The mentor of Warren Buffett, the 'father of value investing' and 'the oracle of Omaha,' Graham once said: 'Investors who cannot control their emotions will not profit from any investment.'
In the cryptocurrency world, everyone likes to watch the candlestick charts and news, hoping that their coins will rise. This process is influenced by FOMO (Fear of Missing Out) and FUD (Fear, Uncertainty, Doubt), which creates a risk of making decisions based on emotions rather than facts. To reduce risk and avoid losing funds in the crypto space, controlling emotions is crucial. The following guide aims to help you avoid letting your emotions dictate your trading.
Make a plan
Before starting trading, it is most important to clearly know what your investment goals in cryptocurrency are. Before purchasing any coins, ask yourself the following questions:
1. Is your investment risk preference suitable for the high-risk coin circle? Do you have other savings to leave yourself a way out? If not, the coin circle may not be a good place for you to invest.
2. Can you bear the risk of losing everything? This not only refers to a 99% drop in coin prices but also the risk of losing assets due to exchanges or wallets being hacked.
3. Do you know the risks and volatility of the coin circle?
4. Are you looking to speculate in the short term or hold long-term?
Conduct a survey
Before buying coins, it is crucial to conduct background research on the coin and its underlying technology. Make sure to read the project's white paper; many people know nothing apart from the coin's letter code. Although these two actions cannot guarantee your investment success, they can help you better understand the coin you want to buy.
Having a clear understanding of the project can reduce the interference of external market emotions. If you buy a coin that you know nothing about and encounter false negative news in the market, can you remain calm?
Choose the right exchange and wallet
Choosing the right exchange and wallet is based on your plan to find out which exchange can help you achieve your goals. If you want to trade altcoins, then Binance is suitable for you; Binance is the home for altcoins. If you want to trade futures contracts, then OKEX and BitMEX are suitable for you. If you want to be a long-term investor, you can store your coins in a decentralized wallet and keep your private keys safe.
When choosing an exchange and wallet, the first consideration is security, which is the most important. Because once a security incident occurs, your mindset will explode. First, try the platform's login process; the stricter it is, the safer it is. Look online for any news and reports related to the platform to have a general idea of the risks so that you can trade with peace of mind.
Capital management
You must know how much you can invest in the coin circle and stay within this limit. How much you want to invest depends on your plan (see the first point above). The coin circle carries great risks, so you should only invest money that you can afford to lose. Once you set this investment limit, stick to it. Don't decide to invest more money because of a moment's impulse or fear of missing out. Based on historical experience, this often marks the beginning of disaster.
A person who goes all in and leaves no way out for themselves has their position size determining their intelligence. Those who go all in find it hard to be rational and are most easily influenced by emotions, leading to wrong investment decisions that often end in tragedy.
Set a stop-loss point
Before entering the market, you must set a stop-loss and strictly enforce it. If the coin price drops sharply, setting a stop-loss point can protect you from excessive losses. A stop-loss order allows you to sell when the coin price falls to the minimum limit. Setting a stop-loss point also helps lock in profits.
For example, if you buy a coin at a price of $10 each, you can set your stop-loss order at $8. If the coin price drops significantly, the exchange will automatically sell your coin at $8. If the coin price skyrockets to $20, you can change the stop-loss order to $16. Most exchanges allow you to set stop-loss orders. This is not a method that allows you to eat from start to finish, but stop-loss helps reduce losses and lock in profits.
Stop-loss is counterintuitive because of sunk costs. The more you invest and lose, the more reluctant you are to cut losses. However, in the high-risk market of the coin circle, stop-loss is extremely important. Look around you; how many people are deeply trapped.
Do not pay excessive attention to the market.
Currently, the market volatility in the coin circle is extremely fierce, and that is also what attracts people to the coin circle. Coin prices can multiply in a single hour, creating opportunities for massive profits. At the same time, coin prices may also be smashed down like a roller coaster. Watching the market can increase your blood pressure and trigger emotional responses, leading to panic selling or buying high out of 'fear of missing out.'
Traders should stay away from the market because the source of your greed and fear emotions is the price fluctuations in the market. Not watching the market may help control your emotions, but day traders are an exception; they need to watch the market. If you're making long-term trend investments, there’s no need to check the market daily and be influenced by price fluctuations.
Watching the market is a waste of life. Sometimes, the further you stay from the market, the easier it is to make money; the closer you are, the more likely you are to lose money.
Write an investment diary
Write down your investment operation plan, and write down how to punish yourself if you violate it. Don't use mental penance; I suggest using physical punishment. For example, if you violate it today, slap yourself 100 times. If you can't do it, then there's nothing more to say.
Summary
Buying and trading coins can be exciting and have the potential for high profits. However, it also comes with risks and uncontrolled emotions. The market will always surprise you. If you cannot manage your emotions well, you will find yourself in one impulsive situation after another, or ignoring risks and chasing prices out of passion, ultimately unable to escape the fate of failure.
