Psychoanalysts and psychotherapists around the world are increasingly seeing signs of manic syndrome in people who are active in cryptocurrency trading. Up and down charts haunt them day and night, they see cryptocurrency logos on coоkie boxes and street signs. They can’t eat or sleep, become millionaires or lose their savings in a matter of minutes, neglect their families, jobs and start to feel bad. The constant need to invest, speculate and calculate trends is intoxicating and blurs the awareness of high risk and possible losses. People in this state are on the verge of serious psychological and even psychiatric problems, risk losing everything, and find themselves at the bottom of the social ladder with no chance of returning to normal life. 

Many traders realize the destructive effects of such states, turn to specialists for help, and work independently with their emotions. But others do not.

Let’s try to understand what the psychology of crypto trading is based on, how to avoid unstable states and control emotions when trading cryptocurrencies.

Psychological traps of trading

For more than a decade, doctors and scientists have been using the term “cryptocurrency ludomania” when talking about people with a pathological addiction to the process of buying/selling cryptocurrencies in pursuit of profit while ignoring potential losses. In the traditional sense, compulsive buying is usually associated with gambling. At the same time, the emotional conditions of trading digital assets have much in common with gambling. 

The influence of emotions on the results of crypto trading is huge. The dynamically developing segment, advanced technologies and stories of dizzying profits attract beginners and fascinate experienced traders. Emotions in cryptocurrency trading are fueled by such objective factors as:

• High volatility. 

The roller coaster-like ups and downs in the value of digital assets, changing tens and hundreds of percent in a matter of hours, sends brave investors up and down on a wave of excitement. This creates a sense that only the smartest, fastest, and bravest will win the grand prize — millions of dollars in profits. Such an emotional state clouds the mind and the understanding that in the conditions of a fast, high-stakes game, the chances of becoming the owner of a penthouse in Westminster or a private island in the Maldives archipelago are about the same as being in the gutter at any point on the globe. Because even if a trader loses money, it seems to him that he can easily get it back on the next wave of success. 

• The market works 24/7. 

The trader’s freedom of action is not limited by the working days and hours of stockbrokers, banks or law firms. The decentralized market, independent of intermediaries and available around the clock, beckons at any time of the day or night — you can enter it at the moment of a successful business situation, as well as after a bottle of whiskey, reading a successful marketing article or an emotional argument with friends. 

• A lot of stories with happy endings.

The mass of amazing real-life stories of successful investments and trades in digital assets is truly impressive. Their representativeness after more than 16 years of cryptocurrency existence leaves no doubt. For professional traders, they serve as a source of inspiration and a basis for developing their own strategy, but in case of reckless approach, they can play the opposite role and become a trigger in the literal sense of the word: both for pouring all your savings into nothing and for shooting yourself in the head.

Today, the motivation and psychology of crypto traders is becoming the subject of more and more in-depth studies. Neglecting the psychological aspects of cryptocurrency trading leads to serious and sometimes irreversible consequences. Specialists from clinics around the world say that addiction to cryptocurrencies has all the chances to become a real “epidemic of our time”.

Analyzing the mistakes of novice crypto traders, psychologists say, first of all, about the lack of self-control. The ability to control emotional state and discipline in crypto trading are no less important aspects of achieving success, saving health and money than mastering trading tools and extensive knowledge of the market situation. 

How to avoid emotional trading decisions

• Control your attitude to the process.

First of all, you should be fully aware and monitor your psycho-emotional state. If you are feeling angry, anxious or euphoric — do not trade. As soon as a trader starts to get excited and sees in every trade only a “chance to win” — this is an alarming signal. In this case, risk becomes an integral part of the trading process. Analytical abilities and rational planning are switched off, a person begins to live by emotions, being in constant stress, and cryptocurrency trading from a tool for earning money becomes a monster that takes time of life and money, replacing work, rest and communication with loved ones. 

• Control the time you spend on trading. 

Self-control in crypto trading is also based on clear rules of time management. You need to define a clear time frame and days of the week in which you work with crypto. You need to control and eliminate the thoughts that coin charts need to be monitored all the time and that only under these conditions you can improve the situation at any moment. Controlling the periods you devote to trading will avoid “time slips” and getting stuck in a situation. 

