Reasons for cryptocurrency losses:
Let me give you an example so you understand.
You have 1 million in assets, and you use 700,000 to buy a cryptocurrency. The next day, this cryptocurrency drops by 1%, and you lose 7,000. You don't care; after all, it will rise again sooner or later.
On the third day, it drops another 3%, and you lose almost 20,000. You are unafraid because it will rise again sooner or later.
On the fourth day, it rises by 2%, and you recover almost 10,000 of your principal. You smile, feeling everything is under control.
On the fifth day, it suddenly plummets by 20%, and you lose 140,000. You feel a bit anxious and start to fantasize that it will rebound tomorrow.
On the sixth day, it rebounds by 5%, and you breathe a sigh of relief, thinking that trading cryptocurrencies still has some patterns to follow.
On the seventh day, it rises by 1%, and you begin to feel hopeful.
On the eighth day, it rises again by 1%. Although you feel the increase is slow, at least there is hope to recover your principal, and you are content with that.
On the ninth day, it suddenly crashes by 30%, and you start to panic, doubting whether you chose the wrong cryptocurrency.
On the tenth day, it drops another 10%, and you start to get angry.
On the eleventh day, the cryptocurrency price no longer fluctuates significantly and starts to consolidate. You see someone online saying this is a bottoming signal, indicating that the market is accumulating momentum, and you firmly believe it will rebound soon.
But…
In the following week, the cryptocurrency price continues to consolidate. You go online to learn some knowledge about cryptocurrencies, and based on your understanding, you think this is the legendary “main force accumulation phase”!
You continue to hold the cryptocurrency..
A month later, not only has the cryptocurrency price not risen, but it has also dropped another 20%. You start to feel numb, thinking that if you could just break even, you would withdraw your money and never touch cryptocurrencies again..
But things don’t go as planned; your cryptocurrency is still falling. At this point, you finally learn a new concept—stop-loss!
You feel tremendous pain and inner struggle, unsure whether to liquidate or continue holding..
Just then, a good friend tells you that a new cryptocurrency has recently surged by 200%, and he shares his “leading strategy” with you!
You believed it! You actually believed it!
So, you sold your cryptocurrency and told yourself,
that once you make a profit on the new cryptocurrency, you would come back to average down, hold it for the long term, and talk about breaking even later!
So, do you understand where the root of cryptocurrency trading losses lies?
