Fear and Greed: Two Worst Enemies of Traders
June 21, 2022
Yesterday, the price of BCH went above $120. In the back of my mind, I wanted to sell half of what I earned in read_cash in the last week or so. I have at least 0.19 BCH in my read_cash wallet. However, I continued doing what I was doing and thought, I will sell at $121.
However, the next time I looked at the prices, they dropped to $118 again. At the time of writing it is now at $116.
Greetings, my fellow Bitcoin Cash lovers. First of all, I am not a day-to-day trader. Not in any currency, crypto, or fiat. Not even in the stock market. I'm more into long-term investments. Though I need to build up my investment portfolio quickly. I'm not getting any younger and another year will be added to my age this week.
Although I am not a day-to-day trader, starting and maintaining any investments still needs to do some trading. Both in trading and investing, emotions will always interfere with logic in our decision-making. Among the different emotions that we encounter, two are the worst enemies of traders... and even investors. Namely, FEAR and GREED!
Fear and Greed
Let's define these two terms first.
Fear: an unpleasant often strong emotion caused by anticipation or awareness of danger
Greed: a selfish and excessive desire for more of something (such as money) than is needed.
Now let's take a look at how these emotions affect the traders. But first...
Disclaimer
I am not an expert trader or investor. What I will share with you is based on what I have learned from various sources that I have read in the past and from my own experience.
These two emotions affect the decision-making of novice traders and investors alike. The bad thing is the effect is mostly negative. These two strong emotions usually lead to wrong decisions that could lead to massive loss of money... if not all.
Fear
As defined, fear is a strong and unpleasant emotion caused by anticipation or awareness of danger.
The first time that this strong emotion, was when the Bitcoin price started to skyrocket from $11,000 approaching its previous high of around $18,000. I joined in late, but some chatter says it will go beyond $20,000. I joined out of Fear of Missing Out (FOMO).
I bought my first crypto when it was already at around $16,000, I think. Luckily it was only a small amount.
When Bitcoin crashed in 2018, I considered the amount I invested in Bitcoin a total loss. I never touched my coins.ph account for years.
Then the pandemic hit and I temporarily lost my source of income for about four months. That's when I remembered the amount I have in coins. ph.
I cashed out the amount little by little. I take out only what I need to pay for my Internet services.
But I made sure to leave at least 1,000 pesos in my bitcoin wallet. I was glad that I did.
Moving forward, it seems that what happened with Bitcoin in 2018 is happening again and with Bitcoin Cash as well.
I already have two 2 BCH. I started saving that when the price was still above $300. Now the price has dropped lower than $150. However, I decided not to sell what I have already saved in my two wallets.
Now, I'm not sure if I made the right decision.
I planned to gradually sell what I earn this month to minimize the losses. But twice this month, fear of losing more got into me. Twice I sold some of my BCH for less than $150. The worse decision I made so far was the second time. I sold about 0.14 BCH for only $112 out of fear.
Greed
Greed usually kicks in when the price pumps. We are happy when we see the bull dominates the market the chart looks green. We don't sell, hoping that the price will go up further.
What happened to me in 2018 was a combination of fear and greed. Lately, greed got me several times. After I sold about 0.28 BCH at the price of $140, it continued to drop. In the last seven days or so, the price had been playing up and below $120. Several times it dipped below that price. So I thought I should sell a portion when it hits $120.
The sad thing is, every time the price goes above $120, I did not sell. I told myself to wait, hoping it will go up some more. Only to see it drop less than an hour later.
On The Bright Side.
When I invested in Bitcoin the first time, I only used the money I can afford to lose. It was from savings. Not that I did not need that amount. It was a small amount that I can accept if I lost it.
That's the very first rule in investing and trading. Invest only the amount you are willing to lose.
I have learned not to sell everything at once. Selling (and buying) gradually will help you absorb the effect of the high volatility of cryptocurrency prices.
That's why I am not losing much. However, I have lost some chances to "secure my gain" several times.
Before I forget, I would like to mention that I am only using Coins dot PH and Bitcoin dot com wallets. I know these platforms were not designed for trading. I know there are applications where I can set the amount when to sell and when to buy but I'm not sure which one to use. I would welcome any suggestions on this matter.
In Closing
Fear and greed will always interfere with logic in our decision-making when it comes to trading and investment. The best way to manage these two strong emotions is to make a plan as to when to sell and when to buy. Plus, having a deeper understanding of how to get the best result in trading is a great tool to manage these emotions.
Do your research on the matter and make a plan.
Thanks for reading
I would say you were not actually trading, you were only hiding your coins in anticipation the price would rise and you sell. If you were a good trader you would know when to safely buy and safely sell so you don't loose your money. Not that it works all the time but you have a high chance of predicting right.