Most Crypto traders aren't profitable.
Why?
They haven't mastered their trading psychology.
And their emotions are sabotaging their potential profits.
"Trading in the Zone" is the Bible of Trading Psychology.
Here are my biggest takeaways (including common mistakes):
Why?
They haven't mastered their trading psychology.
And their emotions are sabotaging their potential profits.
"Trading in the Zone" is the Bible of Trading Psychology.
Here are my biggest takeaways (including common mistakes):
What is Trading Psychology
Your emotional and mental states can cause you to succeed or fail in trading.
It's how YOU handle:
• Fear and Greed
• Hope and Regret
• Gains and Losses
Picking the right coins won't matter if you keep mentally rekt'ing yourself.
Your emotional and mental states can cause you to succeed or fail in trading.
It's how YOU handle:
• Fear and Greed
• Hope and Regret
• Gains and Losses
Picking the right coins won't matter if you keep mentally rekt'ing yourself.
The 3 Types of Traders
• 10% are consistent winners.
• 40% are consistent losers. Mostly losers with a few winners.
• 50% boom and bust.
Boom & Bust traders have learned to make some money, but they haven't learned how to KEEP the money.
• 10% are consistent winners.
• 40% are consistent losers. Mostly losers with a few winners.
• 50% boom and bust.
Boom & Bust traders have learned to make some money, but they haven't learned how to KEEP the money.
Boom & Bust Traders
Sometimes you'll meet an OG who has been around since 2015.
Yet, after all these years, they're still unprofitable.
Their losses are due to euphoria or self-sabotage, such as not learning how to take profits.
Sometimes you'll meet an OG who has been around since 2015.
Yet, after all these years, they're still unprofitable.
Their losses are due to euphoria or self-sabotage, such as not learning how to take profits.
The Negative Cycle
1. You lose money
2. You blame the market
3. You learn MORE about the market
4. You become overconfident
5. You go into euphoria and self-sabotage.
The boom & bust cycles keep repeating themselves every few years.
1. You lose money
2. You blame the market
3. You learn MORE about the market
4. You become overconfident
5. You go into euphoria and self-sabotage.
The boom & bust cycles keep repeating themselves every few years.
Negative Mindsets
Self-criticism, regret, betrayal, and self-pity.
Sometimes we get angry when we lose money, and that leads us to emotional Revenge Trading.
These negative emotions are not productive and can cause more losses.
Self-criticism, regret, betrayal, and self-pity.
Sometimes we get angry when we lose money, and that leads us to emotional Revenge Trading.
These negative emotions are not productive and can cause more losses.
People are afraid of making mistakes.
"Pain Avoidance Mechanism"
It's easy to fall into a trap:
• You enter an echo chambers
• Any bad news is labeled "FUD"
• You seek others who agree with you (confirmation bias)
Be objective and never let a project become your identity.
"Pain Avoidance Mechanism"
It's easy to fall into a trap:
• You enter an echo chambers
• Any bad news is labeled "FUD"
• You seek others who agree with you (confirmation bias)
Be objective and never let a project become your identity.
Why Cult Leaders Exist
There's so much information overload in Crypto. We're naturally attracted to authority figures.
Because we're afraid of making mistakes, it's easy for us to trust confident leaders or influencers.
If we make a mistake, it's not "our fault."
There's so much information overload in Crypto. We're naturally attracted to authority figures.
Because we're afraid of making mistakes, it's easy for us to trust confident leaders or influencers.
If we make a mistake, it's not "our fault."
Reacting to Losses
No one bats 100%.
When we lose a trade, it's easy to blame the market instead of taking responsibility.
The market owes you nothing - the market is neutral.
You and you alone are responsible - not the market, not an influencer, and not the economy.
No one bats 100%.
When we lose a trade, it's easy to blame the market instead of taking responsibility.
The market owes you nothing - the market is neutral.
You and you alone are responsible - not the market, not an influencer, and not the economy.
You're Vulnerable When You Win Too
When you're on a winning streak, you can go into Euphoria. This has its own set of problems:
• You start overtrading
• You put on too large of positions
• You violate your own rules like not taking profits
You need to develop RESTRAINT.
When you're on a winning streak, you can go into Euphoria. This has its own set of problems:
• You start overtrading
• You put on too large of positions
• You violate your own rules like not taking profits
You need to develop RESTRAINT.
Taking Profits
It reminds me of a common piece of advice...
