Cryptocurrency and the Psychology of Trading
A lot of newbies in the crypto market are loosing alot of money these days. If you just started trading on an exchange, let me give you some advice. There’s a lot of psychology in this game.
Fear Of Missing Out is a strong factor in trading. If the price of Ethereum goes from $80 to $100 and over the next days keep surging the fear of missing out is strong. You want to earn money so you check the news and convince yourself, this is it ! Go go go. Hodl hodl. Go long.
Fear Uncertainty and Doubt. You just bought Ethereum at $110 after a week of surging it suddenly dropped hard the day after you bought. You are waiting for it to turn, but at $80 you sell. Why ? Because you convice yourself it’s a bear market and it will go even further down.
You sold at $80. But just after you sold, the price started to surge again. You have lost a lot of money. You are waiting to get back in. You are waiting for the the price to come down to $80 again. You see the price go back up to $100 and to $95 and to $110 and down again. For weeks you wait..
After weeks of waiting the price is back at $80. But because of a long period of Bear market you convice yourself that this is not the bottom. You read news about a collapse and bear trends. So you skip goin back in.
In the news you read about Bear Trends and predictions of a new bottom at $50. You’re new goal is to just wait for it to make the most out of what you have left.
YOU FAILED AGAIN
At $60 the price started to go up again. You think it’s a dead cat bounce and wait, but suddenly or after weeks you realize it’s a Bull Market and the price keep surging.
If you invested $1000 in Ethereum at $110 (9 ETH) and sold at $80, well you are left with $727. Should you once again invest at $100 (7,27 ETH)? What it you wait and the price goes to $110 again. Then you’re only getting 6,6 ETH. This is when the FOMO once again starts to kick in. You waited and now the price is at $120. You can’t take it anymore. You go all in and invest $727 for 6 ETH.
TO THE MOON
At $125 you start feeling good about youself. At $150 You quit your job to become a full time crypto trader. You start dreaming about Lamborghini and stuff. You’ll be rich. You go to bed with a smile.
You wake up. The first you do is checking Coinmarketcap.com. What ? Ethereum at $100. $98. $95. You start looking for some explanations. Every newspaper is talking about the SEC and regulations. BAKKT is delayed.
At $90 you can’t take it anymore. The FUD is killing you so you sell.
Well, what do you know! After a shower and some breakfast you check coinmarketcap.com and to your surprise it’s back up at $110. You are stuck with $540. Should you go back in and get 4,9 ETH or what ?
WHAT IS THE MORAL ?
If you don’t know what you are doing, you should keep away from this market. You should first of all have a look at the long-term trends.
Don’t buy at top and sell at bottom. Becoming a successful swing-trader is not an easy task these days. The market is too volatile, and manipulation is a big issue. Learn about the fundamentals, pump and dump and all that stuff. Our example person lost nearly 50%. If he had tried to swing trade he would have lost even more. But if you dedicate your whole life to trading and sleep and eat crypto, well… good luck with that.