The coin circle academician continues to explain how to improve our trading cognition in the coin circle in the previous article. You can save it and read it repeatedly. It is not easy to write content. Thank you for reading.
The eighth key point to improve your understanding of cryptocurrency trading is to improve your understanding of the importance of controlling your emotions.
First of all, we must be clear that emotional factors are the biggest dominant factor affecting our psychological activities. They directly affect our trading decisions and operations by interfering with or controlling our psychology. The currency circle academician first talks about the emotions that have the greatest impact on our trading. The emotions here mainly include panic, greed, arrogance, depression, and panic in not trading, which mainly stems from the human nature of fear of loss and fear of risk.
The biggest negative impact of panic on our contract trading is that it leads to operational errors, which in turn makes us lose greater profit opportunities. It is undeniable that panic sometimes has a positive side. That is, in the market, when the public sentiment is in a state of extreme excitement and fanaticism, panic can allow us to lock in profits in time and stay away from risks as soon as possible, thereby avoiding the risk of a sharp drop. Therefore, in actual transactions, we should balance the impact of panic on our transactions.
The second is the emotion of greed. Through research, academicians in the currency circle found that the emotion of greed mainly comes from three aspects: the insatiable inner desire, the comparison psychology and the profit drive. The biggest negative impact of greed on our transactions is to ignore the risks in the market, resulting in the return of profits to the market, and even serious losses in many cases.
Therefore, in actual transactions, we must keep a clear head, restrain excessive desires in our hearts, get rid of the vanity of comparison, and maintain a moderate and contented mentality. Only in this way can we avoid putting ourselves in a dangerous situation in transactions.
The third is the conceited emotion, which mainly comes from self-centered overconfidence and self-worship. In trading, the biggest harm of conceited emotion to our trading in the currency circle is that it will trap ourselves in subjective judgment and wishful thinking, and then ignore the existence of risks.
In the end, the market will use all means to eliminate your arrogance and even self-confidence, so in trading we must be market-centered rather than self-centered, and maintain objective, calm and sober analysis and operations.
The fourth is depression, which is mostly caused by failure and setbacks. The biggest impact of depression on our trading is continuous huge losses, which leads to loss of self-confidence and finally makes us fall into a desperate situation and unable to extricate ourselves.
In recent years, the academicians of the currency circle have found that many traders end up here. What about you? The most effective way to overcome frustration is to give up trading, re-examine yourself and your trading behavior, make corrections and adjustments, and still maintain your faith.
The last one is the emotion of gambling. Remember that this emotion mentioned by the academician of the currency circle is the most harmful one to our contract trading in the currency circle. It is also the culprit that puts traders in an irretrievable situation. Because for the newbies who have just entered the currency circle, the origin of the gambling emotion in the transaction is the unwillingness to admit and accept the situation and reality of their own losses, and then use all their capital as chips to gain a greater uncertain profit.
Therefore, in trading, you must acknowledge the results and feedback given by the market and accept them unconditionally. So always beware of your gambling mood. Once this sign appears, the currency circle academician suggests that giving up your ideas and plans is the best choice. Treat this market as gambling and you will lose every time you gamble.
The ninth key point to improve the understanding of cryptocurrency transactions is to improve our understanding of the nature of trading rules.
That is, the recognition of probability. Since the day when the trading industry was born, no one in history has been able to accurately predict the market trend, and the academicians in the currency circle are no exception, because any behavior and result in the market is the result of random probability. The market may rise or fall the next day. There is no 100% certain result.
Therefore, as a trader, what the currency circle academicians have to do is to find profitable possibilities in the random price fluctuations. The core here is to make corresponding plans and results for the possible results of the next day. As for the specific results, they are not the most important. The important thing is that any possible results in the market are within the scope of our preset plans, so that our strategies and plans are controllable.
After understanding this logic, the academicians in the currency circle conducted a detailed analysis of probability, which mainly includes three dimensions.
The first is the understanding of the winning rate. The winning rate can be defined as the number of wins under the same standard result. In trading, it is the ratio of the number of profitable times to the total number of transactions.
The second is the understanding of odds. Academicians in the currency circle understand odds as the ratio of profit to loss, also called profit and loss ratio. The profit and loss ratio is the ratio of the total profit amount in a period of time to the loss amount in the same period of time. So here we need to extend our understanding, for example, the higher the profit and loss ratio, assuming that the profit of a single transaction can completely cover the losses of multiple transactions, then the requirement for the winning rate will not be so high.
So here comes the issue of trading system. If our trading system pursues higher odds, it often comes at the expense of odds, and vice versa. So in actual trading, the relationship between winning rate and odds is like playing a seesaw game, up and down, and restraining each other.
After understanding this logic, when we set up our own trading system, we must focus on and make choices based on our trading goals and our own personality. Whether to choose a higher winning rate or higher odds, because this determines the overall direction of our trading system.
If you are pursuing a high winning rate, you need to strictly control your desire to magnify your single profit target, and you need endurance and continuous stability. If you are pursuing a high odds target, you must accept the reality of long-term frequent small losses and be able to persevere, which is a great test of your trading mentality.
