Market psychology vs. investor psychology.
These are two phenomena to be understood in different ways. However, the psychology of the market and the psychology of the investor are linked because each individual action or reaction has a consequence on the market.
As an investor, your mindset and decision making are part of the market. The way you think influences what you decide to do. This in turn influences market movements as your mindset is echoed by others, and helps to shape the overall psychology of the market.
Keep a cool head.
With the price of your favourite Token or the overall market fluctuating over time, it can be difficult to keep a cool head. Sometimes market reactions seem irrational in light of announcements, the fundamentals of the project(s), its utility(ies), the interest of a community and many other factors.
In a moment of extreme volatility, instead of being carried away, if you can control your emotions, you will react rationally and intelligently, whereas the majority of market players act on the emotion that the sudden price movement has provoked.
The psychology of the crypto investor is based on fighting the main emotional triggers of fear and greed.
The response to these 'emotions' is to trust your own research and experience, insight and mental preparation. Most important of all is your mindset, your ability to use your emotions to your advantage and not let them work against you.
The high level of volatility associated with investing in crypto-currencies creates a pressure cooker type environment that can cloud even the most zen investor's judgment.
The reality is that you will never be free of your emotions during major moves (up and down), but that's perfectly fine, as long as you learn to recognise and manage them.
Assess the exposure associated with each investment as best you can, calculate the worst case from the best case, and decide whether the reward and/or benefit of the project outweighs the risk. Then, if your investment goes against you, keep a clear head and cut your losses.
Whatever happens, whether you make the "right" or "wrong" decision, you will have "Learned"!
Learn to work with your emotions:
Submitting to your emotions is usually making someone who is not you a lot of money, especially when the emotion is fear. This is far from specific to crypto or even investing.
Fear is the primary marketing tool in many industries. It's a staple for influencers and/or market manipulators. FOMO is the term generally used. There are countless "Buy the Dip, Sell the Top, To the Moon" messages on social networks. At worst, it's all done to generate a fear of missing out on an opportunity that won't come around again, which is factually wrong if you're investing for the long term. At best they are just "maximalists" of a project or Token trying desperately to get you to buy in without really having any arguments to offer.
Anyone who has ever witnessed a flash crash in the crypto market will know that many cryptos change hands during these periods, and that this is quite understandable as the more experienced will take advantage of the crash to reload at a lower cost, while the less experienced will sell (sometimes even at a loss) for fear of losing everything.
So, be lucid and see, by doing your own research, if the crash is "legitimate" because it is due to an announcement with a long-term impact. If it is not, then it may be a case of market manipulation by whales, a temporary fear or a massive profit-taking after a bullish move.
You will never get rid of your emotions. The good news is that not reacting to them is enough. The only thing you need is patience and practice to control them over time.
Be aware of your risks. Calculate them, and then follow your strategy with your SL (stop loose) and TP (take profits). Decide for yourself whether the Token has a value based on the Fundamental or the Hipe for you to adjust your strategy. If you have made a mistake, acknowledge it and try to save as much as possible. This will result in a reduction of your losses.
You don't feel able to do that? Then I advise you to DCA and open your wallet and social networks that talk about your investments as little as possible.
DCA or the independent investment of emotions
DCA or "Dollar Cost Averaging" is an investment strategy that involves buying one or more cryptocurrencies for the same amount at regular, scheduled intervals. The purpose of these periodic purchases of the same amount is to reduce the risk taken and the stress, without relying on the currency price.
This strategy is not always the most profitable, but it is probably one of the most emotionally efficient. This is because in downturns, only part of the investment is affected by the decline in the currency, with your final purchases at a lower price than the bottom. Unless there is a total and widespread crash, the rest of the investment is "protected" from volatility.
To embark on a DCA strategy, determine three parameters:
1. The amount of money to invest in each purchase
2. The time between trades.
3. Diversification so that your exposure is not limited to a single token.
Educate yourself:
Reading is also an excellent way to control your emotions. The more knowledge and understanding you have, the more peace of mind you will have about your investments. I suggest you check out the books available on the subject of investing and crypto on our Bookstore page.
You can also read articles, watch videos or interviews, or listen to podcasts about investing or more specifically about a token in your portfolio.
In any case, be kind and respectful in your exchanges:
Positive communication, whatever your point of view, will help you to maintain a good mindset and therefore primarily to keep negative emotions at bay.
Aggression towards others or excessive defence of your investment in others is a waste of time. Aggression is often the expression of frustration, not thought out, but of emotion and disappointment.
One last piece of advice, if a person you follow on social networks or an influencer goes against everything I said before, then delete their notifications or stop following them altogether. You'll feel better in the end.
If you feel that someone around you is on the wrong track, give them this book...
Stay Tuned
Crypto Bubulle
