CEX blog. IO | The psychology of trading: how to make decisions and make mistakes.Part 2

In the previous post we began to look at the different realities of trading and how they can impactToday we continue our excursion into the psyche of the average trader.

The trading process is closely related to the adoptiondifficult decisions, doubts, emotions and, to some extent, luck. It is important to understand that cryptocurrency trading is often very unpredictable, and, moreover, it does not guarantee 100% profit from each operation.

Of course, there are different approaches to trading. For example, you can be a trader with activity on the market almost 24/7, or, conversely, make transactions only in especially favorable conditions. For example, once a week, once a month, or several times a year. Each time, when making a trade, the trader's goal is unchanged - to make a profit and close the operation at the most favorable price.

Here are a few more elements that can put pressure on a trader:

Strong regret for missed market opportunities or hope that it will be better

Strong regret for missing a profitable situationin the market can significantly demotivate you from trading in the foreseeable future. In the same way, the expectation of a "perfect market situation" may not be justified and the trader will lose a potential opportunity. In such situations, a person, fearing to miss the moment, constantly checks the charts, which simply does not allow him to focus on something else.

Confirmation bias

Confirmation bias is a trendseek, select, or interpret information that confirms your beliefs rather than refutes them. This trend is very pronounced among traders. Many people believe that everything around them proves the correctness of their beliefs - from macroeconomic indicators to specific candles on the chart. At the same time, the factors that confirm the opposite become literally invisible. This is the WRONG approach to trading.

Lack of patience

Patience is essential in trading. For example: when the balance goes into negative, you need patience to wait for the restoration of positions. When the user is in the black, patience is needed so as not to close positions too early. Although the essence of trading is often related to the actions in the market, in order to be a successful trader it is important to be able to wait and be patient. There is no need to make thoughtless operations when the market is in a calm stage (that is, there are no potentially profitable trades).

As a result, we can say that trading penetrates intothe very depths of the mind and awakens the inner demons. When a trader is patiently waiting for the desired move in the market, he confronts these demons. And when, in despair, a trader closes a position because the price has not gone in the right direction, he feeds them. Don't feed your demons, stay sensible!

It is interesting

In May 2020, the CEX team.IO launched an interesting experiment - for a month, an ordinary trader (not a professional) made transactions on the CEX.IO Broker platform with a starting capital of $ 100. For four weeks in a row, the CEX.IO blog published a weekly report “Trading Experiment” on how trading decisions were made and what difficulties a trader faced. The issue of “trading psychology” was actively discussed in each of the issues.

Upon completion of the entire experiment, the team released an interview material with the trader. The full text of the "Trading experiment with CEX.IO Broker" can be found here.

You can read the previous material on the psychology of trading here.

If you have trading experience, we invite you to share your opinions and impressions in the comments.