Get started

Psychology

Loss aversion: the biggest “sin” in trading "Losses loom larger than gains" - this expression is a good illustration for the term "Loss aversion" - a key concept in the Prospect Theory (Kahneman and Tversky, 1979). The Prospect Theory is a psychological theory that has built foundations for the modern field of Behavioral Finance. It is the work Kahneman received a Nobel prize for in 2002. According to the Prospect Theory, the psychological pain of loss is nearly twice as intense as the pleasure of the equal size gain. People hate losses and are more prone to take risks when they try to prevent losses. But in trading, accepting small losses is an inevitable and necessary part. Everyone knows that to be profitable in trading, you must cut losses fast and let profits grow. But in fact, traders do everything exactly vice versa over and over again. The reason is loss aversion. Traders let a losing trade live too long, hoping that it will get back to the green zone. At the same time, they close profitable positions too early, not letting the profit grow. People tend to fear losing the earned profit more than missing the opportunity to increase it. Though the abovementioned behavior may work for some particular positions, in the long run, it harshly worsens trading performance and is the surest way to ruin trading capital. Some people may think that this staying in losing trades is just another psychological trading mistake one should work on to get over. But Prospect Theory says that the problem is much deeper than it may seem. Loss aversion is how our mind works as a result of millions of years of evolution. And it is not clear if it is even possible to change this fundamental asymmetry in the perception of losses and gains. One can say without exaggeration that loss aversion is the "biggest sin" and the ultimate reason that people are bad at trading in general. And this is the psychological bias we always have to keep in mind and account for when trading. There are solutions how to decrease the negative impact of loss aversion. And they are well known but, as it often is, underestimating a problem leads to the same thing for the importance of its solution. The solutions are the following: In each trade, one should risk such an amount of money that does not trigger any pain in the case of loss, One needs to develop a system that has a statistical edge and then strictly stick to it. The other helpful tools to address this problem are automation and algorithmic trading. Algorithms can make many boring small trades systematically without getting tired and not affected by emotions. And various kinds of trading automation offered by state-of-art charting software help manual traders stick to their systems (real-time alerts, trading signals visualization, dashboards, etc.).
NASDAQ:TSLAEducation
by AstrideUnicorn
Psychology of the market circle Hello traders! Euphoria and Anxiety, Fear and Greed Psychology of the market cycle Any trader finds himself under the influence of changing market cycles. At favorable moments, investors feel joy and are overwhelmed with self-confidence. On dark days, the investor falls into despair and feels anxiety attacks. The only way not to succumb to such an emotional influence is to follow the clear rules of a properly compiled system. Unfortunately, most traders have no plan and no strategy. In order not to become a victim of emotions, a trader must have an idea of the emotional stages of the market cycle. Psychological stages of trading An uptrend is a trader's emotions. Optimism When the market is growing, the trader sees an opportunity to earn and invests money. The economy is growing, the price is rising, profits are growing. At such a moment, the trader feels confident, begins to open new positions after each pullback, which eventually turns into a kind of instinct. At this stage, the trader begins to forget about the risks. Enthusiasm and Abundance The market is starting to accelerate. Traders experience pleasant feelings of joy and enthusiasm. The trader begins to lose his head, confidence overwhelms him. Euphoria After that, the last stage of the upward trend comes - Euphoria. Money comes very easily, the trader is overwhelmed with confidence in his actions and decides to open positions using leverage. At some point, the trader begins to think that he is a professional analyst, and it is not he who is following the market, but the market is following him. This stage in the market helps large investors to discount their shares to self-confident traders who buy everything in a row, believing in the continuation of the upward trend. In fact, this phase is the most risky, after which the trend is reversed. Emotional stages of a Downtrend in the market Anxiety The price is starting to slow down, there are fewer and fewer sellers, bears are gaining momentum. For a trader blinded by luck, this phase looks like another correction. But the market can no longer create new highs and falls, forming new lows. Such a fall creates anxiety in the trader's soul, easy profits begin to melt. Denial and Fear Fear fills the market, traders are afraid to be wrong, because recently they ruled the market. At this stage, the trader denies that he is wrong and tries in every way to justify holding unprofitable positions. Like any beginner, a trader believes that sooner or later the price will not only return, but also go beyond the maximum. Denial brings the trader to a state of helplessness and inaction, from misunderstanding of the situation on the market. The trader gets lost, not knowing what to do and waits without knowing what, without closing unprofitable positions. Despair and Panic The price continues to fall, and the trader falls into despair, because the confidence in holding a losing position is already beginning to disappear. This phase is the most painful, because the severity