Feelings of anxiety, despair, anger, euphoria, confidence in market control are the main enemies of your cryptocurrency deposit. It often happens that newcomers to the cryptocurrency market are not able to cope with emotions. This leads to the fact that almost every transaction closes in the red. Then the trader does not stand up and gives up everything at the initial stage, without trying to learn how to cope with emotions.
In this article, we will talk about how emotions in trading can ruin your deposit and what to do about it. Experts from the outsource DevOps service company Boosty Labs https://boostylabs.com/devops will help us figure out these issues.
How Emotions Can Negatively Affect Trading
Experienced traders are able to cope with emotions, which cannot be said about beginners who feel great psychological overload at the initial stages. Beginners in trading plunge headlong into trading strategies, while not paying attention to psychological preparation. They underestimate the problem of emotions and later pay the negligence with a deposit.
Trading book authors often talk about how emotional discipline is the key to success in trading. When traders give in to fear, panic, egotism, or greed, they start making serious mistakes.
Fear and anxiety
Anxiety can become a constant companion and background of a trader’s activity. If you begin to feel anxiety, this is an occasion to think: maybe something needs to be changed? Of course, it is difficult to part with money, ambitions and dreams. However, it is important to understand that chronic anxiety prevents you from making the right decisions. In turn, fear will not adequately perceive reality.
When does anxiety and fear manifest itself in trading:
- Too fast and early exit from a profitable trade;
- Fear of closing a position by stop loss.
Greed and impulsiveness
You need to understand that trading is a strategy, patience and a sense of proportion. The exchange does not work on the principle of a casino where you play and gambling controls you. When a trader is disciplined, he gradually increases his income following the developed trading strategy.
How greed and impulsiveness manifest themselves in trading:
- Lack of a trading strategy;
- Unsuccessful trades with high leverage;
- Transactions at a trend reversal;
- Overconfidence and inability to admit mistakes.
Aggression and anger on forums among traders is not uncommon. The reason for this is the psychological inability to accept failure, excessive self-confidence and lack of understanding of the market. In addition, ego is involved, which is a serious enemy for every trader.
After several successful exits in a row, a beginner may begin to believe that he has some kind of control over the market. After that, the inevitable failures and the desire to beat off losses from the market begin. As a result, a “roller coaster” begins, which is based not on the quality of the transaction, but on its profitability.
How overconfidence manifests itself:
- Attempts to buy off a losing position;
- Excessively active trading without taking into account market volatility;
- Refusal to put stop losses.
How to learn to deal with emotions
Emotions make our everyday life brighter. However, a successful trader makes decisions only in a calm state. Learning to control your own emotions is possible. Realize that losses in trading are inevitable. The cryptocurrency market is highly volatile. So you can’t be 100% sure about something you can’t control. Trading is a risk. Risk, on the other hand, is loss. You need to learn to accept it.
Stop losses should not be ignored: if the price reaches their level, the position should be closed. Yes, it can be unpleasant, but you were able to stop in time, save money and nerves. You have shown discipline – an important tool for a successful trader. Many beginners in trading often have thoughts that the price is about to turn around and they will be able to return the lost funds.
However, one cannot be sure of this. No one can know how assets will behave tomorrow, some kind of world situation may happen, because of which everything will collapse. You don’t have to go far for examples.
Last year, this happened because of China, whose authorities almost completely banned the mining of digital assets. Just recently, rallies took place in Kazakhstan, during which the Internet was turned off throughout the country and, as a result, mining in the country was suspended, which negatively affected the rate of the first cryptocurrency.
A trader’s discipline should also manifest itself when closing profitable trades. Greed often ruins a trader who does not take the profit in time. The market can quite suddenly go the other way, so you should not regret that you did not take everything. The trader’s profit is the result of an accurate calculation.
When a trader has a losing trade, he wants to recoup. This is a serious emotion that you need to try to drown out immediately. It is necessary to take a break and cool down, reducing the emotional intensity.
Emotions in the market often play a cruel joke on a trader. Don’t forget to rest. Take a break after a string of failures. This is necessary in order to see the market with fresh eyes, not clouded by recent losses. The main thing that a novice trader should cultivate in himself is discipline. If it appears, then during failures you will be able to control yourself and not make additional mistakes.