Crypto Life (CL)
3 min readMay 19, 2023

Cryptolife Highlights May edition: Trading Psychology & Mental Health In Crypto

Welcome to May’s edition of Crypto Life Highlights!

If you didn’t know, this week is Mental Health Awareness Week in the UK. But even if you’re not in the UK, it’s still just as important to take care of your mental well-being, including in the crypto space.

That’s why this month’s edition will be all about the psychology and emotional factors behind crypto trading. So, let’s begin.

First, what is Trading Psychology?

Put simply, Trading Psychology is a term that refers to psychological factors within the trading space, such as thoughts, feelings, and behaviours — all of which can influence a trader’s decision-making.

Research and thorough analysis is one thing, but having the right mindset is equally important. This includes trying to avoid certain feelings and emotions that can negatively affect returns or the outcome of trading — mainly greed and fear.

  • Greed — The desire for greater profits or gains, which can often lead to impulsive or irrational decisions. For example, holding (or HODLing) declining assets for too long in hopes that their value will increase and lead to a greater profit.
  • Fear — The feeling that comes from the perception of danger or risk. In crypto, fear can make traders avoid risk altogether. On the other hand, some are pushed to buy certain crypto by others through “Fear Of Missing Out” (FOMO).

Common Mistakes in Trading Psychology

The extreme volatility in the crypto market can have a significant impact on psychological and mental well-being. When under emotional pressure, traders can make mistakes that often lead to losses. The most well-known are:

  • Gambler Syndrome — Traders open a large number of transactions without thinking them through.
  • Premature Exiting — After a successful trade, some investors will quickly take the profit and lose part of the profits they could gain.
  • Dependence On Others — Some traders will take guidance and follow established market traders, thus not making independent decisions.
  • First Deal Euphoria — A successful trade gives the trader a positive emotion, which could cause them to become undisciplined.

How investors master their Trading Psychology

In the volatile crypto world, many investors aim to develop a strong mindset when trading — using discipline, patience and emotional regulation to avoid major mistakes or slip-ups.

For example:

  • Keeping the right mindset — There are good days and bad days in crypto, and many traders are aware of this and that making a profit takes time.
  • Setting rules and staying disciplined — For good emotional regulation, investors will set a trading plan and stick with it, such as setting the maximum amount they can gain or lose in a day.
  • Taking regular breaks — The crypto market may be 24/7, but people are not. That’s why traders will take breaks when getting stressed or burnt out, or simply limit the amount of hours they dedicated to trading.
  • Consistent practice — Trading isn’t mastered immediately, so people simply practice to improve their trading skills. Most exchanges even have practice accounts to help learn and build a reliable strategy.

That’s a wrap! 👏

We’ll be back in a month’s time with everything you need to know about types of analysis in crypto trading, so stay tuned!