• Set financial limits. 

This will protect you from making impulsive decisions. Keep a financial diary: by recording your trades, you create a database for regular financial analysis and informed decision-making. 

How to overcome fear and greed in trading

In addition to extreme states, which according to experts are experienced by about 1-3% of active crypto coin holders, there are common emotions that everyone involved in trading experiences. For example, fear and greed (FOMO) are considered traditional characteristics of emotionally driven trading behavior. 

Fear usually manifests itself during periods of bearish sentiment. It encourages one to minimize risk-taking, close positions prematurely, and exit the market too hastily without waiting for the optimal situation. In this way, open profit opportunities are missed. This emotion, when experienced by a large number of crypto traders at the same time, often turns into panic, which develops into herd behavior. And crowd psychology in the crypto market during its activation periods leads to such consequences as panic sell-offs, collapse of assets and entire markets. 

In order not to fall into a state of fear, a trader must constantly improve his level of knowledge and adhere to a clear trading strategy. Qualified analysis and balancing of the chosen trading strategy will allow not to deviate from the right course because of impulsive decisions. 

Greed or FOMO (Fear of Missing Out) in crypto trading drives irrational actions at times when it is impossible to restrain the need to get rich as quickly as possible at any cost. The syndrome of missed opportunity (train running away) is usually most evident during the end of bull cycles. Conducting transactions with increased risks, buying assets without fundamental analysis, reselling or buying at the peak — in a word, everything that increases rapidly in price and promises quick enrichment becomes the object of interest of traders in the state of so-called greed. The most effective way to combat such manifestations is to set clear financial goals, limit expenses and regularly fix profits to maintain a constant positive trend.

Psychological factors of successful trading

It is necessary to realize that the succession of losses and profits is an integral part of cryptocurrency trading. Adequate response to the volatile situation in a highly volatile market and conscious application of psychological strategies in crypto trading will allow you to achieve the best performance. A cool head and a pragmatic approach will bring you money, while emotional actions and an inability to stop in time can rob you of profits or drive you into losses. Mastering the psychology of loss and profit in trading will help you avoid making decisions under the pressure of emotions and create the best conditions for proper motivation and balanced, rational decisions even in the most unstable markets.

How to deal with failures in cryptocurrency trading. Tips from experienced traders

• Discipline yourself. Trading is a work for profit, not a lottery or a casino.
• Trading psychology is no less important for a successful result than skills, experience and expertise.
• Risk management in cryptocurrency trading is crucial, as an inappropriate level of risk taking negates all positive aspects of the current trading environment.
• Trading is a constant stressor. Use relaxation techniques to reduce the level of emotional stress without letting it take over.
• Make decisions based on fundamental and technical analysis data, not subjective feelings. This is especially true during peak emotional states (elation, anger, fear).
• Do not be overconfident. Don’t overestimate your abilities and intuition — this can lead to emotionally charged behavior and excessive risk-taking. 
• If you feel you have a talent for trading, analyze your failures carefully. Talented people often neglect to work on their mistakes and are more likely to explain personal failures as trivial bad luck. 
• Distinguish between tendency and herd behavior. People tend to group together and copy the actions of the majority. Often, the excitement created by the crowd turns out to be a bubble in which the whole herd loses money. 
• A detailed trading strategy provides a structured approach to investing and minimizes the room for emotional decisions.

Conclusion

In the history of the cryptocurrency market, there have been cases when successful traders, making transactions worth hundreds of thousands of dollars per week, ended up in clinics treating mental disorders. The pathological need to monitor quotes and study analytics day and night, to be in constant stress due to fear of making a wrong decision drives young people with iron health into depression. 

Success in trading directly depends on the psycho-emotional indicators of the trader. To increase profitability, a clear head and sober mind are as important as market knowledge and skill in using trading tools. Understanding behavioral concepts such as conscious behavior, herd instinct, FOMO can help in making good decisions. Take the time to study trading psychology, apply its best practices and monitor your states — then you will be able to demonstrate the most successful trading results.

Thank you for your attention. Invest safely and profitably!

AnyExchange is a cryptocurrency exchanger that allows you to convert popular digital assets at the best exchange rates. Our platform also offers fast and anonymous money transfers worldwide.