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Two Major Mistakes New Investors Make When Buying and Selling Crypto

There are two kinds of people in this world: those who buy the dip and those who sell. Don’t sell the dip — I beg you.

Investor sitting in front of laptop double facepalming over her mistake.
Image courtesy of Canva

It’s easy to think the moves we make are always in the best interest of our survival. And when it comes to more fundamental things, such as understanding that a bear will turn you into a hashtag, getting out of that situation is a good move. But, unfortunately, that survival instinct doesn’t translate over to more nuanced and complex decision-making, especially when it comes to investing.

When you invest, you have to reverse your brain’s urges. For example, it will want to sell when things get tough and buy when things get good, which is a big no-no. It’s a great way to lose money. So, if that’s your goal, then have at it. But I’m sure it’s not. Therefore, you must educate yourself and check your emotions at the door. Trying to make money out of the normal cycle of trading your labor for money is a rough ride. But, if you want to start making money, and making it work for you, then you have to do it.

In this article, we’ll look at two mindsets that doom you to failure when it comes to investing. Hopefully, with a better understanding of your state of mind, you can calm yourself down and make the best decisions you can. And although you will still lose sometimes, the goal is to get you to win more than you lose while still accepting that you will lose. And that’s okay.

Let’s get it.

Selling out of fear

“Get out!” That’s what your brain screams at you when your crypto begins to dive. “Sell your holdings before you lose more money!”

Evolution designed you to protect yourself from danger. And while this works well in a true life or death situation, it does the opposite in investing. For example, let’s say your portfolio spreads across 15 different coins. And you’re sitting on a value of $100K. Then, the end of September hits. The jobs report came in earlier that month, and two other prominent financial meetings occurred mid and late September with bad news. Not to mention, September is traditionally bearish for crypto. Therefore, your portfolio drops 40%. You’re staring at your phone with a balled-up stomach, and your brain begins its cadence: “sell, sell, sell.” So, you do. I mean, you had to get out before you lost even more money, right? Well, congratulations. You fell victim to a loser mindset. As I said, the brain does us justice when it’s trying to save our lives but royally screws us when it comes to financial situations. So, what’s the problem?

The brain cannot discern the difference between a life-threatening situation like a wild animal attack and losing your investments. And that’s because, for you, having those investments is survival. You need the money to sustain your life. You need food, shelter, and medicine, and so the brain sees both the wild animal and the plunging portfolio as agents trying to kill you. Therefore, you sell on the dip. Then, as your investment drops, you try and save what you can so you won’t starve. So, how do you fix that mindset?

It’s not easy. No matter your financial situation, you must treat your investments as if you could lose them. By the way, you should never invest anything you can’t afford to lose. You must treat your portfolio like a weekend in Vegas (but with more technical steps). Take the amount of money you’re willing to lose and get your chips. Try and play as smart as possible, and when you’re winning, walk away on a high. Because much like investing, gambling goes up and down, and you will lose sooner or later, but you can control when you go in and when you pull out. Don’t let your emotions take over.

Due to fear, you will want to make the worst decisions when it comes to investing. You’ll want to sell on a dip and buy on an upswing, and you’re going to hurt yourself. You must look at investing as you do shopping: buy during a sale, sell when demand is high, or hold when demand is high. Think about all the collectors who own NFTs. When the price of their piece goes up, what do they do? They have the option to sell or the option to sit on their holdings because they know prices go up and down, so they don’t panic. And as a result, they have options. They are in control.

Buying out of hope

We are a little about buying on an upswing, but why does that happen? Well, it’s the result of another emotion: hope. However, it translates more to desperation. In an attempt to ride the wave of the upswing because your particular crypto is climbing, you buy. You buy more crypto when it is higher than it was mere moments ago. Think about standing at the grocery store in front of the meat section. Hamburger is $5 per pound. Then, right before your eyes, the price on the sticker jumps to $7. Do you buy it? Hell no. You get mad. Why? Because you didn’t buy it when it was $5. You could’ve been in on a great deal and lorded it over those who came after you that had to buy at $7. It would’ve made you feel like you made an intelligent decision. But you didn’t do it, so here you are with no hamburger. Now, you have to eat tofu (which isn’t bad, but you get my point). So, why do you do that? Why buy when the price is going up?

Hope isn’t all bad. In fact, hope can get you through some pretty damn tough times when you need it. If it weren’t for hope, I’d stop writing and give up on my crypto dream of making my first million. However, all things have two sides, and hope is the same. Hope’s lousy side is convincing you to pursue fool’s errands. It leads you to believe that a force or an investment you don’t know enough about will do something in your favor because you want it to be bad enough. Now, I’ve never read The Secret, but I do know about manifesting. And while a positive attitude is crucial for keeping you going, it isn’t enough to bring in the dollars. You must take action also. If you combine a positive attitude, effort, and consistency, something good will happen to you. I don’t know to what degree, but it will happen. My point is, don’t hope when it comes to investing. Throw hope out the window. It doesn’t serve you here. You need education and understanding that investing can yield beautiful rewards while knowing you will also lose. However, it’s a matter of recognizing that the losses don’t last forever, and the wins don’t last forever. It’s about making moves that yield more wins than losses. That’s the game. So, don’t buy on an upswing, hoping it keeps going up. That’s a recipe for sorrow.

Conclusion

Don’t buy on an upswing, and sell on a dip. Instead, you want to look for opportunities to do the opposite. The crypto space is due for a crash or correction soon. I don’t know if it’ll be this winter or early next year, but you should be excited that it’s coming. However, I look forward to the sales and scooping up some great deals. A lot of those people who are afraid will be selling in a panic. So, imagine yourself sitting at your laptop or phone waiting for the sweet moment when you buy Bitcoin at $20K, knowing it’ll go back up later, and you’ll have made $30K in the process. Don’t be afraid, be smart.

Have you begun your investment journey?

Oh, one more thing, if you’d like to support my writing directly, you can do so by signing up to Medium through my link. When you do, part of your subscription goes to me. In addition, reading more of my work helps too. Thank you.

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T.C. Gunter

T.C. Gunter

I draw sounds. And, I can speak them back. I write about a wide variety of topics.

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