"When you start feeling like a genius, it's time to take profits"
It reminds me of a common piece of advice...
"When you start feeling like a genius, it's time to take profits"
A Winning Attitude
A positive expectation of your efforts.
You accept that whatever results you get are a perfect reflection of your level of development & what you need to learn to do better.
You have accountability and don't blame anyone else for your losses.
A positive expectation of your efforts.
You accept that whatever results you get are a perfect reflection of your level of development & what you need to learn to do better.
You have accountability and don't blame anyone else for your losses.
Don't Blame the "Black Swans"
Many people lost money over Terra Luna & Anchor.
And it's easy to blame Do Kwon - yes, he's a piece of shit and I'm NOT defending him.
But at the same time, people need to accept accountability for their trades.
Many people lost money over Terra Luna & Anchor.
And it's easy to blame Do Kwon - yes, he's a piece of shit and I'm NOT defending him.
But at the same time, people need to accept accountability for their trades.
A Few Mistakes I Saw
• Going "all in" on Luna
• Dismissing every criticism and warning sign as FUD
• Too much portfolio concentration in an ecosystem
• Parking a vast portion of their stables in $UST and not diversifying
The best traders take ownership and learn.
• Going "all in" on Luna
• Dismissing every criticism and warning sign as FUD
• Too much portfolio concentration in an ecosystem
• Parking a vast portion of their stables in $UST and not diversifying
The best traders take ownership and learn.
Handling a Loss
I won't sugarcoat it - losing money sucks.
I look at each loss like its part of my education, and I'm paying tuition.
If I make a mistake and learned, then I've upgraded my mental trading software.
The algorithms are more accurate.
I won't sugarcoat it - losing money sucks.
I look at each loss like its part of my education, and I'm paying tuition.
If I make a mistake and learned, then I've upgraded my mental trading software.
The algorithms are more accurate.
The Best Traders
1. Pre-define their risks before the trade
2. Cut their losses without hesitation
3. Have an organized, systemic money management regime for taking profits.
1. Pre-define their risks before the trade
2. Cut their losses without hesitation
3. Have an organized, systemic money management regime for taking profits.
Pre Defining Risks
Before you enter a trade, figure out how much you're willing to LOSE before you're out.
• You decide before biases and emotions kick in
• It prevents you from losing your entire position
Protecting your capital is just as crucial as seeking profiting
Before you enter a trade, figure out how much you're willing to LOSE before you're out.
• You decide before biases and emotions kick in
• It prevents you from losing your entire position
Protecting your capital is just as crucial as seeking profiting
Setting a Stop / Loss.
You bought Solana at $125 earlier this year hoping it goes up.
"I'm selling if it goes down to $100"
It's at $33 today.
You protected your downside by pre-defining your risks before you traded.
Instead of "HODL!!!!"
You bought Solana at $125 earlier this year hoping it goes up.
"I'm selling if it goes down to $100"
It's at $33 today.
You protected your downside by pre-defining your risks before you traded.
Instead of "HODL!!!!"
Cutting Losses
This is one of the HARDEST things to do.
My friend trades NFTs. One problem he has is the emotional attachment to some NFTs.
He feels he's betraying his friends & community if he sells them.
I don't have these feelings when I sell DeFi investments.
This is one of the HARDEST things to do.
My friend trades NFTs. One problem he has is the emotional attachment to some NFTs.
He feels he's betraying his friends & community if he sells them.
I don't have these feelings when I sell DeFi investments.
Creating Systems
Trading has no boundaries.
To prevent yourself from becoming reckless, it helps to create a system you follow.
Examples:
• Take profits if your investment doubles.
• Never use leverage
• Max 15% position size for any token
Stick to them.
Trading has no boundaries.
To prevent yourself from becoming reckless, it helps to create a system you follow.
Examples:
• Take profits if your investment doubles.
• Never use leverage
• Max 15% position size for any token
Stick to them.
Thinking in Probabilities
The best traders think of outcomes in probabilities.
Don't look at the trade outcome as a single event, but see it as one outcome among a set of results.
I learned about this concept from playing poker.
The best traders think of outcomes in probabilities.
Don't look at the trade outcome as a single event, but see it as one outcome among a set of results.
I learned about this concept from playing poker.
Let's say you have AA pre-flop, and someone calls you all in.
You should call it because the odds and expected value are in your favor.
Occasionally you'll lose.
