The Inimitable Psychology Of Investors & Traders
The Passage Of Entrance
Well, the year is fast coming to a close and we will soon be in the final quarter of 2023. As usual, the patience and resolve of many Crypto investors are busy being tested. Financial markets have a very unique way of reminding us that we are not in control. Certain personality types are unable to take part in that which they are unable to control, which is why financial markets are not for everyone.
It’s also the reason why certain individuals are never able to enjoy any measure of success. Essentially, their personality types are not conducive to the behavioral approach that the market requires and demands. A patient, disciplined, and calculated approach is what is required. If a person does not already exhibit these traits in other areas of their life, why will they suddenly appear when they begin investing or trading?
It’s either you, or it’s not you. Sure, one can learn skills, and how to interpret the market and technical analysis. However, trading comes down to execution and not head knowledge. Even though execution is subject to knowledge. It is however twofold. Without disciplined execution, the knowledge becomes impotent. Similarly, a vehicle without fuel is unable to benefit your movements. It’s a lot easier to learn a skill than it is to develop behavioral traits.
This is why certain individuals are able to enjoy numerous successes early on in their journey. Essentially, they had a head start. This is due to their temperament and inherent behavioral patterns. A good skill set that is further complimented by the appropriate temperament can produce consistent results. Consistency is very important, especially as a trader. Enjoying significant wins is futile if they are followed by significant losses.
Keeping A Cool Head
If you are monitoring price on a 5-minute or 10-minute chart, chances are you will see the market constantly swinging from bullish to bearish. Taking note of higher time-frames, overall sentiment, and other indicators helps to offset knee-jerk responses. An unskilled trader will adjust their bias in conjunction with the sporadic shifts taking place on lower time-frames. However, a key psychological approach of a trader is to avoid sudden and repetitive adjustments to his or her bias.
A key market behavioral pattern to watch out for is a long or short squeeze. Essentially, the market moves momentarily in the opposite direction it is about to embark on. This is used to capture liquidity, prior to a strong move. Keeping a cool head and choosing not to respond to every contrarian move is a psychological discipline that every trader, and even investor, needs to develop if they are to be successful.
Operating in financial markets as a trader or investor is a game of psychological strength and emotional intelligence. Emotions are constantly being tested, and the weak, or unprepared continually fail these tests. This is perhaps why many choose a very “loose” dollar-cost averaging strategy. It is perhaps the best approach for new and unskilled market participants. However, with time and experience, this strategy should be improved upon.
At the end of the day, operating in financial markets is a mental game. Just as certain sports require a certain level of fitness, skill, and flexibility… markets require mental strength and discipline. Essentially, it’s impossible to succeed if you are an impulsive or capricious person. Different personality types are ideally suited to certain activities. Unfortunately, an impulsive personality is not really suited to financial markets. However, there are other skills that thrive on impulsive behavior.
Final Thoughts
Dealing with finances in any capacity always requires a cool head. Patient and calculated individuals are generally well-suited to investing. They are able to plan and execute their strategy over time without being swayed by the emotional turbulence that the market spews out in order to distract and startle market participants. This is a lot easier said than done, and like anything else will improve with disciplined dedication.
The “moves” and executions of effective traders are impossible to mimic or duplicate. What inspires each move is unique and subjective. There is no way to repeat or create “laws” based on previous decisions. An effective trader is accessing multiple “mental files” and knowledge at any given time. Each situation is unique, and he comprises a unique approach to every decision. Sometimes similarities exist.
However, there can be no laws. These decisions are governed by a disciplined database of knowledge, skill, and experience. An inimitable psychology…
Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.
