Trading is a tough game. With so many factors that impact success, it’s no wonder the success rate is so low. Emotion, fear, and confidence are just three examples of how trading is a war of the mind. And because crypto is such a new market, everything is amplified to greater heights. Crypto trading success can be significantly impacted by how well you know yourself.
Trading is one giant competition. When you win, money changes hands from the winner to the loser. It’s a zero-sum game, meaning that there must be a winner and a loser over the long-term. A significant part of trading is about self-discovery. Knowing how your mind and body work, in comparison to everyone else.
Discipline is crucial to trading. It allows the trader to keep their emotions in check, and execute a plan for success. Dr. Woody Johnson, instructor at Tradingacademy.com, explains that “it is very difficult to have stable discipline when you don’t know what is throwing you off target”.
Personality Matters When Trading
When developing or implementing a trading strategy, it is essential to take into account factors like personal tendencies and personality type. This can even be as broad as deciding whether to swing trade over longer periods of time, or whether to day trade in shorter time frames. Some people find that one suits them better than the other.
It is also important to take stock of personal emotional tendencies. Do you easily get down on yourself and stop thinking rationally? Then it may be important to try to step back after a failed trade and look at reasons for that result, with particular emphasis on logic, without jumping right into the next trade in an effort to “revenge” trade. This may prevent a string of emotion-based losses.
It may also be important to note that what works for most, may still not work for you. For example, it’s common trading advice to “‘let your profits run and cut your losses short”. This advice makes sense. But what if you often tend to hold your trades so long that they turn into losing trades? That’s a case of holding profits too long. Or what if you cut your losses so short, that you are not giving your trades enough time to play out in the market?
It’s all about knowing yourself
As mentioned above, situations in crypto are greatly amplified. Emotions are further exaggerated, with higher gains and lower losses. The market is also developing, so trades can fail, even due to an absence of logic, which can lead to many negative thought patterns.
It is important to always be aware of how you handle each situation and then act accordingly. The more you know yourself, your tendencies, and your abilities, the more equipped you will be for success.