The secret of success in the world of digital currency trading lies in mastering emotions. If you have ever traded in the digital currency market, you know that trading in this market is like riding a roller coaster of emotions. In the digital currency market, positive and negative emotions do not leave your head even for a second; Especially if you are a beginner or use leverage in your trading.
The strong feelings and emotions you experience in the crypto market can disrupt your judgment and make correct decisions and negatively affect the outcome of your transactions. So, it’s better to find a way to avoid common mistakes and diversify your portfolio wisely and always enter the market with a trading plan.
In this article, with the help of an article from the Coinmarketcap website, we will get to know 6 effective strategies that can help us control and manage emotions in real-time trading. If you are also looking for a way to get off the roller coaster of negative emotions in the crypto market, stay with us until the end of this article.
Why is sentiment management important in the crypto market?
Trading in any market can make you nervous; But in the cryptocurrency market, with the unbridled volatility you experience, things are even worse. Digital assets have erratic movements and the lower their market value, the more unpredictable they become.
For example, just one tweet from Elon Musk can cause a significant increase in the price of Dogecoin, and on the other hand, a few bad news headlines in the media can cause the price to drop sharply and blow away a lot of capital overnight.
Read more: Familiarity with 5 risk management strategies in digital currencies
In another example, just look at the consequences of the fall of the FTX exchange in November 2022. As the bear market continued for more than a year, the second largest crypto derivatives exchange suddenly collapsed, sending a mix of fear, uncertainty and doubt (FUD) across the market. People sold their assets out of sheer fear and lost a lot of money.
The aforementioned example is a perfect example of the disaster that uncontrolled emotions in the cryptocurrency market can bring to traders. Conversely, at the same time when most traders were looking to exit the market, those who were able to keep calm took advantage of this opportunity and bought more coins when the prices had fallen to the bottom.
If you want to succeed in cryptocurrency trading, you need to control your emotions. Emotions like fear, greed, and FOMO (fear of missing out) can impair your ability to make decisions and cause you to behave irrationally.
In fact, uncontrolled emotions cause the trader to look for information that confirms his previous biases, instead of seeing the reality, which will result in nothing but loss of capital.
Read more: How to get rid of FOMO and stick to your strategy?
By managing your emotions, you can trade objectively and based on objective analysis. Undoubtedly, this will have a positive effect on the amount of profit obtained. Next, we mention 6 strategies for controlling and managing emotions that will significantly increase your success in trading.
1. Acknowledge your feelings
The first step to managing and mastering emotions is to recognize them as they really are. Acknowledge your feelings and learn what each feeling is telling you. For example, fear and greed are some of the common emotions in trading that cause many trading errors. Recognizing and fully understanding these emotions will help you manage them better.
When the price is at the best level to buy, FOMO, or the fear of missing out, becomes common among traders and can cause the trader to overinvest in a particular asset. The next time you experience fumo, analyze what might be causing your feeling. Recognizing this feeling can be a good guide for your next step.
Similarly, greed often plagues traders when they have a winning trade and have made a significant profit. Next time you’re in an open, winning position, check how you feel. You probably want to leave the position open and get more profit; But don’t forget that most of the time, the risk of losing the profit is much higher than the potential of making more profit.
Read more: 8 of the most common mistakes of traders that you should know
All in all, studying sentiments and understanding them deeply gives you important information about the market. This information will help you make better investment decisions; Especially if you consider the fact that many other people in the market are experiencing the same feelings and may make irrational decisions based on them. So, in a word, understand your emotions to beat your competitors!
2. Failure in the transactionTheAvoidanceTheIt is inescapable
Sentiment in the crypto market is often tied to losing money, and for good reason. Cryptocurrency trading is a game of probabilities, and losing is an inevitable part of the game of probabilities. Undoubtedly, you can invest in a relatively risk-averse way; But you should always consider a chance to lose.
The famous slogan “Don’t invest more than you can afford to lose” is one of the practical trading recommendations. If you are trading or investing, the best move is to treat your capital as a loss from the start. This can prevent negative emotions after a failure and make you less likely to make irrational trades and take excessive risks to compensate for your losses.
Read more: 10 important things that new traders should know
Don’t forget that as long as the money is in the exchange, it is nothing but a few numbers on the monitor. This makes it easier to accept any loss. You can say that you have successfully withdrawn your money from the market only when the profit is returned to your bank account.
3. Diversification reduces riskTheto give
Although losing money is an inevitable part of trading, there are always steps you can take to reduce your chances of losing. By dividing your money over several different investment options, you can reduce the effects of price fluctuations on your property and, as a result, show less emotional reactions to fluctuations.
Instead of investing all your money in one altcoin, put your eggs in several baskets. For example, buy some Bitcoin and Ethereum and some other altcoins. This solution not only allows you to easily maintain your position in the rising market; Rather, it allows you to invest in different narratives in different segments.
Read more: Guide to portfolio diversification
4. Gain experience and learn from your mistakes
Another way to manage emotions is to learn from past mistakes. Take a look behind you and review the trades you made out of fear or greed or fomo. By checking the result of these transactions, you get useful information. The next time you are affected by the emotions of the market, use this information to make a rational and informed decision.
5. Record your transactions and feelings
The more experience you gain, the better you can recognize and act on certain situations. Enter the data of the trades in your trading book and write down the reasons why you did them. Also, record the results of the trades and how you feel during each trade.
Creating a trading book will help you review your trades over time and identify possible errors and weaknesses in your trading approach. In the long run, this process allows you to make more rational and sound decisions instead of emotional trading.
Read more: training to build a trading system; Where do we start?
6. Always have a trading plan
Obviously, you often get upset when a deal goes against your expectations. Experienced traders prepare themselves for the failure scenario by setting a specific trading plan for each trade they make.
They specify entry and exit positions and consider common errors. In addition, with previous planning, you will no longer be affected by the emotions and emotions of the market. All you have to do is stick to your trading plan.
Before entering any trade, design a trading plan and determine your entry point, profit limit, and loss limit. A trading plan should outline the strategy and rules you will follow during trading. In the trading plan, you should also determine how to manage risk and make sure that you are not overly exposed to risk and loss.
Read more: Ordering in digital currency exchanges
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In the volatile market of digital currencies, mastering emotions is one of the main keys to success. Emotions such as fear, greed, greed and fumo often cause emotional and irrational decision-making that may cause many losses; Therefore, every trader should know these feelings and emotions.
In this article, we mentioned 6 effective strategies to control and manage emotions during trading. Solutions such as recognizing and deeply understanding emotions, accepting failures and failures in trading, creating diversity in the asset portfolio, learning from past emotional mistakes, recording emotions when trading and determining risk management strategies before entering any trading situation can help you in effective management. Let your feelings help.
In the turbulent crypto market, the use of emotion management solutions along with different approaches of fundamental and technical analysis can make the trading results of traders better, more profitable and more stable.
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