Steemit Crypto Academy Contest / SLC S22W1 : Mastering Trading Psychology: Emotional Discipline in Cryptocurrency Markets
Hello Everyone!
Today when I saw the topic of this contest, it hit me very hard because it was very relatable to me. I was very much into trading, I earn along with a lot of losses and liquidation. I really want to share my experience and the strategies I used later on.
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Question 1: Identifying Emotional Triggers in Trading
Discuss common emotional triggers (e.g., fear, greed, overconfidence) that affect traders. Provide examples of how these emotions manifest during market movements.
Trading is all about emotions and according to my experience only those who have control over their emotions can stay at profit and are better traders. while trading there are many moments where our emotions are triggered by many factors such as,
FEAR
Fear, whenever the market is going against us we try to escape the market sometimes by losing some of the funds or either we just come out of the trade on the break even. It's because of the fear that what if things got worse or what if we lose everything.
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As mentioned, trading is not for those who have weak hearts and who do not have control over their emotions. Whenever you fear losing all the assets sometimes lead you to making wrong decisions. whenever we feel that we will lose everything we most of the time close the trade and it's just Our own fear that lead us to make such decisions. And we instead of waiting for the market to at least get out of the trade on break even we prefer getting out of the trade losing some assets because in the back of our mind we think that using a few assets can save most of our money but it's actually the fear of losing everything.
GREED
Greed is another triggering factor in trading as whenever the market is in your favor and you earn money your greedy emotions start triggering and now you want more and more in this great you don't know when the market turns against you making you lose whatever you had won.
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For instance a person buys a coin and suddenly its value starts rising and the person's greed triggers and he buys more of the same coin. Not Realising that whenever a market jumps suddenly it also comes down at the same speed and it results in losing more money.
Overconfidence:
Over confidence also makes people bankrupt in trading because after earning some money or after their guess hits the target they start believing that they are the kings of trading but people just get lucky in trading at times and it's not forever. Whenever you start believing in your decisions it can make you lose everything because the market does not always behave in the same way. confidence is a very good thing while you are doing trading but overconfidence May lead you down the wrong path.
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I will give my own example, About an year ago when I was into trading most of the time I was hit by overconfidence because when one or two trades of mine started into positive I tell myself that yes my trade is going in profit and I know I can make more profit out of it so I started investing more and more into that one trade and eventually when the market took u turn as always I lost more than what I have and from trading.
Question 2: Overcoming Psychological Barriers
Share techniques to overcome psychological barriers like fear of missing out (FOMO), loss aversion, or overconfidence. Use examples relevant to Steem/USDT trading.
Human psyche is very fragile and keeping in mind things that can Trigger you at Times of fair is important. if we talk about fear of missing out which is I think the most common type of psychological barrier which everyone faces and is influenced by during trading.
FOMO:
Setting goals can be one of the way through which you can overcome for fomo because once you decided to achieve that target and once the target is it you will not care about what opportunities the market is providing and how much more profit you can gain but you will focus on your goal and will not continue any other trade.
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When the market is at its peak and you see that there are various opportunities in STEEM/USD for a good trade but due to your achievement of goal you will not get influenced by anything and will not enter any such trade that can make you stuck in it.
Loss Aversion Strategies:
Setting Stop Loss
In case of loss aversion the very good example can be setting stop loss in your trades because whenever you are stuck and you wait for it for a very long time it probably gives your shock by dumping too low or jumping to hi eventually leading to a big loss. Here stop loss can make you lose something but can save your portfolio from getting vanished.
Market Research
Another thing that we can use here is market research. Whoever knows the market patterns never stays for a very long time in one trade because they know at which time everything is going to be changed. so, I think one can avoid loss aversion by checking the probabilities of the market trends to keep you on the safe side.
Portfolio Management
Lastly, in order to not get stuck in trades and lose everything due to overconfidence, you should not invest all your portfolio in one trade. For example, when you get the news that steem will go up in the coming month and when you hear such news you invest all your portfolio into steem expecting it to go high and you earn a good profit. This is your overconfidence that can lead to disastrous results. Here if you invest 4-5% of your portfolio into this, it can save you from huge losses and if the price is actually raised you can invest later on.
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Question 3: Developing a Trading Routine
Propose a daily or weekly trading routine that includes psychological preparation, such as journaling trades, setting realistic goals, and practicing mindfulness.
