When there is a downturn in the market, the same happens with the mood of traders and investors. All those emotions that are associated with a growing market and growth in general (inspiration and confidence) disappear, giving way to anger, disappointment and even depression.
In such a situation, the worst thing is when a trader starts to look for excuses and ultimately make decisions based on emotions instead of common sense. Inexperienced traders are especially inclined to blame external circumstances, and not their ego. They believe that their poorly managed portfolio sank due to some events related, for example, to the SEC, futures markets, Spoofy (by some influential traders with almost unlimited funds that manipulate the Bitcoin market), etc.
These arguments are inevitably gaining support on social media, spreading at an incredible rate. Newbies tend to believe such claims: due to their lack of knowledge about the financial markets, they become especially vulnerable. This leads to the development of pessimistic sentiments that do not allow them to develop, because in their understanding it is useless to learn to analyze the market if its movements are completely determined by someone's manipulation.
As a result, pessimism begins to prevail, which only worsens the situation. As a rule, it looks like this: traders embrace pessimism; he begins to trade, giving in to emotions; it justifies losses by external factors, so it does not waste time on such an important constructive self-criticism, which creates the basis for improving the practice of trading and risk management; money is melting, and anger is growing.
When the market situation deteriorates, social networks become overwhelmed with angry and noisy people. They form groups in which they feed each other’s moods in an attempt to protect their egos. If in their reality some external event is to blame for all troubles, then even if in practice their capital could be protected with the help of proper risk management, no one would even think about it in order not to look “stupid”. In the end, this is normal.
I spent a lot of time with my true self, and believe me: this guy can't please anyone
Here are some helpful tips that can help you survive these difficult periods in the market and not be influenced by the people and stereotypes I described above:
- Books are always better than twitter. Static knowledge is impassive and not subject to fears. I will list some of my favorite books: John J. Murphy "Technical Analysis of Financial Markets"
- K. Huston "Charting the Stock Market: The Wyckoff Method"
- Mark Douglas "Zone Trading"
- Nicole Elliot "Ichimoku Charts"
- Steve Nison "Candlesticks: a graphical analysis of financial markets"
- Howard Marx “On the most important. Nontrivial solutions for a thinking investor "
- Sun Tzu "The Art of War"
- Mark Douglas "Disciplined Trader"
- There is no need to trade every day or week. Forced and excessive trading is a direct path to losses. You make about 80% of your profits in a bull market. The rest of the time, you need to focus on preserving capital.
- Be humble and humble; this does not apply to the way of life (no need to honor the legacy of slave morality). Be modest in terms of your own opinions about yourself. Identify your weaknesses and develop your own strategy accordingly.
- It is not necessary to always be aware of every slight price movement. There is nothing wrong with reading graphs. Just keep your flexibility to react quickly in the event of any scenario. Many people are fixated on this and track the price movements in each candle of each timeframe. But sometimes the situation is just vague, that's all. No need to risk capital in a weak position.
- Do not invest more than are willing to lose. Probably everyone heard this phrase, but still many people continue to make this mistake. Positions should be opened and closed at the right time for this, and not when you need money. The market does not adapt to your needs.
- Trying to apply risk management techniques after the prices of all assets have plummeted — this is how late it is and come to the party at the very end. Risk management and diversification relative to USDT or BTC should be dealt with as the market grows in order to hedge against future recessions. There are no endless bull rallies (unless you are the central bank).
- Until the moment is right for making a deal, spend time with benefits: learn methods of technical and fundamental analysis, explore good projects, delve into the essence of mining, etc. Make connections and share your ideas with friends. If you are surrounded by the right people, you can succeed in self-development by checking your strategies and getting feedback from other traders.
- Develop patience and strengthen your nerves. Emotions always lead to radical solutions. It is not necessary to divide everything only into black and white. It is necessary to distinguish shades. Never rule out that your opinion may be mistaken, even if you are completely sure of it.
- Travel, meet new people, meet new cultures, try new products and enjoy new landscapes. All this experience will help you keep open to new ideas and opportunities.
Summarizing:
- Be skeptical of all the information you find on social networks and media.
- Be patient and trade only when appropriate, as the market will not adapt to your needs.
- Analyze all possible scenarios and use a flexible approach.
If you accumulate bitcoins or other cryptocurrencies, you do not need to wait for the perfect moment to buy. For example, if you want to buy bitcoins, start carefully buying small quantities as you lower the price, constantly reviewing the likelihood of a particular scenario and strictly limiting the size of each transaction instead of buying everything at one particular price level. So you will not fall into the trap, and even if you have incorrectly determined the bottom, you will have a chance to get a plus by averaging. As I have already said, it is not necessary to divide everything only into black and white, when in reality uncertainty reigns in the market. Openness and a rational approach will increase the value of your portfolio over time. Do not fall prey to your ego.
First of all, try to survive in this market - without it you will not be able to succeed in the long term.