Trading psychology is a vast field that traders of any kind need to know about. Laptops, cell phones, and mobile offices first opened the doors to the public being able to trade. Cryptocurrency opened floodgates to trading. However there is a lot of essential knowledge that needs to be in place in order to trade on any market. Just like it is essential to research cryptocurrency and understand what you are trading, it is essential to understand how to trade. Trading psychology is a whole field devoted to studying, not only how to trade, but how to trade most effectively.
Disclaimer: this article is only an introduction to trade psychology. No products, mentioned or not, are endorsed by this article. This is not financial or legal advice.
With the volitility of the Cryptocurrency Market, it is vital to create a quiet, calm center in order to trade as successfully as possible. This is what this article aims to address.
Balance in Life
The most important element of remaining mentally healthy is to live a balanced lifestyle. You, as is true for everyone, need to be balanced. That means you need to balance home, work, relationships (love and friendship), finance, and work. You also need to develop yourself and be engaged in a hobby or hobbies. Some people are blessed enough that their work and hobby, or hobbies, are the same thing.
Finance and Balance
When you are involved in the financial industry as your profession, there is an extra stress. You stand to gain or lose your capital, AKA money, in every trade, or investment. Trade will now include investment to simplify this article.
Maintaining balance in the financial industry is therefore even harder to achieve. Many professional traders have been broken mentally by 1 trade. So it should be clear that there are major consequences for trading opening up to the public through traditional trading made possible by laptops, PCs, and cell phones. Even more so with the introduction of cryptocurrency where on- and off-boarding are basically only possible through exchanges. Multiply this with an astronomical bull market in 2017 and you have an idea just how important trading psychology is for cryptotraders.
In the privious article, essentials of trading psychology were outlined. This article centers on the importance of balance. Without balance, there is no way to stay calm in the turbulence of the Cryptomarket. You have to build strong emotional calm in order to stick to your trading rules. In order to create this calm center from which to trade, you have to lead a balanced life. Taking regular holidays and having interests other than cryptocurrency is essential.
Know You are More than Your Money
You are more than your financial wealth.
A very big mistake most of us make is we believe we are worth how much we earn. We equate our selfworth with our bank balance. Part of the process of maturing is to realize that we are worthy because we are alive and that worthiness is not tied to anything material, especially money.
If you do not have money, you are poor, with a negative “P”.
It is so easy for this to blur in a world that is so physical. Where, if you do not have money, you are poor, with a negative “P”. This is far from true. Millionaires go bankrupt. How can the same person be worth million 1 day because of his or her bank balance, and worthless the next because his or her business went bankcrupt? We all know most successful entrepreneurs went bankcrupt multiple times before they “hit it big”. So why do most of us still set our bank balance as our selfworth? This is because we buy into the myth that we are what we earn.
The best things in life are free.
A life outside work is the only way to combat this strong connection between net worth and selfworth. When you are able to give to and receive from others you cannot deny that money is NOT the only thing worthwhile. We know the best things in life are free. However if you trade this is vital to have in the forefront of your mind. It is so easy to forget this fact when you lose thousands of dollars (or the equivalent in cryptocurrency or any other currency for that matter). Suicide rates are highly correlated to financial loss.
Cryptocurrency Trading in a Bull Run Compounded by Mass Adoption
There is no question that bull runs in any market attract traders. It was clear from the 2017 cryptocurrency bull run that many people jumped on the Cryptobandwagon and started training on the cryptomarket. While this is amazing for mass adoption, it carries grave consequences for the unprepared.
Knowledge is power.
The old adage, “money is power” has since been replaced by, “knowledge is power”. Ivan Liljeqvist, best known as Ivan on Tech’s academy is exemplary in this regard. An expert programmer explains inner workings of cryptocurrency. While this is essential, it is only half of the picture. The other half, as Ivan often reiterates, is staying focused emotionally and this is the essence of trading psychology. At the heart of trading psychology is balance. This might explain Ivan’s occasional tangents on his morning show, “Good Morning Crypto”, which have earned him nicknames such as, Ivan on Philosophy. “Keeping a cool head” is something you will hear Ivan saying as often as he gets the opportunity to because he too recognizes the importance of this.
Staying in the Green
If you are a trader, your overall goal is to stay in the green. As pointed out in the last article, over 6 months to a year you should be in the green for the majority of the time. That means you win more trades than you lose. If this is the case, you are probably already well aware of trading psychology. That is really great, except even professional traders lose their grip on their emotions and slip into the natural trap of greed and fear. So it is essential to work on keeping all the principles of trading psychology in the forefront of your mind during each and every trade.
Happy Endings
“And we all lived happily ever after…. ” It is worth (pun intended) noting that fairy tales end in “happily” NOT “richly” ever after. This is due to the fact that we recognize “richly ever after” is NOT what we are after. Get rich quick promises are always scams and if 1 out 100 turn out to be real, be happy that you missed the other 99 scams!
Even the American Dream sells happiness as 1 of its inalienable rights due to the fact that happiness is such a necessity of every person. The only problem is that they sell the “pursuit of happiness” and not happiness. America nowadays also pushes:
Money Buys You Happiness?!
Everyone knows this is false, but the message is pumped so hard by the marketing industry that is hard to resist. Keeping your eye in the “green overall goal” might make the difference between trading consistently profitably and losing because you are swayed by your emotions. So keep your balance and trade safely.
Never invest more than you can afford to lose. Stick to your trading rules. Remember the market is NEVER predictable under Any circumstances. If you trade safely with trading psychology principles, you have more chance of staying in the green.