But over the long run, you'll win way more than you lose.
You should call it because the odds and expected value are in your favor.
Occasionally you'll lose.
But over the long run, you'll win way more than you lose.
Probable Outcomes
Events that have probable outcomes can produce consistent results.
Don't believe me?
Think about Casinos - those gambling heavens based their business model on probability.
Yet they're consistent enough to profit every single year.
Events that have probable outcomes can produce consistent results.
Don't believe me?
Think about Casinos - those gambling heavens based their business model on probability.
Yet they're consistent enough to profit every single year.
There Are No Guarantees When You Trade
• No matter how much you think you know, a single trader can make an action that invalidates all your analysis.
• The 3AC fallout shows how much is going on behind the scenes that we have no idea about.
• No matter how much you think you know, a single trader can make an action that invalidates all your analysis.
• The 3AC fallout shows how much is going on behind the scenes that we have no idea about.
What You Need to Know
1. The odds are in your favor of working
2. How much it'll cost to find out if the trade will work
3. You don't need to know what happens next to make money.
4. Anything can happen.
1. The odds are in your favor of working
2. How much it'll cost to find out if the trade will work
3. You don't need to know what happens next to make money.
4. Anything can happen.
Typical Trading Errors
1. Hesitation
2. Jumping the Gun
3. Not predefining your risks
4. Defining your risk, but refusing to take the loss.
1. Hesitation
2. Jumping the Gun
3. Not predefining your risks
4. Defining your risk, but refusing to take the loss.
5. Moving a stop close to your entry point, getting stopped out, and watching the market trade back in your favor.
6. Trading too large a position relative to your equity.
6. Trading too large a position relative to your equity.
Don't Let Recency Bias Affect You
Most people's perception of risk depends on the results of the last 2 to 3 trades.
Stay in the present.
Each moment is unique and independent.
Most people's perception of risk depends on the results of the last 2 to 3 trades.
Stay in the present.
Each moment is unique and independent.
Being Objective
• You're free from fear or overconfidence
• You have your"pain avoidance mechanisms" under control
• Every moment is UNIQUE. Just because a similar event happened in the past, doesn't mean it'll repeat itself.
• You're free from fear or overconfidence
• You have your"pain avoidance mechanisms" under control
• Every moment is UNIQUE. Just because a similar event happened in the past, doesn't mean it'll repeat itself.
Consistent Winners
• Objectively identify your edges
• Predefine the risk of every trade
• Be willing to accept the risks
• Act on your edges without hesitation
• Pay yourself as the market makes money available to you
• Objectively identify your edges
• Predefine the risk of every trade
• Be willing to accept the risks
• Act on your edges without hesitation
• Pay yourself as the market makes money available to you
• Continually monitor your susceptibility to making errors.
(like finding your Poker leaks)
• Stick to these principles and never violate them.
(like finding your Poker leaks)
• Stick to these principles and never violate them.
My Thoughts About the Book
I wish I read this book earlier because I learned some of these concepts the hard way.
Emotions are a part of being human, but they can be your biggest enemy when it comes to trading.
I wish I read this book earlier because I learned some of these concepts the hard way.
Emotions are a part of being human, but they can be your biggest enemy when it comes to trading.
Creating systems/rules protects you from yourself. And systems are needed to produce consistent results.
Anyone can get lucky with a single trade, but you want to replicate your success.
Anyone can get lucky with a single trade, but you want to replicate your success.
Trading is all about developing your mental software.
It's a bunch of if/then statements if you think about it.
We all make mistakes & errors. I find reflection is the best way to understand and patch these bugs.
It's a bunch of if/then statements if you think about it.
We all make mistakes & errors. I find reflection is the best way to understand and patch these bugs.
https://twitter.com/thedefiedge/status/1524782511783415813
Questions for You:
• Are you pre-defining your risks before entering a trade?
• What biases have you suffered from?
• Who do you blame when you lose money?
• Are you pre-defining your risks before entering a trade?
• What biases have you suffered from?
• Who do you blame when you lose money?
The Edge Crypto Book Club
This was the first book review!
Tune in Monday for the next book.
It's going to be a good one.
Please share your takeaways from this book. Did you enjoy it?
This was the first book review!
Tune in Monday for the next book.
It's going to be a good one.
Please share your takeaways from this book. Did you enjoy it?
https://twitter.com/thedefiedge/status/1531709606728060928
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