of losses presses too hard to stay calm. Surrender The unprofitability of the position is increasing, traders can no longer tolerate this pain. In this phase, traders have to capitulate just to stop these torments. Traders are starting to close positions and it is here that large companies are included, for which this moment gives a new opportunity for large profits. Asset buying begins, because a reversal is possible soon. Despondency and Confusion As it often happens, as soon as a trader has closed a position, the market begins to grow. It looks like the law of meanness. This phase drives the trader into despondency, because the position was closed a moment before the rise. It is here that newcomers begin to think about whether it is worth investing further. Hope The market is starting to revive. The price shows new highs and the investor has hope. It seems that here it is, a new opportunity. The trader begins to enter the market, forgetting about the past, without drawing conclusions. A trader enters the market when the price has already accelerated, at points where the risk is again close to a critical value, the cycle begins again. Traders should keep this cycle in mind. Such emotional roller coasters can ruin anyone. A well-designed strategy can help avoid these painful blows. Remember the risks, remember the cycles, work on the mistakes, and victory will not take long to wait. Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩‍💻
Education
by Lingrid
40
Formation of distribution to Wyckoff Phase A - The moment the previous trend stops. The dominant force up to this point was demand, but now the balance is changing in favor of supply. The capitulation of the bulls has not yet happened, but it is at this stage that the bears begin to struggle to reverse the trend: • PSY - pre-delivery - at this stage, a big stock reset begins, after a strong growth. There is an increase in volumes, while the price movement begins to expand. • BC - the end of purchases - the volume increases greatly, the price soars sharply. Large players need to close their long positions without a strong change in the exchange rate, so at this moment news about profits or losses usually come out, which encourage retail traders to buy stocks en masse, which are dumped by big players. • AR - automatic reaction. The price falls under the influence of decreased purchases and retained sales - AR is formed. The minimum of movement in the AR phase is the lower bound of the TR distribution. Phase B - Creating conditions for a new trend. Smart money starts dropping long positions and opening short ones, while trying not to push the price too much in order to get a better price: • ST - secondary (repeated) test , in which the price returns to the BC area again, to check the difference in supply/demand. The supply at such a moment must exceed the demand to confirm the top. There is a decrease in volume and spread. The secondary test (ST) can sometimes be formed in the form of an upward movement (UT). At such a moment, the price may pass the BC resistance line before turning sharply. Often, after UT, the price tests the lower bound of TR. Phase C - This is a test of the remaining demand . The price can update the maximum, thereby collecting stops and a new portion of energy for the fall. This moment may turn out to be a trap for bulls who believe that the bullish trend has gained strength again. Big players will push the price against the crowd to close their positions in the footsteps, so it is quite dangerous to trade in this phase: • UTAD - uptrast after distribution. In the last phases of TR, a test of new demand is possible, after the breakdown of resistance. At the same time, UTAD does not necessarily have to appear on the chart. Phase D - breakdown of the TR line and confirmation of the bears' strength. It is here that it becomes finally clear - bulls have lost the fight and bears are pushing the price in the direction they need. Small short-term rises will often appear which can serve as good points for opening positions. The proof of the bears' strength will be the breakdown of support and a further fall in the price: • SOW - a sign of weakness. At this point, the price falls below TR or stops a little higher. All this is happening because there is more supply than demand. • LPSY - is the last power point. The weakness of growth is clearly observed when the price bounces and tries to move up, after the SOW test. The reason for such weakness may be a lack of demand or a large supply pushing the price down. In the LPSY phase, there is a wave of the last distribution of major players, after which a stronger fall will begin. Phase E - acceleration of a new downtrend. The accumulated force breaks through the TR line and a strong downward movement begins, which, however, may temporarily switch to a return to the resistance line. This moment can serve as another opportunity to enter. ------------------- Share your opinion in the comments and support the idea with Like. Thanks for your support! info taken from WyckoffAnalysis
Education
by DeGRAM
6
Bitcoin Simple Psychology PatternsThe times I leave money on the table as a swing trader are the times when I over estimate the human crowd psychology in thinking the ease and obviousness of a continued pattern playing out again would be...just TOO predicable. Afterwards, I "woulda shoulda coulda"... and then remember that humans rarely change their ways. And when they do, it happens slowly. Because let us be honest, your slob of a friend Joey isn't going to wake up today and suddenly feel inspired to help clean the house. I mean sure - those moments happen. But the odds don't favor the new and unpredictable behavior as much as it favors the old conditioned habits. But one day your friend may actually have a real awakening. Any risk management system that doesn't account for that possibly as well, is broken.
