7 Ways to Build Trading Psychology for Success

Many people say trading is a science. Not just any science though. The science of psychology. Alright, that might not be exactly what you were thinking of, but a lot of psychology articles have pointed out that certain emotions can get the best of us, especially if we are new to a trading environment that is quite volatile. This might sound familiar if you are in the process of selecting which blockchain stocks you’d like to invest in. Rather than letting our minds get the best of us, it can help to understand that our feelings are completely normal and experienced by other traders just like us.

But instead of just pointing out the symptoms of trading psychology, we decided to do you one better. That’s why we put together our top tips for building trading psychology for success so that you are equipped to combat these emotions (and the not so fun feelings that can arise).

1. Don’t Be Overcome by The Psychology of Fear

For every winner, there are many losers. If this wasn’t the case there would be no crypto market. Although this does not bode well for traders it is good to keep in mind that losing at some point or another will be inevitable. However, even with this mentality it is likely your heart may begin racing and you may become fearful when there is a downturn. This fear can stem from many areas such as the fear that your profit will turn into a loss, the fear that you were incorrect about your strategy or the fear that you are missing out on a potentially big win in which all of your friends will become millionaires on the latest bitcoin spike. It is in all of these cases that beginner traders let their emotions take over. 

This is where your strategy comes in. By having a plan complete with accurate stop/losses (the prices that you will buy or sell a given stock)  you will be equipped to act strategically and avoid thinking with your emotions. Take comfort in knowing that even the most successful investors become fearful. So at no point will you ever rid yourself of this emotion. Rather, it is about recognizing the presence of fear and not letting this emotion be your motivation. 

2. Say No To Rationalization 

When your parents told you not to overthink things, you probably did not think it applied to your trading strategies. As you make each trade, it is easy to start making rationalizations like believing your crypto will continue to rise because it has been performing so good and the trends are good and really it’s just been a good week. Alternatively, your crypto might fall below your stop/loss and you might think this is just temporary and it will go right back up. Unfortunately, overthinking is common and there is no full-proof way to overcome rationalization. 

Like your fear, the best way to overcome it is to do your best and ignore it. Act in accordance with that well thought out plan you put in place. This will not come easy at first. But as you continue to follow your plan and ignore your overworking brain, it will become easier and easier to avoid submitting to typical trading psychology. 

3. Don’t Get Greedy

For many, the hardest emotion to overcome is greed. Greed can often be the motivation to take risky positions, investing in more with money they don’t have or even holding on to trade so they can squeeze out just a little more money. Regardless of the circumstance, it is easy to succumb to greed and act irrationally. While this pays off sometimes (consider those who purchased bitcoin at $15,000 only to let it keep rising to $20,000), most times you jump in too late and watch the price fall substantially (such as bitcoin hitting $8000).

Trading is far from a get rich quick scheme. Rather it is based on precision and timing in the cryptocurrency investments. This means rather than overtrading like many have become accustomed to, remain realistic with your prospects. Most importantly, only execute trades that were considered in your plan.

4. Know Your Crypto

You know what they say knowledge is power, so knowing a little more about what you are up against can put you far ahead of your game. Research might look different for everyone but studying charts, industry trends, background research about the company and their management, trade journals or attending crypto conferences are all part of the knowledge gathering. While these methods will all help you get a more holistic view of the investment you are about to make, remember a “tip” or “inside advice” is not research. It is likely just a rumor which may end up hurting your investments.

As your knowledge begins to develop and you begin to understand the trends, you will be able to position yourself as a confident trader. Once you come out at the top, remind yourself that this is by no means a cue to stop learning. In a constantly evolving industry, understanding the cryptosphere should be viewed as a journey that is constantly full of new ups and downs. This means there is never a win when it comes to trading. Whether you are a professional investor or an amateur, the research never stops.

5. Learn To Accept your Failures

In our own heads, it might be difficult for us to admit when we are wrong. After all, being wrong has got to be one of the worst feelings. Again take comfort in knowing that any smart investor knows you will have winners and you will have losers within your portfolio. This is just the way it is. So knowing you’ll have to lose sometimes will set you one step ahead of the game. Just know that this is normal. As long as you take each failure and learn from it you are on the right track. Take the great Warren Buffet for example. If he was able to admit his mistakes we’re pretty confident that you will be able to as well.

However, in order for you to build trading psychology to succeed, you must also keep in mind that trading will require some experimentation from time to time. And with every experiment, there will be a lesson learned. It is only through this process ( and a little bit of practice) will you become comfortable with each “failure” and be ready to take a lesson learned and turn it into a better and more improved strategy. Even the best thought out plans will not have a 100% success rate. Don’t worry this is completely normal. Although you may be uncomfortable at first, accepting this will become a little easier each time.

6. Become a Realistic Optimist

Nothing is more powerful for trading psychology than a positive mindset. Okay, we know that sounds like every motivational speaker ever. But a part of it does hold true. All successful people visualize success and work to make that come true. This fulfills that little thing psychologists refer to as the self-fulfilling prophecy. This does not mean that you will always be right, but it will mean that you have accepted that success is on your horizon and will do the necessary planning to achieve it. 

While research can help you to understand trends, remember a crypto market is an unpredictable place. This means as much as you can know a coin and how its price changes, there is still a chance the market will fool you. At the end of the day, it’s about you and how you view and react to the market’s actions. So continue to invest in learning about and mastering your strategies and the rest will fall into place.

7. Never Trade Bored 

While fear and greed are common topics amongst psychology articles, a crypto trader should never ever overlook the feeling of boredom. While your plan might be going on track, a quick look at the markets might remind you of the excitement of trading. In these cases, it is common that you might deviate from your well thought out plan and engage in a quick trade or two. Without research more often than not these trades will be unprofitable.

Trading is supposed to be boring. If you happen to be one of the few that are finding excitement in trading there is a chance you might be doing it wrong. To let your plan execute, take up a hobby. Whether it is cooking or playing the guitar or even developing your own cryptocurrency these are all great distractions to avoid getting too involved in the markets. 

A Final Word on Trading Psychology

There’s a reason that the best stay the best. Consider who the good investors are and the strategies as to how they trade. To be successful, these traders have taken the time to learn the ins and outs of the market. While they may have increased knowledge, they’ll also be a bit of reassurance that maybe some of the emotions you are feeling are completely normal.

Perhaps you don’t know who the “best traders” are and that’s okay. There are tons of great platforms out there that can help you follow the leader. Remember the concept of Follow Coin? Other platforms a little closer to our hearts such as Hedgetrade (sorry we had to!) also show us who is taking the lead in this space.

Although a good strategy is a must, we also need to remember to master the art of psychology. Knowing that fear and greed are likely to arise can help us to recognize these own emotions within ourselves and to ignore these as motivations. It is only when we are able to do this will we begin to trade smarter, not harder. 

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