Trading is, more or less, an exercise in psychological warfare with the goal being to "outsmart" and anticipate the market in order to meet investment objectives. Everyone involved is playing this game to varying degrees, and some are a little better than others. With cryptocurrency being a largely speculative space, this effect can be greatly exaggerated.
As an example, one common downfall for Bitcoin (BTC) traders is a phenomenon dubbed "weak hands". I'm sure you have heard of this term and are familiar but just in case you have not, a weak-handed trader is one who cannot hold their investments and sells too early, often times at a loss.
In order to combat this, a strong level of mental fortitude and some basic strategies are required. We have all been there, even the best traders fall for traps. When a splash of red hits the chart and threatens your hard-earned gains it can become an irresistible, almost instinctual, reaction to sell, or if you prefer the pejorative for maximum shaming, panic sell. Anyway, let's get to the good stuff, like learning how to avoid panic selling and start with.
#1: DO YOUR DUE DILIGENCE!
Absolutely, the most important part of any investment strategy, do your DD! Doing your own proper research and making sure you are informed is the greatest defense against Fear Uncertainty and Doubt and Fear Of Missing Out. When you know and understand what you are trading, it allows you to better understand it's true value, deflect rumors and conjecture. Generally, disallow yourself to be taken advantage of by the powers that be, whether they are huge market makers or just that annoying guy who keeps spamming the message boards. Now that you know all about your asset of choice we can move on to number two reason.
#2: MAKE A PLAN AND STICK TO IT!
So, you are absolutely confident that the coin or stock you just bought for, let's say, $10 USD is going to gain at least 100% in two years time. You make your purchase and vow to not sell for at least that time period. Now let's imagine the token or stock doesn't go up right away, maybe over the next month, it loses half of its value and you are down 50% on your investment while other coins are seemingly skyrocketing in value. Now you are feeling FOMO and the need to "chase" gains, when one gives in this usually leads to many small losses over a period that add up as a trader makes buys and sells trying to recoup losses only to further those losses. The best thing you can do is stick to your plan and have the patience to see it through for better or worse. This can be easier when you do number 3.
#3 HEDGE! HEDGE! HEDGE!
So, you see that a certain crypto token or stock is on a tear today and that gets your mind going, it's up 50% now, why wouldn't it go up 100% or even 200%? It can be tempting to go all in and try to make a large amount in a short time, however, chances are it is too late in the run and you may buy in at the peak of a cycle... anyway, say goodbye to a chunk of your position as an inevitable dump takes place which of course inspires a panic sell. Whew, further losses avoided, Murphy's law then takes effect and now that crypto asset has tripled the next day.
If I had just held on, It would have worked out!! Scenarios like this are devastating but a well-hedged portfolio can make a loss easier to bear. First off, never go all in on anything, ever. There is no such thing as a 100% guarantee with any investment and much less so in crypto. When you hold a variety of assets, well spread and not too closely related, it can be a lot easier to accept a loss, either temporary or otherwise in your overall portfolio.
Well, this has been knifedag's guide to stronger hands. Now that your hands are more pumped up than ever, you can get out there and put a death grip on your favorite crypto tokens and stocks. Happy Trading!
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