Concentrating losses and increasing profits are two familiar actions that any investor has experienced. However, the mentality of embracing losses is always stronger than the mentality of embracing profits and this can lead to wrong decisions and big losses in investing. Why is that? Let's learn more in the article below.
1. How to understand "getting losses" and "getting profits"?
The psychology of holding on to losses is the persistence in holding an investment position even though the value of the asset is decreasing. This could result in the loss of new investment opportunities, or a reduction in the value of the original investment. However, many investors continue to hold their positions for fear of selling at a loss, and hope that the asset value will increase again in the future.
Meanwhile, the psychology of making a profit is being decisive and quick in selling when the value of the asset is increasing. Investors will profit and look for newer investment opportunities. However, many investors may fear that asset values still have the potential to rise further, and therefore miss out on the opportunity to profit.
2. Why is it easier to make losses than to make profits?
The fact that we can make losses better than profits may first come from human nature, as we tend to fear losing what we already have, rather than fear missing out on new opportunities. This is especially true in the case of investments, where investors will focus on holding their positions and avoiding the risk of losing money, rather than looking for new investment opportunities. When we lose money, the brain will try to cling to the information it has and set an expectation. At this time, that expectation is a virtual expectation that we set for ourselves and lean towards it, making the brain forget to evaluate other risk information.
When investing in the crypto market, many people think that when the price increases again, they should cut profits or keep coins while they have not yet lost money. However, if you lack the market reading skills to distinguish between rising and falling waves, or lack the technical analysis skills to determine when to cut losses, these decisions can cause significant losses. If you have lost 20-30% and invested a large amount of money, a passive mentality is normal. This mentality can lead to ignoring exit opportunities, and often leads to abandonment and disregard for investing.
In addition, gong loss can be right or wrong and this depends a lot on how well we understand the project. For example, a good project with prices that have never increased will always have a need to recover capital and may have an increase in the future. Therefore, if we understand this project clearly, we can DCA and keep the coin to wait for the rising wave. Sometimes a downtrend period lasts for several months. Many NFT-Fi altcoins appear to be at the bottom, however then as the market increases, their prices increase by up to 10-20 times. A clear understanding of the project and the market is necessary to be able to keep and hold coins in such situations.
A classic example of holding coins during a downtrend is Solana. When the SOL token increased to $5, divided 5 times, then increased to $240, many investors sold their coins when the price was only $100, because they thought they had achieved significant profits and did not want to let them go. Miss. However, if they had a clear understanding of the project and market potential, they could have held on to their coins to achieve greater profits.
3. How to make the right investment decision?
To help you answer this question, please visit the detailed article below by Theblock101: https://theblock101.com/tai-sao-tam-li-gong-lo-luon-cung-hon- gong-loi
