When the Crypto market is up and everything is green it feels good to jump in, it feels like everything is going to go up forever. When the market is down and everything is red, its much harder to hit the BUY button, it feels like there might not ever be a recovery. You are not alone, these are natural feelings, falling prices and red portfolios, trigger a fight or flight response that is hardwired into our brains. We have all heard the famous saying, "Buy when there is blood in the street", which tells us to BUY when everyone else is selling. Its easy to understand, but much harder to put into practice. Our natural instinct keeps us from implementing this strategy. Successful traders leave emotion out of trading and are able to understand these hard wired responses. By understanding, a plan can be made that factors in the emotional aspects of others. This emotional aspect or sentiment, is based on our natural responses and can change quickly, I describe it as the overall feeling of the market, and it can hit hard at times, but its important to learn to control. On a "red" day when your portfolio is down, its hard not to feel like its over, to feel like you should get out, but rationally this is the time to buy, setting the table for the next uptrend, and large profits. In the Cryptospace there are a few terms that go along with this sentiment:
FOMO- Fear of missing out - Buying into a token after it has already had an uptrend. The token is seeing gains and it feels good to get into, it feels like it will never go down. We buy because we are fearful of missing out on the future gains that are coming. Much of the time we FOMO in, and it turns out we bought at the top, the asset has a correction and we are forced to hold until there is another uptrend, to even break even.
FUD- Fear, uncertainty, and doubt - Information and/or media coverage that has been spun to manipulate the Cryptospace into a down trend. We have most recently seen this with the tweets of our "favorite" electric car CEO, and media coverage of China banning Crypto. This China news has been used numerous times over the years, because it works.
Suicide Trading - A trade, based on emotion, made after an unsuccessful trade, in hope of regaining losses. these trades are looked as 'bad ideas" because they are based on emotion and not properly thought out.
Natural, hard wired responses and human emotion plays a major role in trading. Recognizing these natural responses in ourselves, understanding them and removing them from our trades, can help us to form a rational plan, that is more likely to succeed. BEST of LUCK in ALL YOU DO
