On Crypto-Psychology: Three Emotions That Obscure Sound Trading

One's worst enemies during trading are not the unfair conditions in your Exchange, the manipulations performed by the so-called whales or the difficulty inherent to reading obscure graphics. No, one's worst enemies are three basic emotions. If these emotions can be managed, one could then imagine being the king of trading.

Depression, fear and euphoria.  These are the three invisible spirits in control in most cases while trading.  While concentration is on the tasks and the criteria involved in buys and sells, these three vultures are taking full control deep inside.  One may think that reason and logic are in command of decision-making, but alas, ‘tis not true! Nine times out of ten, they are the ones giving the orders.

DEPRESSION

This is a feeling that, in traders, manifests as a sensation of weakness and vulnerability.  The trader in depression feels sad or less motivated in mood and invaded by negativity.  This emotional state is frequently experimented after realizing a big loss.  Under depression, one tends to make terrible decisions like accepting a lot more risk than usual to compensate for losses.  In some cases, one may see traders in depression who present in an apathetic way.

These expressions can be tricky.  Real apathy tends to make people sentimentally numb.  Depression propels behavior, but it is usually the wrong behavior.  One good tip for depressive moments is to convince one’s self that most moves in trading are only attempts, and that failure and losses are important steps to get closer to success.

FEAR

This emotion is very powerful.  Fear is the most basic emotion that defines human beings.  Fear is said to be present in every single second of human existence.  It drives human behavior in most circumstances and is usually accompanied by stress.  During the fearful state of mind, our bodies are tense and ready to attack or run away.  Two kinds of fear are often seen in Crypto: Fear of Missing Out (FOMO) and Fear of Loss (FOL).

FOMO is an intense attack of anxiety caused by the pressure of having an immensely profitable opportunity for a limited period of time and the perception that one will probably not seize it. FOL is equally intense.  It is a rise in anxiety and nervousness caused by the idea that one might lose a valuable possession.  FOMO is a kind of fear one feels when imagining not being able to get something.  FOL is, on the contrary, a kind of fear one feels when imagining not being able to keep something one already has.  FOMO and FOL will make a trader rush and not pay attention to details.  They tend to make traders believe in shallow evidence and take dangerous risks.

One recommendation that can be made from the standpoint of Crypto-Psychology, is to train traders’ minds to think that big life-changing opportunities are common.  Losing one is not a big deal.  There will always be more.  This will put FOMO under control in advance.  FOL can be controlled too, by training oneself in accepting losses.  Traders should dump a small percentage of their favorite coins once in a while if they suspect FOL is affecting their work in a severely negative way.

EUPHORIA

Euphoria is usually described as the feeling of being the king of the world.  Similar to depression and fear, it is not a bad emotion.  No emotion is bad actually.  Euphoria is not bad if it does not dominate the trader’s mind.  Euphoria is experienced as an exaggerated sensation of happiness and safety or a temporal self-perception of being in absolute control, and as a result, euphoric traders will probably make decisions based on a feeling of total faith.  Faith guides to blindness and to inhibition of reasoning and precaution.

Euphoria is not perceived as bad by traders under these emotions.  It is probably responsible for losses of billions of dollars in bad decisions though.  One technique to help in not succumbing to euphoria is to list down and compare pros and cons for each decision.  If the trader’s mind is still not clear, a second useful step would be to ask for an opinion from a professional.  This usually helps as it is highly recommended to never trust one’s own gut too much.

All emotions exist for the biological purpose of helping us survive.  An emotion can be of great help during the process of decision-making if the emotion does not assume complete control of the process or does not overtake the job of logical reasoning.  A good trader respects his emotions and values them.  A good trader never fights his emotions but learns to keep his objective brain in control.  Whenever he feels strong emotions are causing danger, he goes back to his lessons in psychology in order to recover stability and self-empowerment.

Will you let depression, fear and euphoria take over your control?

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