Bitcoin has been very volatile in its not-so-long existence, and it has been able to go up and down. We saw that bitcoin dropped to nearly $3,000 due to coronavirus, then soared again to nearly $10,000. So bitcoin is very unpredictable and always knows how to produce surprises, like the one in 2017, when it hit nearly $20,000. So to make money from bitcoin investing, you need to have experience, determination, and discipline.
It’s because human beings are not related to commerce. Our brains are built to perpetuate survival, not make profits. That’s why so many traders know just what to do to make money, but they still do the reverse. Thousands of years ago, living in the state of nature did not entail long-term thought, probabilities calculation, risk control or handling of drawdowns. Instead, urgent action was required.
5 Tips to Improve Your Trading Psychology
1. Embark minor loses
Dealing with setbacks is mentally the hardest thing a trader has to contend with. Losses have an effect on our feelings whether we take a major loss, are in the middle of a ten trade drawdown, or are stopped from a stock that suddenly reverses and ends up meeting our expected target. The failure cause leads to retaliation dealing, micro-management, bad decision-making, and a range of other traps in trading psychology.
Fix the loss caused by taking minor losses. Know the minor loses means you’re doing the right thing. You adhere to good risk management. You know, these defeats don’t mean much if they’re sandwiched by any bigger victories.
2. Dream about the next 100 trades
Most merchants are alive or dead from their next trade. Although we evaluate any trade, our main emphasis should not be on profits and losses at the moment, but on time. Don’t think over a defeat. This adds to a bias in recency that is going to havoc with the mind. Know, in the grand scheme of your investing, one failure is insignificant. Instead, think of the next 100 trades, no fixation. This would keep you focused on the process and not the outcomes in the short term. Note, we’re selling probabilities, and occasionally you’re going to fail on a successful offer. A drawdown does not mean that you are trading badly. Do not let successful trades and bad short-term consequences have an effect on your trading psychology.
3. Fighting anxiety by reducing chance
Putting on a company can be frightening. Your hard-earned cash is on the line and you don’t want to risk it. Anyone who has effectively sold a paper account and made a move to real money knows that fear has an impact on the investing. Fear expresses itself in trading by finding it impossible to pull the trigger on trade, to leave before meeting goals, to pull out trades before stopping, and other micro-management problems. If you’re concerned about your trading, reduce your risk. The greater the possible loss, the less terrified you are of the trade. For example, if you normally gamble $200 per exchange, lower it to $100 before you lose your fear. Then slowly raise the risk in tiny amounts before you get back to $200 and no longer fear exchange.
4. Fight Greed Through Partial Benefit
Avarice is the opposite of terror. Although we enjoy the challenge and the trading approach, at the end of the day we’re in this game to make money. This leaves us greedy for it. Greed has two big impacts on traders. The first is to make our goals so ambitious and illogical. For eg, let’s presume you’re entering a $90 stock with a $100 target just under resistance. When the stock hits $100, you figure you’re going to hang on forever, hit $110, and you’re going to increase the income. That sounds fantastic, but for a reason, you set your goal at $100. Your stock is expected to pull back at the level of resistance. So, pretty fast, the $10 benefit is $5, or you risk it all. Greed has converted the winning trade into a loser. Fix this trade psychology leak by making partial profits. In the current case, take half off at $100, shift your stop to $95. This makes you strategically sound, but also encouraging your greed to play out in a constructive way.
5. Battle Greed By Decreasing Place Size
The other way greed shows itself is where an investor trades too high by growing the value of his position. The trader thinks that if she can make $1000 off 100 shares, she can double the profit by doubling the position. If this is real, it commits suicide trading because not only does the dealer maximize future gains, but also potential losses. A minor drawdown is no longer negligible, nor leads to losses that are impossible to come back from. The way to fight this common emotion is to adhere diligently to your laws of risk. If you have established $500 as your highest risk, you will never take a place size that raises that risk. This is the only way you can defend your account. Note, winning traders are playing defensive against the assault.
Good trading psychology is key to being an effective trader. Humans are not wired to trade successfully, so we need to attack the mental game as hard as we do while studying markets and trading facilities.