Gate. io AMA: Trading Psychology

Q: We will approach it from two points of view: Psychology of Market vs Psychology of Trader

A: Good topic, let's get to more details.

1.Technically, these are two different things. The market psychology and a trader’s psychology are related.

2.As a trader, your mindset and your decision making is part of the market.

3.The way you think influences what you decide to do. That in turn influences the market movements and helps form the aggregate market psychology.

Tips:

1.Market is the aggregate of individuals

2.Market is made by exchange of value between buyers and sellers - two parties who act in opposition, or at least with different reasons and on different time scales.

3.Your aim is to get your trading psychology slightly AHEAD of the market psychology.

Q: How to get the right psychological status?

A: We will present from two sides.

Market Psychology

1.We learned the indicators from previous AMA. These tools are very popular and useful to do the analysis.

And we can collect information from all media to do the research.

Combined the data and news, we can get the trend.

Trader Psychology

1.Besides using useful tools and information, remember not to use your emotions.

2.There are three emotions that have to be avoided:

Fear/Nervousness

A common cause of fear is trading too big. Trading with improper size magnifies volatility unnecessarily and causes you to makemistakes you normally wouldn’t make if you weren’t under the stress of risking larger losses than normal.

Another culprit for fear (or nervousness) is you are in the ‘wrong’ trade, meaning one that doesn’t fit your trading plan.

Conviction/Excitement

Conviction and excitement are key emotions you’ll want to feed off, and you should feel these in every trade you enter. Conviction is the final piece of any good trade, and if you don’t have a level of excitement or conviction then there is a good chance you are not in the ‘right’ trade for you.

By ‘right’ we mean the correct trade according to your trading plan. Good trades can be losers just as bad trades can be winners. The idea is to keep yourself winning and losing on only good trades. Making sure you have conviction on a trade will help ensure this.

Greed/Overconfidence

If you find yourself only wanting to take trades that you deem as possible big winners, you could be getting greedy. Your greed may have been the result of doing well, but if you aren’t careful you may slip and end up in a drawdown.

Always check that you are using proper trade mechanics (i.e. sticking to stops, targets, good risk/management, good trade set-ups). Sloppy trading as a result of overconfidence can end a strong run.

Q: What is the Right Mindset for Trading Cryptocurrencies?

A:

1.The right mindset for trading cryptocurrencies is a mind that is calm and non-reactive to the crypto markets. You remain as mentally steady for the wins as you do for the losses. You don't revenge trade, and you assess every potential crypto trade before entering the market.

2.You do not take your results personally. You assume full responsibility for every cryptocurrency trade, and you assess every trade after it has closed.

Q: Why the Mind Matters in Trading Cryptocurrencies

A: You could battle on for years, searching for better strategies for trading crypto. You can define your risk management and have a high risk to reward ratio (RTR). But without managing the mind, you will have a boom and bust relationship with your cryptocurrency trading.

Q: How Do Successful Cryptocurrency Traders Think?

A: Successful winning cryptocurrency traders think differently than novice crypto traders.

They believe that –

1.They can remain detached from the crypto markets

2.The crypto coin markets have no emotions

3.Better strategies will not make them win more

4.Being better at market analysis will not create more wins

5.Their psychological response to the crypto market is the answer to success

Q: How Do You Develop a Trader's Mindset for Trading Cryptocurrency?

A:

1.Have a trading routine – Start your routine with quiet time. Remove all distraction - leave the mobile phone in another room & turn off social media alerts.

2.Commit to your crypto trading education – spend time learning. Take a course, read books and study what successful crypto traders do

3.Control your losses – never risk more than 1% and always have a stop loss

4.Keep a daily trading journal – Document every trade – why did you take it, and what happened? Once a week, read it back and observe your good and bad habits.

5.Detach from the outcome – your crypto trade will win or lose. Once you have placed the trade, you have no control. Don't watch your trade, as this stimulates the amygdala and may cause you to act impulsively.

Q: How Do I Overcome Emotional Trading on Cryptocurrencies?

A: It isn't easy to reduce emotional trading. It takes effort, but there are a few positive habits you can start which will help

1.After placing the trade, walk away – do not stare at the trade. Go for a walk, get a drink or make a phone call. Do anything that takes you away from the charts.

2.Do not keep checking the trade - Ideally, close your charts, so you don't keep checking what is happening. This bad habit is classic for a novice crypto trader. You will feel elated when the trade is in profit and deflated if it is showing a negative figure

3.Stop trading after three consecutive losses – tomorrow is another day. Close down the trading platform and write in your trading journal about what happened. Analyse the losses. Was there anything you could have done better?

4.Choose a less volatile trading session – crypto is volatile at the best of times but study the charts and work out when the market is a little steadier and trade at those times

5.Check your emotions – how are you feeling? Are you tired or feeling emotional, fearful or worried you might miss out on a good trade? If you are feeling anything less than calm, walk away and come back when you have your emotions under control

Q: How Can I Stop Impulsive Trading Cryptocurrencies?

A:

1.Detach from the outcome.

2.Ask yourself if you are over-trading or risking more than 1% on your cryptocurrency trades.

3.Greed and fear are two emotions that dominate the novice cryptocurrency trader. FOMO is another. Missing out on a big move can feel frustrating. But, look, this mentality is a bit crazy. The crypto market is enormous, with the potential for multiple trades every day. If you miss one trade, so what? Just look for another.

And keep the points below in mind all the time:

1.Don't be greedy. Small, incremental profits grow your crypto account steadily.

2.A significant loss may follow one big win.

3.Aim for the long game, increasing your crypto account one dollar at a time. Do you know the tortoise and the hare story? Yes, be the tortoise because the profits you gain must be nurtured and protected. The losses will come but treat those wins like gold dust.

Q: Let's get to the recap of the Psychology of Trading Cryptocurrencies

The fact is very few traders become successful at trading cryptocurrencies. But, if you are prepared to make an effort, it can be done, and the rewards can be significant.

Preparing your mind for trading cryptocurrency, self-discipline and patience are the key components to success. You have to create good trading habits and not deviate from them when things get tough.