Graham, the mentor of "the father of value investing" and "the stock god" Buffett, once said: "Investors who cannot control their emotions will not make a profit from any investment."
In the cryptocurrency world, everyone likes to stare at K-lines and news flashes, hoping that their coins will rise. This process is affected by FOMO (fear of missing out) and FUD (fear, uncertainty, doubt), which creates a risk of making decisions based on emotions rather than facts. In order to reduce risks and avoid losing money in the cryptocurrency world, it is crucial to control emotions. The following guide is designed to help you avoid letting your emotions control your trading.
Make a plan
Before you start trading, it is important to clearly understand what your goals are for investing in cryptocurrencies. Before buying any coin, ask yourself the following questions:
1. Is your investment risk appetite suitable for the high-risk cryptocurrency world? Do you have other savings to leave yourself a way out? If not, the cryptocurrency world may not be a good place for you to invest.
2. Can you bear the risk of going to zero? It not only refers to the 99% drop in the price of the currency, but also the risk of losing assets due to hacking of exchanges and wallets.
3. Do you know the risks and volatility of the cryptocurrency world?
4. Do you want to speculate in the short term or hold for the long term?
Do your research
Before buying a coin, it is crucial to do background research on the coin and its underlying technology. Be sure to read the project's white paper, as many people buy coins without knowing anything other than the coin's letter code. While these two things won't guarantee a successful investment, they can help you better understand the coin you are buying.
Having a clear understanding of the project can reduce the interference of external market sentiment. If you buy a coin that you don’t understand at all and encounter false negative news in the market, would you not panic?
Choose the right exchange and wallet
Choosing the right exchange and wallet is to find out which exchange can help you achieve your goals according to your plan. If you want to play altcoins, then Binance is suitable for you, and Binance is the base camp of altcoins. If you want to play futures contracts, then OKEX and BitMEX are suitable for you. If you want to be a long-term investor, you can deposit the coins into a decentralized wallet and keep the private key.
The first thing to consider when choosing an exchange and wallet is security, which is the most important thing, because once a security incident occurs, your mentality will explode. Try the platform's login process first, the stricter the better. Check the news and reports related to the platform online for any risks, so that you can have a general idea of the risks in your mind and feel at ease when trading cryptocurrencies.
Money Management
You must know how much money you can invest in cryptocurrencies and stay within that limit. How much money you want to invest depends on your plan (see point 1 above). Cryptocurrencies are very risky, so you should only invest money you can afford to risk losing. Once you set this limit, stick to it. Don't decide to invest more money on a whim or because you are afraid of missing out, which is often the beginning of disaster based on past historical experience.
For a person who goes all in and leaves no way out for himself, the size of his position has already determined his IQ. It is difficult for people who go all in to be rational, and they are most easily affected by emotions, leading to wrong investment decisions, which 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 price of the currency drops rapidly, setting a stop loss point can protect you from excessive losses. A stop loss order allows you to set a limit price at which you will sell the currency. Setting a stop loss point also helps to lock in profits.
For example, if you buy a coin at $10 per coin, you can set a stop loss order at $8. If the price of the coin drops significantly, the exchange will automatically sell your coins at $8. If the price of the coin soars to $20, you can change the stop loss order to $16. Most exchanges allow you to set a stop loss. This is not a method that will make you lose everything, but a stop loss can help reduce losses and lock in gains.
Stop loss is against human nature, because there are sunk costs. The more you invest and lose, the more reluctant you are to cut your losses. But in the high-risk market of the cryptocurrency circle, stop loss is extremely important. Look at the people around you, how many people are trapped.
Don't pay too much attention to the market
Currently, the market fluctuations in the cryptocurrency market are extremely volatile, which is also what makes the cryptocurrency market attractive. The price of a coin can double several times in an hour, which creates opportunities for huge profits. At the same time, the price of a coin may be smashed in an instant like a roller coaster. Staring at the market will cause your blood pressure to rise, which will trigger an emotional reaction, leading to panic selling or buying high due to "fear of missing out".
Traders should stay away from the market, because the source of your greed and fear is the fluctuation of the market price. Not watching the market may help you control your emotions. Of course, day traders are an exception. They need to watch the market. If you are investing in long-term trends, there is no need to watch the market every day and be affected by the fluctuation of the market price.
Watching the market is a waste of life. Sometimes the farther you are from the market, the easier it is to make money, and the closer you are to the market, the easier it is to lose money.
Keep an investment journal
Write down your investment operation plan and how to punish if you violate it. Don't use spiritual repentance, it is recommended to use corporal punishment. For example, if you violate it today, you will be slapped 100 times. If you can't do it, then there is no other way.
Summarize
Buying and trading coins can be exciting and potentially very profitable, but it also comes with risks and uncontrolled emotions. The market will always surprise you, and if you can’t control your emotions well, you will fall into impulse again and again, or ignore the risks and chase the rise passionately, and you will not be able to escape the fate of failure.
