Seasoned traders say that the worst time to learn trading or to invest is in a bull market. Why? Because you develop bad habits during the good times, and a bull market makes you blind to the risk that comes with playing in financial markets.

There are people who started in the markets at the bottom of the 2020 market cash. They watched their portfolio grow with the market rise, making profits. Some started to believe they had found the holy grail. Others believed they have a genius intuition, as they poured more money into the market and made even more money. Everyone was buying the dip. However, the dangerous side of bull markets lies within the lessons it doesn’t teach.

Mark Twain famously said “It’s not what we don’t know that gets us in trouble. It’s what we know for sure that just ain’t so.”

Bull markets create the belief that

• Markets always come back eventually
• Since markets always come back, you’re guaranteed profits if you buy the dip
• If you increase your leverage you make more, and more

Growing pains

Then there are those first-time experiences, like watching markets fall while you have money on the line. Learning that “eventually” can be a long way still. One of the hardest experiences to get through is when you don’t know when or if it’s going to end. You have to have conviction in your market action. Unfortunately, this cannot be inherited.

So, what has the 2022 market condition been teaching us?

• Know what you’re going to do when the opposite of what you think will happen, happens
• A dry season can outlast your solvency
• Stocks don’t always go up
• It’s not always sunny – some days are cold

We need to learn from the experience and not repeat the same mistakes when the bull run comes.

Traders share a peculiar characteristic: they’re fiercely competitive, but only with themselves. In practice this means that they see every outcome as an opportunity to learn, and they’re brutally honest about both their failures and successes. This also means that they’re hungry for knowledge. They don’t sleep easy with unanswered questions. And they’re seldom satisfied with just one answer.

Njabulo Nsibande is a founder of Village Trader, and Sakha Ingcebo investment club. His interest in trading began in 2016, alongside a rash of Instagram ‘fx traders’…

Find him on Twitter: @njabulo_goje.