Acting in crypto coins creates a lot of emotions. A familiar phrase is FUD: Fear, Uncertainty and Doubt. Or in dutch: fear, uncertainty and doubts. FOMO is also a well-known emotion among traders.
Fear Of Missing Out makes you afraid to miss the train when it starts driving. You'll quickly take positions in a currency that's already rising fast.
Acting on the basis of emotion isn't the best strategy. Investing and investing is not a good plan at all if you're emotionally minded. Doubt, greed and overconfidence can also cost you the head. But there's another emotion that leaves a big mark on your trading behaviour unnoticed: being in love.
Acting on emotions
But first step back. If you act from an emotional point of view, there is a good chance that you will make mistakes. You're trading too much or very impulsive. You want to make up for your losses at all costs (revenge trading), you're chasing the market and you can't step away from the market by looking at it from a distance.
Does this sound recognizable? Many cryptotraders are hobbyists who saw the chance to take money in a simple way. Especially when you entered a bull market like the one at the end of 2017. Almost every trade resulted in profit at the time.
By sitting behind your screen for hours, you got the impression that you could turn this into your job. Every day you did research on projects and you looked at the tickers and quotes. But that makes you far from being a professional trader.
Emotional decisions often cost more money than they bring in. In bull markets, you might be able to imagine this. But emotion is also dangerous in bear markets.
Fear, greed and love
Fear and greed are the two most common emotions that traders experience, and these are responsible for most decisions that result in money loss.
Fear is often caused by excessive trading, which exacerbates the consequences of a bad decision. Traders often make mistakes when they are in an oversized position that they did not really want to make.
Fear is also common when you do a trade with little conviction - you know you're in the 'wrong' currency, but you don't see a way out of it. Fear causes us to withdraw our profits too early and to hold on to losses too long.
Greed also ensures that traders keep a position beyond their set target and often don't get out at the right moment.
There are also many crypto fanatics 'in love' with a particular coin. It seems as if they are married to it and that they belong together completely. They have given each other the 'yes' word for 'both prosperity and adversity'. However, this is very dangerous: the market does not take anyone into account. Clear thinking remains extremely important!
Keep yourself in control
Nothing causes more fear than wanting to act too much. Start small and scale up as your portfolio and knowledge grows with the market. Use only money that you can spare and make sure you also put your money back into your bank account to cover all risks.
Only view the end result
Only the profit at the end counts. Try not to look at your portfolio or trades too much. The more often you look at these, the faster you'll make emotional decisions because of things you see happening at that moment.
It is important to do your own research on the different crypto coins you could buy and the underlying technology. Look for crypto coins that you find interesting and that are supported by active developers. Although these two things are no guarantee for success, they will help you better understand what you are buying.