Psychology Factors and Crypto Trading
Psychology comes to play in crypto trading and it is one of the factors that determine the performance of traders in the crypto market. A trader’s behavior and character are known to majorly influence his or her decision-making process as such we have often emphasized that traders need to control their emotions when making investment decisions. Some of the emotions associated with trading psychology include fear, greed, hope, and regret. In light of this, we shall detail the effect of fear in crypto trading and how to deal with it.
Fear, Greed, and Cryptocurrency
Fear is one of the biggest emotional factors that mar the decision-making process of traders. the inability of traders to recognize and manage fear leads to trading mistakes which put them at risk of incurring significant losses. Seasoned and professional traders have learned to master fear and appear rational. A trader that is susceptible to fear is always scared to take on risks and he or she is often unable to maximize profit.
The opposite of fear in crypto trading is greed. Greed is an emotional factor that spurs a trader to take on unnecessary risks in order to make profits. There is a need for traders to find a balance between fear and greed.
Is Fear Bad When Trading Crypto?
In a bear market, traders that are susceptible to fear are able to limit the losses they incur while generating insignificant profits. And in a bull market, fear jeopardizes a trader’s chances of partaking in significant profit generating trades.
A trader will likely develop fear when he or she is in a losing streak which has damaged his or her self-confidence. Such traders are unable to accept these losses and move on, instead, they remain in a state of regret and their trading performance suddenly starts to decline. With fear, the decision-making process is flawed, and traders tend to hesitate when they ought to swiftly capitalize on trading signals. Therefore, it is important that traders free themselves from fear before making investment decisions.
The ability to negate fear is one of the criteria for becoming a professional trader. To negate fear, you need to do the following:
You Need To Understand The Market
It is important to understand that the crypto market is volatile, hence, there is bound to be sentimental views that the market will crash or fail. Understand that this is a vicious cycle and it has been going on for years. When the market appears to hit a low and then people come out to predict the total collapse of the market and yet it still holds strong.
Realizing that the volatile nature of the market is likely to create fear and anxiety is the key to mastering ones fear. When you have done this, then it becomes easy to take advantage of the volatility as well as the doubt, fear and the anxiety that comes with it.
Accept That Everyone Makes Mistakes
Even the most seasoned trader is bound to make trading mistakes. They are called professionals because they are able to learn from these mistakes and move on. After experiencing a losing streak, the best thing to do is to take a break from the market. While away, you should analyze each trade in order to figure out your mistakes. Then, you can come back to take on new trades. However, you should never chase losses or revenge trade. In addition, don’t give fear a chance to grow by delaying your return to the market.
You Should Utilize Fear
As mentioned earlier, the opposite of fear is greed. Traders who do not have an ounce of fear tend to become greedy. As such, it is also risky to be a completely fearless trader as we start to ignore risks because of greed or overconfidence. You can use fear to control overconfidence.
Research and Analyze Every Trade
An in-depth analysis of the market will help you negate fear while making investment decisions. Therefore, you should diligently research the market in order to rightly predict the price movements. One of the easiest ways to do this is to subscribe to our telegram trading signal channel or bitmex signal channel that offers traders quality signals that will help them control their fears.