Psychology Trade Art: How to reduce losses on the cryptocurrency market
In recent years, the cryptocurrency trade world has become more and more popular. As blockchain technology increases and with decentralized exchanges (DEX), the profit potential is enormous. However, for many traders, cryptocurrency trade can quickly turn into a disaster recipe – financial deterioration.
The main cause of losses in the cryptocurrency trade is not only failure or lack of skills. It is in fact a combination of psychological biases which can cause impulsive decisions and poor risk management. In this article, we will study current psychological deficiencies in which traders come with regard to the trade in cryptocurrencies and to provide strategies to overcome them.
1. Make emotional decisions
One of the most important psychological factors that affect commercial decisions is emotional control. The prices of cryptocurrencies can be very volatile, and emotions such as fear, greed and excitement can even encourage experienced merchants to make impulsive decisions.
* Fear : The threat of losing a large sum of money due to market fluctuations can lead to the panic of the merchant and to rush to position himself with the reckless abandonment.
* GREED : What is facilitated by a rapid promise, some merchants can ignore the basic analysis or take excessive risks to obtain a higher yield.
* Passion : Passion for new technologies and innovation can ensure that traders are too paid for assets or speculative rates without meticulous research.
Solution:
Develop a first routine which includes an analysis of the mood of the market and clear parameters of the management of objectives and risks. This will help you avoid impulsive emotions and make sure you are informed, calculated.
2. Risk prevention
Risk prevention can be another major obstacle to merchants on the cryptocurrency market. Fear of potential losses can lead to too cautious behavior, causing delay or poor performance.
* Revaluation : Traders may believe that certain assets are too volatile or unpredictable, forcing them to underestimate their risks.
* Fear of loss : Traders can hesitate to take more risk of market fluctuations due to uncertainty and unpredictability.
Solution: Develop a rational risk management strategy which involves determining a level of stopping, the diversification of the portfolio and taking into account a variety of assets. This will help you avoid the risk of on investment and reduce losses.
3. Excessive conviction
Excessive convictions can also mislead traders in the cryptocurrency trade. A false feeling of security or self -confidence can make some believe that they are invincible or that their strategies are safe.
* Confidence : Traders can become too confident in their abilities, forcing them to take more risks than they should.
* Lack of study
: Insufficient study of asset classes or market trends can ensure that traders make uninformed decisions according to intuition, not analysis.
Solution: Stay informed of market development and trends thanks to continuous learning. Develop a solid research strategy which includes an analysis of fundamental data, technical indicators and expert opinions before transactions.
4th discipline lack of discipline
Finally, the disadvantage of discipline is another major psychological factor that can cause losses on the cryptocurrency market. Without self -control or borders, traders can fight to withstand impulsive decisions or respect their commercial plans.
* Forced behavior : Traders can become too attracted to specific transactions or strategies, forcing them to make repeated errors.