Trading psychology: If you are a trader, you must have felt the adrenaline rush, the anxiety, the anger, and of course the happiness associated with crypto trading. Trading is a game that makes a person tumble across multiple emotions simultaneously and sometimes none too. At times you might be bursting out happy vibes, while some other times, people would not want to be near you or your anger. This is all because of how much trading can gather control over your mind. Crypto trading is nothing far from this very concept. It is a much more volatile market, which is why crypto traders experience many more ‘mood swings.’
The changes in emotions are not just about personal life; they also impact how a person invests and moves in the market. This is why it is important to control emotions and make smart choices. Some basics of investment psychology need to be followed to improve the emotional response to various trading situations. In this post, let’s see how to master your emotions and have better control in various situations while you use cryptocurrency as an investment and trading source.
Why Learn About Investment Psychology?
If you have never heard of the term ‘investment psychology’ or trading psychology, even though you have been regularly trading, this is where you can find its importance. The term means how your mind reacts and pushes up thoughts whenever different situations arise in your trading journey. Often, people suffer losses and get so angry that they smash things around. Sometimes emotions take over, and the hype over a currency can also make you invest in the wrong crypto asset.
Sadness, anxiety, and confusion are also emotions that can be felt because of trading, especially crypto trading. People do not want to risk their assets over emotions, as trading is a game of calculated risks. There is no requirement for emotions here; just data-driven research and the right gut instinct are all it needs to have a strong trading technique. So, having control over emotions or knowing how to process them to get better results from trading is what investment psychology is about and why it is important.
How to Master Your Crypto Trading Emotions?
There is no one way to have control over emotions. No one can even guarantee that they have complete control over how they will react or feel about a certain event. There is a gray area to this conversation where people have control over how to process their emotions. For example, you have the urge to punch the wall in frustration, but you control that thought and focus on things that calm you, that is what processing your emotions is about. Some aspects of life can help improve how people react to different situations. These aspects can help you learn how to master investment psychology and maintain emotional well-being. Some of the emotions that every crypto trader needs to learn to handle are fear, greed, anxiety, lack of discipline, and lack of patience.
Discipline in Crypto Trading
Every trader plans a strategy before entering the trading arena. With crypto trading, there is much more importance on a strategy as the market is volatile, and people need a proper backup. A disciplined mindset about sticking to the original strategy is important in managing emotional well-being.
Cryptocurrency as an investment can be very tempting, but you need to be disciplined even if the assets show better results than your strategy. One way of discipline is always using the stop loss/take profit feature. Make this a habit to always research and learn the market trend about an asset before investing.
Lastly, ensure you are careful while investing in a very volatile market, even if it is highly bullish. You need to be cautious with the risks before investing.
Control the Fear
No person will admit that they have fear while trading different assets. But here, the fear is not being scared of making a trade. It can be of the ‘FOMO’ form as well. A lot of times, crypto traders tend to be hyped by the market movement or the news of everyone investing in a particular currency and earning loads of profit. In the ‘fear’ of being too late or not making a profit at that time, people make wrong decisions and invest at the wrong time.
Here the risk is all about luck; if you are in good luck, you might ride the boat of great profits, or your investment might sink into the river of volatility. This is pretty common and nothing to worry about. If a person feels such fear, they should try to calm down and think if the investment will justify their strategy and earn them profit. Always do research and then make a choice. Also, you can trade in small amounts if you are scared that you might lose a lot.
Emotionally Neutral Crypto Trading
Journaling
One of the ways of managing emotional well-being while crypto trading is always entering your activities into a journal. Whether profit or loss, always ensure you enter every small detail of the path you follow. Such journaling helps crypto traders learn from their mistakes and take an example from their own investments.
Create rules
After thoroughly researching the market, ensure a strategy and set rules for the trading. It should include the entry and exit plan, loss tolerance, stop loss/take profit, re-examine the trading plan before placing the trade, and ensure that you follow your own rules.
Be Self Aware
Another way to maintain your emotional well-being while crypto trading is always to be aware of yourself. It includes making sure you are not burdening yourself with trading pressure. Rest from crypto trading from time to time and give your mind some relaxation and recollection time.
Conclusion
Cryptocurrency as an investment is a huge investment opportunity, which is why it attracts a lot of traders as well. The market is highly volatile, and people have also made huge profits and incurred huge losses. So, you must be aware of your mental state before entering the crypto trading domain. Managing your thoughts and following investment psychology will help you to stay calm. You must learn to control and process your emotions to minimize your risks.
We wish you good luck with your crypto trading!