The third is to improve the understanding of bankruptcy rate. The understanding of bankruptcy rate by academicians in the currency circle here is our position management and fund management. The simple and straightforward understanding is that if you have absolute confidence in winning in market transactions in the long term, you must also weigh how many losses you can bear without going bankrupt.
Let's take the coin tossing game as an example, but assume that Party A and Party B have 100 times each. We set a game rule that Party A has an advantage in winning rate and odds, but every time Party A loses, it needs to pay Party B 1.1 yuan. Although Party B's winning rate and odds are not as good as Party A's, every time Party A loses, it only needs to pay Party A 0.95 yuan. At this time, the bets of each party are magnified 100 times. In this case, the result of the game is difficult to define.
Because although Party A has the advantage in winning rate and odds, the bankruptcy rate is too high. It is very likely that he has lost all his principal in the first time, and he will have no principal to participate in the second game. The core meaning of the currency circle academician is that when making each transaction, no matter how much we are sure of the chance of winning in the transaction, we must never bet all our principal on a single trading opportunity. And we must think clearly, if the transaction is wrong every time, what is the maximum loss we can bear? That is, the maximum bottom line stop loss we can bear, because when we quantify by loss, the most basic premise of our transaction is to put safety first every time we open an order. This is why the currency circle academician often says that the fundamental of trading is survival.
The tenth key point to improve the understanding of cryptocurrency trading is to improve our understanding of the nonlinearity of trading profits and losses.
The core idea expressed by the nonlinearity of trading profit and loss is that not all transactions are sure to make money, but in most cases they are profitable, and it is based on small losses and big profits. It is a result of probability statistics.
Here, the academician of the currency circle gives an example to explain in detail. Suppose a person works in a company, and his average daily income is a fixed number. Suppose he has not been absent for a month, then his income will increase as his working days increase, and it will be presented as a straight line on the chart. Because the more working days he has, the more his income will increase in a straight line, which is reflected in the linear growth.
Rather than a linear understanding. The academician of the currency circle used mahjong as an example. Assuming that a mahjong master plays 30 yuan a day and attends every month, his daily income is counted as follows: on the first day, he made 300 yuan, on the second day, he lost 80 yuan, on the third day, he lost 70 yuan, and on the fourth day, he made 380 yuan. The result of such continuous statistics is that he made a profit of 8,000 yuan a month, lost 2,000 yuan, and finally made a net profit of 6,000 yuan a month.
If his daily income is presented on a graph, his income is not a straight line as time goes by, but an unstable jumping state. However, from the perspective of his overall income for a month, his income is positive. This is the understanding of nonlinearity.
Understanding the two concepts mentioned by the academicians in the currency circle will give us a basic understanding of the nonlinearity of trading profits and losses. Therefore, in actual trading, we need to have a broader perspective on the profits and losses within a single day. This perspective focuses on how much profit and loss each operation makes, as well as the stability and sustainability of monthly profits.
The eleventh key point to improve the understanding of cryptocurrency trading is to improve your understanding of the concept of survival first.
Academicians in the cryptocurrency circle often say that the basis of trading is survival. The core idea of survival first is that in any transaction, preserving the principal is our primary consideration in trading, because the principal is the foundation of our survival and sustainable development in this market.
However, in real transactions, the coin circle academician found that most traders ignored this fundamental condition, especially here, Bitcoin and Ethereum liquidated and plummeted according to the style. The coin circle academician gave a clear entry point and stop loss point, and also reminded everyone to use their own advantages of high leverage and low positions to operate. Even if they are swept out, it doesn’t matter, they will only exit with a small loss.
Because of the nature of human beings, many people are always eager for success, and even pursue short-term wealth. It is precisely because of this eagerness to get rich that they frequently make moves and trade heavily. In theory, frequent heavy trading will lead to two results. One is a single large profit. If it is a single large profit, according to the logical relationship that thoughts guide behavior, behavior becomes a habit, and habits determine destiny, so the next time you operate, you will still trade heavily, then the final result is self-evident, and it must be back to the starting point from the starting point.
In hindsight, the huge profits here are actually a trap with extreme temptation. Because the idea of frequent heavy positions in our minds will eventually lead to our disastrous failure in the cryptocurrency market.
Another result is a large loss in a single transaction. The academician of the currency circle used the principle of mathematical reasoning to explain that if a single transaction loses 5%, to make up for this loss later, it will need a profit of 5.26% next time to balance it. If a single transaction loses 10%, to make up for this loss later, it will need a profit of 11.11%. By analogy, the academician of the currency circle found that if each loss is to be balanced by a single profit, a higher profit base is required to achieve it.
Then the difficulty is naturally imaginable. Therefore, a single large loss in a transaction can greatly reduce our principal. If you understand these logics, you will understand what the academicians in the currency circle often say: the fundamental purpose of trading is survival.
I am an academician of the cryptocurrency circle and a warrior who has always been protecting the leeks. I wish my fans to achieve financial freedom in 2024. Let’s cheer together!
