In 2024, a study of 100,000 traders was conducted. 68% of trades were made under the influence of emotions. Only 12% of traders considered fundamental indicators.
These data clearly show: people lack patience and self-control to maximize profits.
Even if you have an excellent strategy, emotions can play a cruel trick on you. When you give in to panic or greed, the strategy takes a backseat.
Why do emotions dominate in crypto?
The crypto market is different from any other market: emotional surges are proportional to volatility spikes or hype.
The crowd rushes to buy without checking facts. A coin can skyrocket by hundreds of percent simply because everyone is buying, blinded by the thirst for profit. Greed and fear are the two main drivers of this market.
People buy without analysis, driven by greed. But as soon as there’s no one left to buy, the price plummets.
When the opinions of a few turn into crowd psychology, it starts moving markets.
How to distinguish a rational decision from an emotional one?
First
When you feel emotions taking over, pause and consider what’s behind your decision.
Acknowledging the emotion is the first step to controlling it.
Second
Ask yourself tough questions, such as: “What specific data supports my decision? Online metrics, volumes, or fundamental news?”
If you can’t find an immediate answer, it’s likely best to hold off on acting.
Third
“Less is more.” The more you rush and overcomplicate, the lower your profits will be.
If you stick to the core principles of your strategy without overcomplicating things, success will follow.
The most common psychological traps
Fear of Missing Out (FOMO)
This emotion is akin to euphoria. At any market stage, you’ll feel like you’re missing out on profits because there will always be people earning more than you.
You might want to change the assets in your portfolio, but this often leads to losses: growth is followed by a decline, and hype leads to losses.
Panic / FUD
Stands for Fear, Uncertainty, Doubt.
It’s crucial to be prepared for these emotions and remember that when the market falls, panic sets in.
Under no circumstances should you give in to the urge to sell all assets and exit the market. That would be the biggest mistake.
Sunk Cost Fallacy
When you hold onto a bad asset not because it makes sense, but because you regret letting go of the money, time, and nerves you’ve already invested.
Confirmation Bias
Ignoring bad news. When something goes wrong, you keep searching for news that supports your hopeful perspective.
Despite obvious risks, you continue to ignore them.
Hyper-Optimism
Belief in endless growth without considering risks. Another factor that misleads even the most experienced traders.
The market is growing, cryptocurrencies are breaking records, and you start thinking: “That’s it, now it’s only up!” But this feeling and complete disregard for risks often lead to significant losses.
Dunning-Kruger Effect
As soon as you make your first profit, you start to think you’ve mastered everything.
This is a deceptive sense of expertise and experience.
You take risks because you’re confident you know a lot, but it’s a trap.
How to think to earn?
There are no shortcuts to big results.
All outstanding achievements in investing are based on consistently performing simple actions over a long period.
Traders who earned significant sums didn’t use any special methods. They simply performed basic actions consistently, which are accessible to everyone.
Cold calculation and iron discipline.
Successful investors hold assets for years based on sound reasoning, ignoring background noise like artificial hype.
Specific techniques for controlling emotions
24-Hour Rule
Don’t make decisions based on emotions.
Simply delay a buying decision for 24 hours after the first price impulse.
Trader’s Journal
Record trades and thoughts before making them.
By documenting each trade with details of your emotional state, the reasoning for entering, and the outcome, you can identify patterns leading to losses.
Clear Entry and Exit Plan
Invest based on a strategy, not intuition. Entry and exit levels for assets must be clearly defined.
If the price reaches your target, exit the asset. Stick to your plan unwaveringly.
Position Sizing and Risk Management to Avoid Losing Everything
A position sizing formula where the risk per trade doesn’t exceed 1-2% of your capital helps preserve your deposit even during a series of losses.
Using stop-losses is also crucial. They automate the process of closing losing trades, limiting losses to a predetermined level.
Diversification – Insurance Against Catastrophe
Don’t invest everything in one project; spread your funds across at least 2-3 different assets.
Why the mass panic is the best time to buy?
A portfolio cannot and should not grow 100 percent of the time. The market needs to cool down sometimes to gain new momentum.
Cyclicality: ups turn to downs. And vice versa. Understanding this cycle is key to avoiding the urge to sell everything. Don’t sell everything when most people are doing so.
The most important thing is to look for opportunities that the market presents and use them.
Conclusion
Psychology is the key to profitable trading.
In the crypto market, where 90% of mistakes are caused by emotions, success requires not just knowledge but a complete mindset shift.
Main Takeaway: The winners are not those who predict trends, but those who keep a cool head.
Those who don’t follow the crowd but act according to a plan. Those who don’t panic during a drawdown but see it as an opportunity to buy at a favorable price.
The key is to think like a professional.
If anxiety or excitement starts influencing decisions, a professional pauses, understanding that cold calculation is only possible in a state of psychological stability.
