Greed & Fear

It's the weekend today, first of all, I wish everyone happiness, and then let's talk about a topic that all friends in the crypto community are familiar with: greed and fear.

Human nature inherently contains two basic emotions: fear and greed. Fear arises from unease about the unknown and instinctive resistance to loss, while greed stems from a desire for profit and an endless pursuit of satisfaction. In trading, these two emotions are amplified to the fullest extent.

Greed often manifests as:
Desire knows no bounds, and human nature is inherently greedy. When the market is rising, the initial goal is to make a small profit and then withdraw. However, as the market continues to heat up, desire suddenly expands, and one thinks, if I wait a little longer, maybe I can double my investment, always wanting to squeeze out the last bit of profit from the market.

The gambler's mentality, the excitement and thrill brought by the market's rise, leads us to fantasize about accurately timing the bottom and escaping at the peak, winning a few times in this game of probability, while ignoring the risks.

Herd mentality, blindly following trends; when the market is booming and everyone is celebrating, even those who are originally rational and calm will blindly follow the trend and chase after rising prices. If everyone says a certain coin is going to soar, it feels as if not buying it means missing out on a fortune.

The temptation of the market is overwhelming, filled with various wealth stories. I've heard that someone made a fortune during the bull market and became a winner in life. Seeing others share their profit screenshots in investment groups, displaying how they doubled their earnings in just a few days, constantly stimulates our nerves.

Overconfidence in one's own judgment can often lead to a state of self-indulgence during trading, where one feels that their analysis and judgment are the most accurate, believing that the coins they choose will definitely rise, especially when they see market trends aligning with their expectations, this confidence can turn into greed.

Fear often manifests as:
The potential loss of principal, the hard-earned money once invested in the trading market, is like being placed in a turbulent sea, where it could be swept away by giant waves at any moment. This fear of losing principal serves as a defense line deep within us; once there is a stir in the market, that defense line can collapse in an instant.

Fear of uncertainty, the market trends are strange and ever-changing, filled with uncertainty. No matter how many charts and indicators we study, it is still difficult to predict the market in the next second with 100% accuracy. This fear of the unknown makes us walk on thin ice when trading, afraid that a single misstep could lead to irretrievable consequences.

Social comparison, fearing being ridiculed as a "picking-up-the-pieces guy," is a fundamental aspect of human nature. In the cryptocurrency space, it acts as a magnifying glass. In group chats and forums, others flaunt their profits and boast about their operations, while one may be trapped in a quagmire of losses. This disparity can instantly shatter one's psychological defenses. The anxiety and self-doubt stemming from such comparisons further exacerbate fear, making us hesitant in our trading decisions.

How to cope with fear and greed?
Self-awareness is the starting point of cultivation. Understanding yourself is the first step to overcoming emotions. Clarify your risk tolerance, investment goals, and trading style. Do not blindly follow trends and do not overestimate yourself. Just like climbing a mountain, you must be clear about your physical strength, equipment, and the target peak in order to formulate a reasonable route, avoid unnecessary risks, and make trading decisions that are more aligned with reality.

Rational planning, formulating a detailed trading plan, to do a good job, one must first sharpen their tools. Set stop-loss and take-profit points, and decisively execute when the market reaches preset conditions. Controlling risk is the key to coping with greed; do not blindly chase after rising prices or panic sell. When the market is favorable, do not forget that risks are always present. In every trade, only invest a portion of your funds and keep some in reserve.

Emotional awareness, learn to notice your emotional fluctuations, and when fear and greed arise, identify and adjust in a timely manner. For example, when you feel anxious due to a market downturn, pause to take deep breaths, meditate, and remind yourself of the purpose of your plan.

Continuous learning is essential as the market constantly changes. Traders need to keep learning, enhance their trading skills and knowledge base, understand the characteristics of different market stages and trading strategies, such as trend following and mean reversion, enrich their toolbox, cultivate rational thinking, and reduce fear of market uncertainty.

Accept imperfection. In trading, accept the possibility of losses. Understand that even with a rigorous strategy, market uncertainty can lead to failure. Don’t demand perfection; treat each trade as a life experience. Learn from mistakes, continuously improve, and face the imperfections in trading with composure to keep growing.

Let go of attachment and prejudice. One must release attachment and bias towards things, facing transactions with a calm mind. Learn to let go of obsession with market trends and adapt to the laws of the market. Do not attempt to go against market trends; instead, observe and analyze the market to understand its operating rules and rhythm. Do not rely too heavily on your own opinions and expectations.

Diversify your investments; don’t think about putting all your funds into one coin. This way, if something goes wrong with that coin, you’re done. You should spread your funds across different coins, so even if one coin drops, the others can stabilize the situation.

Stay rational and don't let the market lead you by the nose. When trading, be sure to remain calm; don't get so excited because the market has risen that you can't sleep, and don't panic like an ant on a hot pan when the market has fallen. Always remind yourself that the market has ups and downs, which is a normal pattern.

Buddhism believes that human suffering stems from the limitations of self-awareness and misunderstandings of the essence of things. In trading, we often become too attached to our own views and expectations, thinking that the market should develop in the direction we envision. Once the market trends contradict our expectations, we experience emotions of fear and greed. This attachment and bias are actually due to our inability to see the essence of the market, not recognizing that the market is a complex system constructed by the actions and factors of countless individuals, rather than being swayed by personal will.

In a bull market, one corrects greed; in a bear market, one corrects fear.
——The market does not ferry people; only people can ferry themselves.

‍#交易心理 #恐惧与贪婪  #投资技巧 #投资感悟