2 Ingredients of Trading Success: Systems & Psychology

If you’ve seen movies about traders and Wall Street specifically, you might think that trading is about big wins, home runs, and major deals.

The reality of crypto trading is a little less poetic than that. The fact is that effective crypto trading is almost completely based on rules and systems.


Because markets are affected by thousands of variables that you can’t realistically stay on top of. There’s so much information that no trader can conceivably to hope to understand it all.

Instead, what traders do is find simple rules that they can stick to in order to make consistent profits. A collection of rules like these is known as a trading system, and having a good one is important if you’re going to make it as a trader.

Also important is psychology. Even the best traders make rookie mistakes when they let their feelings run amok, and learning to handle these with discipline is essential to making a system work.

What does a good system need to have?

On a basic level, a system should include rules that govern how you approach and deal with risk. This includes your overall risk tolerance, the specific actions you take when facing a loss, and the kinds of crypto assets you’re going to buy and sell.

Beyond that, a good system will work with, rather than against, your natural personality and instincts. For example, if you are prone to impulsive behavior and find that you usually benefit from it, you may want to create a system that seeks out risky but profitable coins. Conversely, if you don’t deal well with stress, you may want a low-risk strategy.

Third, a system will tell you — directly or indirectly — when you should look at buying or selling a specific coin. This can be a great aide, especially when used with analytical tools like indicators and patterns, which we’ll tell you all about in upcoming lessons.

On the psychology of trading

The 2 main emotions we talk about in trading psychology are fear and greed. Fear scares you away from making good decisions, and Greed “helps” you make bad decisions. Here’s what I mean.

When a trader sees something they don’t like — whether in a news report, on their screen, or from another trader — they might get scared. This can result in the purchase or liquidation of an asset at a bad time, which in turn leads to losses.

The second problematic emotion traders deal with is greed. This emotion is a problem because, as the old trading adage goes, pigs get slaughtered. Trying to get every last bit of profit you can from every trade and position often leads to devastating losses.

Of course, both emotions do have their place. With absolutely no fear and no greed, we couldn’t trade. But learning to manage these emotions is essential to making sure you can execute your trading strategy effectively and consistently.

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