Psychology in Crypto Trading
Not so long ago, crypto-exchanges appeared, which allowed its participants anywhere in the world to buy, sell and exchange some cryptocurrencies for others, or for fiat of other countries. Each crypto-exchange is trying to offer clients convenient ways to convert financial instruments, as well as provide the opportunity to conduct transactions on their own terms.
The high rate of development and distribution of cryptocurrencies based on Blockchain, as well as the gradual wide acceptance of the global community and leading economists, ensure further improvement of exchange technologies. It means that in an effort to provide the most comfortable conditions for its clients, each crypto-exchange will bring them to an increasingly higher quality level of service with innovative shades.
But at the same time, within the technological process of exchange trading, which is available to users (from professional traders to amateurs), the question of psychology and its role in influencing decision-making has not been canceled.
Successful trading depends primarily on the psychology of the cryptocurrency trader by 70% and only by 30% on the trading scheme/strategy.When trading on the stock exchange, it is necessary to develop discipline, self-control and be able to react quickly to volatile stock charts. All of this will allow you to earn more efficiently and minimize your losses. Everyone must remember, from amateur to expert, that in financial markets you can not only make money, but also lose money.
Cryptocurrency rates are still subject to political and regulatory influences, their value is influenced by the reputation of the founders of the companies, information throw-ups about blockchain projects and plans for their further development, scandals and revelations. Nevertheless, there are simple rules of successful trading from the field of psychology that will reduce the risks when trying to make money from cryptocurrency and not only. There are a number of problems that always hinder every amateur beginner:
– Unwillingness to learn more about trading
– Imaginary visualization of results
All of these problems have psychological aspects. Emotions, feelings and desires significantly affect trading decisions made by a trader. It happens quite often not only on traditional exchanges, but also in the cryptocurrency industry.
Excitement is an emotional state when a person feels lucky, and as long as a series of successful trades continues, he or she makes larger financial transactions. Excitement often motivates a person to turn away from long-term deals and trends, and to look toward short-term operations. After all, it seems that the more often you make successful transactions, the more capital you will earn. No! The more often you make mistakes, which leads to the default of your account. Money is made on long-term trends and operations. Traders are often worried, fearing a bad trade closing. Sure, losing is bad, but sometimes it’s better to close a position at a loss than to lose a big amount just because you hope for a quick price reversal.
This is why fear often leads to bad strategic decisions. Fear of loss eventually becomes a verdict on your positioning for profit. On the same line with fear is, oddly enough, the greed factor. Having essentially a different source of inspiration, greed, like fear, leads to an overall unfortunate result: the default of your trading account.
An unwillingness to learn new strategies, technologies, and a denial of foresight, also leads to failure. Successful is the one who always strives to learn new things, and perceives the fact and necessity of constant learning. As learning is a process of striving to progress one’s results and professional qualities. Another scourge is the desire or visualization. Everyone wants to see a price movement in the right direction. This is quite dangerous. Visualizing a price spike in the right direction can lead to daydreaming and investing too much in cryptocurrency.
This will lead to losses. This is where you should always remember to diversify your investments. Remember your psychological profile even when you program your trading strategies, algorithms and bots. After all, your algorithm is essentially your psychological portrait. After all, the above-mentioned flaws, especially in a strategy, can dominate and damage your deposit and reputation. The main signs of a competent crypto-trading are the same as in other exchanges (like FOREX). This is a kind of algorithm of sustainable strategy for profit:
Step 1: Decide on the type of trade
After the user has become a client of the exchange, it is possible to start trading. There are several variants — to begin at once, relying on intuition and advice of analysts, or to be trained in technical analysis, to learn more about the psychology of trading and then, fully prepared to make the first steps in the market.
The first option is a good one in its own way as it allows you to start trading almost immediately. But there are great risks of losing capital.
The thing is that it is rather difficult to predict the market fluctuations. And if you don’t have the proper knowledge you can only do it at random with minimal chances for success. Though it is unlikely you will want to play roulette with your own money.