Although there are many market analysis methods, the unchanging task for individual investors is — you don't need to master the theory, just control yourself. Learn to manage your emotions, and respond to changes with constancy, then you can unlock the door to financial freedom.
Trading coins without faith, what’s the difference from being a salted fish?
I asked the master: "I am trading coins, feeling stressed, unable to eat or sleep well, while others have time for vacations, but I cannot. I feel particularly tired and confused, and my mind is blocked. Master, what should I do?"
The Zen master covered his left chest with his right hand and remained silent.
I pressed the master: "You mean to say do not complain, to ask oneself without guilt, to live up to one's dreams, right?"
The Zen master shook his head and said: "Keep your distance from me. I used to trade coins before I became a monk! Hearing you say these things today makes me feel uneasy!"
Sister X randomly interviewed several friends who wished to remain anonymous:
Friend 1: Isn't trading coins quite popular now? Just play along with everyone, try it out.
Friend 2: Trading coins is just a hobby, whether you make money depends on your own ability.
Friend 3: Make money!
Friend 4: Get rich!
Friend 5: Get rich!
Although I randomly asked friends, I still see some issues. The wealthy's trading of coins is called investment, aiming for money to roll money, while ordinary people's trading of coins is a 'fantasy' of getting rich overnight.
Those with foresight entered the market early and are now making a fortune, while those who realize too late have only grand dreams of getting rich but lack the capability.
They cannot afford mainstream coins and can only play with small coins. Everyone knows that small coins are much riskier than mainstream coins. As the bear market arrives, slightly better small coins are deeply trapped, while worse ones go directly to zero, leaving no hope for a comeback.
In the bear market, trading coins means having nothing but faith.
Some people have even lost their faith. For such people, I just want to say: "Get lost! Get out of my magical fairy castle in the coin circle."
There are many forms of faith:
A pure desire for wealth;
A pure love for trading coins;
But the belief I admire most is the unwavering recognition and trust in the value of digital currency.
What is the value of digital currency? Lao Wang believes that future digital currencies are not only for trading but also for circulation, serving as a token economy, circulating in many blockchain application scenarios.
01 There’s nothing wrong with seeking wealth, but greed is a sin.
The lowest faith in trading coins — the pursuit of getting rich quickly.
Although it is the lowest, Sister X does not think there is anything wrong with it. It is human nature; most people who initially traded coins stepped into the coin circle with this faith and ultimately realized this faith.
But there is one behavior that is most taboo in trading coins, and that is to go all in.
Going all in is a gambler's behavior. Those who take such actions are either confident of victory or completely irrational, just wanting to take a big gamble.
Why do you become an investor? Of course, it’s because the market manipulators are at play! The so-called 'manipulation' plays on the gambler's heart.
When the coin rises, you can aggressively increase your positions, but when the highest point comes, you might not even get to make a profit, as the market manipulators directly crash the price. Oh no, the little investors are being cut down without mercy, and their underpants are lost, greed is indeed the original sin of being cut.
For example, regarding the current trend of coins, most types of coins have started to warm up, but the future is unclear. Will the little investors choose to sell their coins or continue to add positions?
I believe there will be many people adding positions. It's not that buying is wrong, but in the current unclear situation without inside information, who gives the investors the courage? Liang Jingru?
02 It's easy to believe for a moment, but difficult to persevere.
When the wave of digital currency hits, a large crowd rushes in. Now that the bear market has arrived, some go bankrupt while others exit the market. How many are left fighting alone?
Times create heroes. The more it is like this, the more precious those who remain become. Nowadays, there are not many who still believe in the value of digital currency, but there are always a few.
For example, the CEOs of various leading digital currency exchanges, they absolutely believe in the value of digital currency, after all, they choose to run digital currency exchanges not for immediate profits.
The establishment of exchanges is based on their unwavering belief that digital currency is not a bubble but a revolutionary product.
Counting carefully, those who now believe in the value of digital currency are also the initial investors in digital currency.
They created miracles; they have succeeded, so they understand where the true value of digital currency lies. Therefore, they persisted and believed in what they recognized during the 1994 incident and the great bear market in 2018.
It's easy to believe for a moment, but difficult to persevere. The easy part is following the flow, the difficult part is being unique.
Digital currency will never exit the market. This is what Lao Wang believes in. I hope those who have lost their faith or given it up can find it again and not become like salted fish.
Playing contracts in the coin circle is not about gambling blindly; it requires systematic methods, reasonable position management, and strict profit-taking and stop-loss strategies. Using two thousand dollars to gamble for nearly a million may sound difficult, but as long as you master these skills and do well in every single trade, the dream of becoming a millionaire can be completely realized.
These insights stem from my ten years of experience in trading coins, a profound understanding gained through trials and tribulations. I hope they can illuminate your path. Produced by Lao Wang, quality guaranteed!
One tree cannot make a boat, and a lone sail cannot go far! In the coin circle, if you do not have a good circle, and no insider news from the coin circle, then I suggest you follow Lao Wang, who will help you get on board without cost. Welcome to join the team!!!