⚠️Have you ever had such an experience❓
🎈When you plan to buy BTC, do you hesitate to place an order because of losses from the previous trade, and end up missing out on a big profit opportunity just because your order didn’t execute by a few cents?
🎈After missing this profit opportunity, you rushed in, only to end up standing at a high position❓
🎈Do you rush to close positions every time you make a small profit, cashing out early and securing the money, fearing that the profits you have will slip away, ultimately missing out on larger profit opportunities❓
🎈Do you find it hard to cut losses when you're in floating losses, ultimately turning a $100 loss into $1000, or even a total loss❓
This is actually you being swayed by emotions, unable to rationally judge the current situation, and unable to rationally treat the outcome of each trade. And this is the fundamental gap between you and top traders.
❓❓So where do these emotions come from? Some psychological cognitive biases can help us solve this doubt.
Loss aversion: A strong preference for avoiding losses, meaning not losing money is far more important than making money. This psychology can cause us to hesitate to enter the market and miss profit opportunities.
Sunk cost effect: Placing more importance on money already spent rather than considering future costs. This psychology can lead us to avoid cutting losses when losing, resulting in even larger losses.
Disposition effect: Cashing out profits early while allowing losses to continue, ultimately making us miss out on great trading opportunities.
Outcome bias: Judging the quality of a decision solely based on its outcome, without considering whether the outcome is genuinely related to the decision criteria. 'Successful people are always right' is the most direct manifestation.
Recent bias: Placing more importance on recent data or experiences while ignoring earlier data or experiences. Being deeply impressed by recent experiences while neglecting past experiences, such as the importance of recent highs and lows over those in the past.
Anchoring effect: Excessively relying on easily accessible information.
Herd behavior: Blindly doing something just because many others believe in it, often getting stuck at the peak because of the blind pursuit of trends that everyone is chasing.
Law of small numbers: Always drawing unfounded conclusions from a few instances of information and experience, making it impossible for you to develop a truly advantageous profit model.
🎈These cognitive biases almost exist in everyone; since everyone has them, if we can excel in a few aspects or even leverage others' cognitive biases, we can perform better than others. For example, the psychological sources of support and resistance are the anchoring effect, recent bias, and outcome bias. If we understand this, we will know where support and resistance will occur and how they can transform into each other, allowing us to distinguish between effective breakouts and false breakouts.
🎈For specific analysis, you can check my technical analysis public class on August 23.
❓So what cognitive biases do you have yourself? You can leave a message to let me know.