According to my previous experience I can suggest some techniques that I have used to avoid silly mistakes during trading. at time when I lost most of my assets I started making a routine for trading which includes:
Weekly Trading Routine
I used to trade once a week. For the six days I just do market research, looking at the Trends and patterns that the market is following which turns out to be very beneficial for me as without market research and knowing anything about the market trends you cannot become a professional trader. while I did research the whole week and then only on the weekend I used to trade. Due to this I removed the greedy element from my personality and did Some very successful trades.
Setting Realistic Goals
Additionally, another thing is important to learn while trading is that you must always set realistic goals because no one becomes rich overnight and whenever you think that you can become a millionaire overnight while doing trading this is totally wrong concept.
So, setting realistic goals such as trading up to a limit for a day, will help you overcome your greed and I ensure you will never stuck in any trade because once you are done with your goal of the day that I have to earn this much profit and then I will be out of the trade helps you in not get stuck in any difficult and also help you in generating I healthy portfolio.
Mindfulness
Mindfulness is also very important Because when you are psychologically and mentally prepared for what is going to happen you stay calm and try to avoid situations that can bring you down during trading. If I tell you guys what my strategy is, every time while I was in trade I used to pray and relax my mind And believe me that work like magic for me because after that I never felt greedy and fearful even though in worse situations.
Question 4: Case Study on Emotional Trading
Analyze a hypothetical or real-life scenario where emotions led to a significant trading mistake. Explain how emotional discipline could have prevented the loss.
As I was into trading earlier one year ago I was very much into it and I traded for around 2 months continuously and made very good profit but the very last trade that I was stuck on was that I was very confident about my decision and it was the time of night around 12:00 a.m. I thought why not to take this last trade and then I will go to sleep the second I enter into the trade everything changed the whole market dump in a very bad way I did not set any stop loss and my liquidation price was very near I continuously added money to save my liquidation and to save my Assets and in this way I added almost all my portfolio into that one trade.
The trade ran for around 2 days and on the 3rd day my assets were finished so there was nothing for me to add more and to increase my liquidation price and the market on the 3rd day crashed really hard that I lost all my money. That was the time when I was about to get mad because it was my long savings and it vanished in just a few seconds.
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Here when I realise my mistake was that I was influenced by fomo and due to fear of missing out I entered into this last trade all though my goal for the day was completed but I thought the market is going really good and everyone is making good profit so why not I also enter into the trade and get some more profit that was the biggest mistake of my life. Control over emotions and greed is very important and if I had done that and did not enter into the trade I am in, I would have had all my money with me now.
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Question 5: Building Resilience in Volatile Markets
Discuss how to build mental resilience to handle high-stress trading environments, including techniques for staying focused during volatile conditions.
Resilience in all cases does not come at once it always takes time and practice keeping yourself dedicated to your goal. In the case of trading where highest stress environments are often faced, mental resilience is very important.
Market Research For Coins of interest:
It's always very important to do market research in order to know about the Trends and patterns of the market, especially in the coin that you are investing in. you should know the history of that coin. When you do market research it allows you to be on the safe side when the market is volatile and people are. When I think about the situation you will be safe because you already know the pattern and will be resolved into the high risk situations.
Setting Profit Goals
Sitting goals is another very important method in which you can be resilient to the highest volatile markets, you already know where to enter and at what point you will get out of the trade. This helps you in maintaining your portfolio and whenever your goals are received you stay back and just watch the market and observe the patterns.
For instance, the market is very volatile and entering a trade but not setting any outpoint or stop loss can cause me a huge loss because the market of cryptocurrency is more volatile than the stock market. To stay resilient you should always set in point and outpoint of the trade so that you will never get stuck when the market volatility is very high and people are stressed.
Risk management
Risk management is a very important element that one should have but as I said it does not come once and it needs experience and dedication. while risk management you can adopt is that can decrease your chances of liquidation and increase your profit margins.
While trading you should not invest all your portfolio in one coin and in one trade. Always try to use 4- 5% of your portfolio for one trade because when you are stuck, you have assets to use to delay your liquidation. and also if this trade is stuck in the middle you have the portfolio to enter other trades and make profit out of it.
You can also invest your portfolio in different kinds and Indifference situations because the market does not work the same for every coin and by investing in different coins you get good chances To get profit because if one of your trades is going in laws you can recover that loss from the opposite trade.
MY INTRODUCTION ❤️️
With Love
@janemorane
Der time bad, welcome back.🥰
Thank you so much!