Mind Traps 101: Mastering the Mental Game

Most traders begin their journey by studying technical analysis, candle patterns, maybe some fundamental analysis. The common mistake - they completely overlook the emotional factor. And it's precisely the mental state that transforms a novice into a professional.

Although mastering the emotions of greed and fear is challenging, there are several fundamental pieces of advice that can help you avoid the most common mistakes:

1. Minimize risks.
2. Always stick to your original plan.
3. Avoid the gambling mentality.

Remember: the foolish learn from their own mistakes, but the wise from the errors of others.

#1. Minimize risks.

As we start, many of us believe that cryptocurrency trading is a quick and easy path to financial success. However, few pay attention to how quickly most financially inexperienced players lose their deposits. It's often happening in a matter of days or even hours.

Why does this happen? It's because the desire for quick gains clouds our judgment, and an excess of confidence in our abilities puts on rose-tinted glasses. At this point, we may feel like we got it, but the reality is quite different.

Remember - at the beginning, the primary goal is to preserve your deposit. To achieve this:

• Define your trading system and strategy (test all systems only on a demo account).
• Minimize leverage (ideally, trade only in the spot market without leverage).
• Establish risk management; it should not exceed 5%.
• Calculate the amount you want and can earn in a month, convert it into points — this becomes your goal.
• Don't open trades based on emotions. Whether it's joy from profit or disappointment from losses, let cold calculation drive your actions.
• If several consecutive trades go into a loss "without apparent reason," take a break and switch to a demo account for 2-3 days. Reevaluate your trading system, regain confidence.
• Never regret missed opportunities; the market won't go anywhere, but you might lose money be trying to catch a missed chance.
• Never open too many contracts! This is maximum risk.
  

#2. Always stick to the initial plan.

Before entering a trade, you should have a clear plan of action - your profit expectations and acceptable risk. Most errors occur because we change our initial plan on the go.

From my experience, I can say that closing a trade too early can bring much more disappointment than a triggered stop-loss. This disappointment, in turn, leads to incorrect decisions.

To avoid this:

a) Don't give in to emotions.

Fear and greed are inherent in every person. You need to learn how to control them.

Novice boxers often miss punches because they blink. It's he basic reflex - when something moves fast towards your face, the brain automatically sends signals to protect the eyes, leading to an instant blink. Experienced boxers know that to evade/block a punch, they need to overcome this reflex and keep their eyes open.

Similarly, in trading - when novices see a correction and feel fear, the basic reflex drives their hand towards the "sell" button. The correct course of action, however, is quite the opposite - you need to ignore the fear and buy more.

"Buy when there's blood in the streets.."

b) Assess risk and reward before entering a trade.

As the market moves, you will find yourself tempted to adjust your targets. That's you once again giving in to emotions.

Remember that you set them correctly the first time after a thorough analysis, and it is often a bad decision to change it. The exception is moving orders to break-even.

c) Conduct your own research.

Before buying a coin, dedicate a few hours to understanding the technology itself. You should know all about the project you are investing in. Read everything you can find about it's partners, developers, technology, funding rounds. Only when you are convinced of the investment's reliability should you make the purchase. In such a case, you are less likely to fall prey to FOMO, as you will have a well-rounded understanding of your purchase.

#3. Avoid the gambling mentality.

Remember - if you want to earn in the long run, you must consider trading as your job. You're here to make money, not to have fun. The thrill, the desire for a quick buck without a clear plan, trading based on emotions - is the primary source of income for exchanges.

In the casino game, the house always wins.

In conclusion, dear traders, take your time. Sort out your thoughts. Opportunities to earn will always be there - the market isn't going anywhere. Success or failure depends solely on your thoughts and feelings.

"Successful trading is 90% emotions and psychology and 10% technique" (Lewis J. Borsellino).

Respectfully yours,

SZ.