Although there are many methods of market analysis, the unchanging task for individual investors is to control themselves instead of being proficient in theory. Only by learning to control their emotions and responding to ever-changing situations can they open the door to financial freedom.
What’s the difference between speculating in cryptocurrencies without faith and being a salted fish?
I asked the master: "I am a cryptocurrency trader, I am under a lot of pressure, I can't eat well, I can't sleep well, others have time to take a vacation, but I can't, I feel very tired and confused, I feel psychologically blocked, master, what should I do?"
The Zen master covered his left chest with his right hand and remained silent.
I asked the master: "You mean don't complain, have a clear conscience, and live up to your dreams, right?"
The Zen master shook his head and said, "Stay away from me. I was a cryptocurrency trader before I became a monk! I feel upset when I hear you say these things again today!"
Randomly interviewed several friends who wished to remain anonymous:
Friend 1: Cryptocurrency trading is very popular nowadays. I might as well join in and try it out.
Friend 2: Cryptocurrency trading is just a hobby. Whether you can make money depends on your ability.
Friend 3: Make money!
Friend 4: Get rich!
Friend 5: Get rich overnight!
Although I just asked a friend randomly, I can still see some problems. The rich people's cryptocurrency speculation is called investment, they want to make money and interest, while ordinary people's cryptocurrency speculation is "delusional" to get rich overnight.
People with foresight entered the market early and have now made a fortune. People who entered the market late have only the dream of getting rich quickly but do not have the ability to do so.
They can't afford mainstream coins, so they can only play with small coins. Everyone knows that small coins are much more pitfalls than mainstream coins. When the bear market comes, the better small coins are deeply trapped, and the worse ones are directly reduced to zero, leaving no hope for a comeback.
In a bear market, there is nothing left for cryptocurrency trading except faith.
There are many kinds of faith:
There is a simple desire for wealth;
I have a pure love for cryptocurrency trading;
But the belief that I appreciate most is the unwavering recognition and trust in the value of digital currency.
What is the value of digital currency? Uncle Wolf believes that digital currency in the future will not only be used for speculation, but also for circulation. As a token economy, it will circulate in many blockchain implementation scenarios.
01 Seeking wealth is not wrong, but greed is a sin
The lowest belief in cryptocurrency trading is 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 of the people who initially speculated in cryptocurrencies entered the cryptocurrency circle with this belief, and finally realized this belief.
But there is one behavior that is the most taboo in cryptocurrency trading, and that is going all in.
All in is a gambler's behavior. People who do this are either sure to win or are completely irrational and just want to take a gamble.
Why did you become a leek? Of course it was the dealer who manipulated the market! The so-called "manipulation" is the gambler's heart.
When the currency is rising, you can add more positions and sell them at the highest point. However, before you can make any profit, the dealer will directly dump the market. Oh no, the little leeks are being ripped off and even their underwear is gone. Greed is the original sin that causes you to be ripped off.
For example, as far as the current currency situation is concerned, most currencies have begun to recover, but the future is unclear. Should small investors choose to sell their currencies or continue to increase their positions?
I think there will be many people who will add to their positions. It’s not that they bought wrong, but the current situation is unclear and there is no inside information. Who gave the leeks the courage? Fish Leong?
02It is easy to believe for a while, but it is hard to persevere
When the digital currency wave hit, a large number of people flocked in. Now that the bear market has come, some are bankrupt, some are withdrawing, and how many people are left fighting alone?
Times make heroes, and the more such times, the more valuable the talents who remain are. There are not many people who still believe that digital currency is valuable, but there are always a few.
For example, the CEOs of various leading digital currency exchanges absolutely believe in the value of digital currency. After all, their choice to run digital currency exchanges is not driven by temporary interests.
The exchange was established because they have always believed that digital currency is not a bubble, but a groundbreaking product.
If you count carefully, those who now believe in the value of digital currency are also the people who initially invested in digital currency.
They have created miracles and have succeeded, so they understand the true value of digital currency. That is why they have persisted and believed in what they believe in during the 1994 tragedy and the 2018 bear market.
It is easy to believe for a while, but difficult to persevere. It is easy to go with the flow, but difficult to be unique.
Digital currency will never be eliminated. This is what Sister X believes in. I hope that you who have no faith or have given up faith can regain your faith and stop being a salted fish.
Playing contracts in the cryptocurrency world is not blind gambling. You need a systematic method, reasonable position management, and a strict stop-profit and stop-loss strategy. It sounds difficult to use 2,000 yuan to win nearly a million, but as long as you master these skills and do every order well, the dream of becoming a millionaire can be fully realized!
These experiences are all derived from my ten years of hard work in cryptocurrency trading. They are the profound insights I gained after going through all the ups and downs. I hope they can illuminate the way forward for you.
I have been in the market for many years and I am well aware of the opportunities and pitfalls. If your investment is not going well and you are unwilling to lose money, please leave 999 in the comment area! Wu Chang shares his experience!
