after lunch meeting with our US team this time, now it was our turn to tell them what we had seen, heard, traded. Then the US was doing the same on their side with Asia… going in a loop everyday.
With the help of researchers and analysts doing the so called DYOR and due diligence and sending constant reports throughout the day to us traders, and this organisation of news flowing from Asia to Europe to US back to Asia, Investment Banks are making sure they leave no stone unturned and have the right information at the right time. This gives them a massive edge over retail traders which are most of the time by themselves or with less resources to access information (Bloomberg Terminal costs a minimum of $40K per year per account).
Now, let’s make a parallel with Web3. By Web3 I include crypto and NFT.
The main source of information in Web3 is the internet… Crypto news, traditional markets news (which often impact the Web3 one) and social media.
That being said… majority of Web3 investors do not read financial news (how many of you have the Financial Times in your favourites?), and also not the crypto related news websites, although now the industry is getting more and more educated (probably tired of wrong investment decisions) and websites like CoinDesk have seen their traffic increasing.
Web3 investors are usually single traders, or can be acting in Alpha groups but even then, unless the group is acting over different continents, with analysts and researchers, traders cannot do it all by themselves. Good Alpha Groups should have this type of organisation; most do not yet.
This leaves one source which is mainly used by the average Web3 investor wannabe (no offence we all started there)… social media like Twitter, Discord, Telegram.
When Discord and Telegram are great tools to communicate, they definitely have their pros and cons but they are only what you make of them. If you join the wrong groups and do not use your critical mind, you will be led to wrong investments. Now, interact with the right people, and these become powerful platforms!
The great danger resides with Twitter, for one main reason that can be summarised in one word: “Algorithm”!
Creating an audience today and working on personal branding is a fantastic tool for whatever venture you want to create. It is today a smart way to raise awareness about your cause, product, company, community etc…
For an audience, you need followers. Followers follow the mass and the biggest numbers of likes and retweets but not just because they are biased (which we all are) but also because this is what is shown first to them on their news feed.
Web3 Influencers, like any influencer, is aware of that and will be using SEO and keywords trending to write their tweets, several times a day, to gain traffic and grow their audience. How many tweets about Elon Musk selling his Bitcoin have you read when it happened?
The issue with this is that you end up being forced fed news that then appear bigger than they are. Not because they are important for your investment, but because they help influencers trending more. The whole market looks in the same direction, making the same mistake when people who use other sources of information will understand that what will make them money is not necessarily what is talked about the most on social media. Having a poor NFT project gaining thousands of followers because they were skilled in growing an audience (or bought bots), does not make it a great trade or prevents you from a scam.
You get the idea, I could go on and on about how Twitter can be pushing you in the wrong direction. Now it remains a great tool also to get the latest news and educate ourselves but always keep a critical mind and remember that 90% of the post you see on a daily basis have been posted for one and only reason, get this f*****g algorithm going their way! Genuine information, at the right time, will get you far.
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I am an entrepreneur who enjoys educating people about trading and sharing my 13 years experience in the finance industry. I am working on an exciting Web3 ecosystem project with my team which will soon be released and of course… we will be using Twitter 😉
Thank you for reading!
I write short articles about Web3 and trading. I am an entrepreneur who enjoys educating people about trading and sharing my 13 years experience in the finance industry. I am working on an exciting Web3 ecosystem project with my team. I will be posting more educative content on Medium going forward. Feel free to follow me here or directly on my Twitter https://twitter.com/MarkFobo as I post there first.
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