Cryptocurrencies have risen in popularity across the globe and the number of crypto investors is increasing every day. There are many stories of people who have earned a lot of wealth through cryptocurrencies. However, you shouldn’t just get seduced by that and jump headfirst into the volatile world of crypto. Especially in periods when prices are fluctuating, good psychological management is needed in order to keep the investor’s psychology under control and to avoid emotional movements. In this post, we will find out about the things you need to be careful about, before investing in crypto. Let’s get started.
Things To Avoid In Crypto Trading
Even investors who are experts in the financial field may encounter the situation that the analysis results are not as they want. Especially since the cryptocurrency market is a very volatile market, volatile situations can be encountered even within seconds. While the technical analysis results are very clear, the markets may turn upside down with news. That’s why technical analysis alone is not enough and one has to direct one’s psychology very well.
It is very important to set a stop loss point when investing in cryptocurrencies. However, more importantly, in the case of a decline while expecting profitable purchases in the analysis, it means that the investor closes the position by taking small losses, and directs his psychology well. On the other hand, the results often end in disappointment, as novice investors expect a further rise and expect a new upward movement.
What factors affect psychology in the financial market?
Anyone entering the cryptocurrency market, no matter the expertise, should be aware that they are taking a big risk. As we said at the beginning, since the balances in cryptocurrencies can change at any time, it is necessary to manage psychology correctly. While you can generate a good amount of profit using tools like the crypto engine, it is necessary to know that there are some underlying causes. So what are they?
According to a study conducted in the London stock market in 2007, the blood levels of stress hormones (cortisol and testosterone) of traders were examined. As a result, it was observed that especially stress hormones increased much more during the process.
What are the Risk Factors in the Cryptocurrency Market?
Don’t get FOMO
FOMO can also be explained as the fear of missing out on opportunities. For example, DOGE Coin can suddenly double or triple with a tweet by Elon Musk. Seeing this situation, the investor opens a purchase transaction while the prices are high, with the fear of losing profits. In fact, this is absolutely no different from gambling. Especially getting shilcoin without any analysis means that one cannot manage one’s psychology.
Don’t be impatient
One of the biggest reasons for not being able to manage psychology in financial markets is the person’s inability to act patiently and steadily. If we are talking about a volatile market, it is definitely not right to expect every crypto money bought to rise suddenly. First of all, technical analysis and fundamental analysis are done, then a purchase order is entered from a suitable point. However, after the entered point, although an increase is expected, a decrease may occur. In this case, it is important to put a stop and be patient if there is no general decline in the market and no purchase order has been entered at the peak price. If it has not come to a stop, there is no need to worry, the price is expected to rise by patiently waiting. In other words, while directing the psychology of the person, he should write to his brain like a code to be patient.
Don’t make emotional decisions
One of the biggest mistakes that novice investors make in cryptocurrency is making emotional decisions. Acting emotionally without knowing any information about a coin, by looking at the up-down trends completely by rote logic, will cause serious harm. Unless the newbies get lucky.
Acting with your emotions unconsciously, without undergoing a technical analysis of cryptocurrencies, can cause you to lose all or a large part of your money. The truth is, if you don’t know about technical analysis and fundamental analysis and you want to take part in this market, it would be healthier to trade by listening to the recommendations of expert traders. However, you should not forget that traders are also human and their analysis cannot be 100 percent accurate.
Don’t invest without considering the market volume
One of the biggest mistakes novice traders make when trading cryptocurrencies is to act without considering the impact of market size.
For example, you should think carefully about the point at which you should sell a cryptocurrency you hold, and while doing this, you need to correctly determine the level at which you sell. Otherwise, selling at a different level among the support-resistance points will cause the coin to not find buyers and therefore to lose.
Don’t stay locked on your screen all the time
One of the biggest causes of losses in the cryptocurrency market is constantly focusing on the screen. This is one of the most common causes of wrongdoing. If the necessary analyzes are made and the stop point is determined before entering a transaction, there is no point in spending a long time on the screen. If short-term purchases are made, it will be sufficient to look at the screen at certain time intervals and examine the situation.
Don’t work with just one exchange
Cryptocurrencies make money when acted correctly. However, the mistakes that novice investors make frequently cause them to lose their time. One of the biggest mistakes made is to work with only one exchange. Even though the exchanges have proven themselves in terms of trust, we cannot say that they give a 100% guarantee. Therefore, investing all your capital in a single stock market means that you are taking a big risk. Instead, dividing your capital equally between different exchanges helps reduce your risk even more.
Stay away from “get rich quick” plans
Since the place of cryptocurrencies in our lives is still new, most novice investors expect to get rich in a short time from this business. However, cryptocurrency investment is not much different from other investments. Some transactions may take 1 month, some may take 2 days. It all depends on the direction of the market. In other words, it is completely disappointing to expect crypto money bought in the evening to make X100 when it wakes up in the morning. Therefore, with such a thought, crypto money should not be invested.
Don’t be arrogant
Although it seems like it has “existed” for a very long time, the spread of cryptocurrencies is limited to only 5 years. This means that there are very few experts in this field, and that as a novice they should not have unnecessary self-confidence and feel like “I can analyze too”. Among the most common mistakes made by novice traders in crypto, having undue self-confidence is the riskiest. This often causes investors to make losses.
Never convince yourself that you have fully learned the trade. As in every sector, the risk is high in the crypto money sector. For example, you made an investment and you think that you will definitely make money from this crypto money, but it is highly likely that you will see that the crypto money you bought by acting with your completely unfounded self-confidence without analysis, starts to go down from the level you bought, which will cause you to lose. So don’t fool yourself before others call you an “expert”.
Don’t park all your money in one cryptocurrency
This is sometimes wrong and sometimes right. For example, it would not be right for an investor with a lot of capital to trade in a single cryptocurrency. It would be more accurate to divide the capital by analyzing different cryptocurrencies. However, it would be more logical for someone who invests with low capital to continue on a single cryptocurrency, at least for a while, in order to make a profit.
Don’t invest based on hearsay
The most important risk factor in the crypto money market is to act with hearsay information. It must be admitted that cryptocurrencies have just entered our lives and most people are cautious about these things. However, people can talk about a coin even when they are chatting. There has been a lot of news about Holo Chain (HOT) in the past months and it has become one of the most talked about topics on the street, hairdresser, taxi, public transport. This causes people to unconsciously buy HOT coins. Those who bought at low prices, of course, made profits, but the news that was made too much caused purchases at the peak price, and it resulted in disappointment again.
If you have entered any financial investment field, you should definitely research its risks and psychological aspects. Especially if you are investing in an area where money is digital, that is, it is not tangible, you should know very well that you should guide your psychology extremely well and not act on everyone’s word.