BYBIT:ETHUSD.P
by EsotericTrading
LBRY/BTC Channel. "Dying Coin" was in the TOP 20 - 2017There is a channel of 80%. You can see on the graph that someone is interested in this coin. Perhaps the organizers of one of the hundreds of pamp groups for the future, which pamping illiquid on the principle of "he who first slippers. Mostly traded on Bitrex. One of the hundreds of dying coins, but this one is the exception of all, because at the beginning of 2017 (the launch of the project) it was in the 20 coins by coenmarket capitalization. The sect of believers was quite large. Coin in coinmarketcap: LBRY Credits Read the contents of this idea carefully and understand what I want to convey with examples of similar belief altcoins. LBRY Credits (LBC) / BTC Triangle Pump Channel 400% Psychology Coins like this can be traded on a pamp/dump basis and get away with it. On such coins the work is rational not by large amounts and without accumulation of large positions. Goals are adequate. Always remember this is a trading tool, a phantom on the screen, its real value is zero. So 99% of coenmarkets. The price depends on the legend and marketing efforts, imitation of "work" and as a result the size of the sect of believers in the phantom that will get them golden (a small probability). Sooner or later there will be a death, 99% of the coenmarket, it's only a matter of time. Also, you have to understand that because of the "influx" of new faith scams you do not notice the complete depreciation of previous "money-grubbing projects" and the eventual death of them. This coin is more for experience and understanding of the work than for real earnings. Although you can make money on price movement pulling, it all depends on your greed and understanding. You can work with similar coins in groups (up to 10) on opposite correlation. Some instruments are up, others down or in accumulation, due to low liquidity it is feasible. This is how the question of liquidity and rationality of spending time for potential earnings is solved. The death of one of the instruments from the group then will not affect your deposit at all. The main thing is that there won't be a mass extinction of "dinosaurs", and it will happen when the market climate changes for total control (I want to know everything about everybody, including what you have hidden, it is illegal to have much money), and "big brother" comes with a big shovel of wiper. Coin Group 4, former top, that's what I want to emphasize again.
by SpartaBTC
9
8 Trading Habits of Successful TradersConsistently profitable traders have a lot of things in common. Watching how they act and following their ideas & thoughts we can spot a lot of commonalities among them. In this post, I have collected 8 trading habits that a trader should have to become successful. 1️⃣ - Realistic Expectation & Vision Many traders, most often beginners, commonly fall for the trap of wishful thinking. When analysing the charts, they usually only view the market from one bias and only perceive price heading in one direction. And this is typically the one that their own analysis is pointing towards. However, going into each trade with a realistic expectation that the market doesn't care what you think may happen, and being prepared for a trade to go wrong will help keep you level headed. 2️⃣ - Anticipation of Different Outcomes Anything can happen in financial markets and for this reason, professional traders always justify their decisions in probabilities. They understand that 100% chances do not exist so looking at all possible probabilities before entering any trades, the trader is always ready for completely different outcomes and accepts each and every move given by the market. 3️⃣ - Emotional Stability The market is a wild beast who always wants to bite us and most of the time it manages to do that e.g. drawdowns & losing streaks... Those who trade for at least 1 year know how unpredictable and unstable the market can be. A perfectly looking trading setup can easily turn into a big losing trade. Of course, that is painful and of course with more & more losses, the anxiety will begin to chase us, the stress will overwhelm us and you may begin to start second guessing yourself. Only by remaining stable and calm, you will manage to overcome the negative periods. Learn to control your emotions, learn to take losses! 4️⃣ - Continuous Learning The markets are infinitely deep in their nature. Trading & constant monitoring of the market always unveil new, uncharted elements and things. Throughout all my years of day trading, I can't help wondering how many new things I learn each and every day. With continuous learning you evolve, you become better and it improves your trading performance & results. 5️⃣ - Flexibility & Adaptivity The markets are always changing. If you were trading before COVID crisis, I guess you feel how the reality among us shifted. With fundamental changes in our daily lives, the markets changed as well. It is hard to say what exactly has altered though, however, we all can feel it. In order to survive in a constantly changing environment we must always be adapting and never stagnant. 6️⃣ - Trade Journaling Pro traders always assess their past performance & results. They track each and every trading position that they opened. Both losing trades and winning trades require analysis and observations. Only by studying the past results the trader can improve his trading performance and evolve. Only by identifying mistakes & peculiar commonalities, the trader learns to lose less than he makes. 7️⃣ - Risk Management 90% of traders lose 90% of their funds within 90 days and under 90 trades . This is a well known statistic in the trading industry and aside from psychological factors, it mainly boils down to incorrect risk management. If you're looking to survive in this game and have a long, prosperous career in trading. You must have your risk management locked down. One beneficial risk management habit to develop is to not enter any trades unless they have a risk:reward ratio of at least 1:3+ . 8️⃣ - Trading Plan Sticking to your trading plan is one way of promoting long-term success throughout your trading journey. Undoubtedly, you will go through many psychological ups & downs, mental battles and periods of low confidence. Abiding by your own trading plan will help assist in ensuring that you don't step out of line from your own trading rules and allow you to stop yourself from developing bad habits overtime. 9️⃣ - Constant Practice Professional traders never stop, they always watch the charts, they always monitor the prices, and follow the market. Trading requires constant TRADING. Just spending one single week on a vacation without charts, you can not imagine how hard it is to return back. The trading skills must be constantly maintained.
Education
by NimmoCapital
Bitcoin - Market Cycle Psychology - Road to despairA double peak scenario is likely. It seems that the ETF news is a stretch, and the increases depend on it. We closed the CME gap at 62k. Falling volume indicates some change in trend. The decrease in volume and the increase in price also suggest an irrational increase in the current price. We stop at 30k, there is a CME gap at 32k. Then we should see the area around EVEN 10k! If there is no double top formation it means we only had a bear trap and we are going to 200k +
Short
by czupryn888
2
So You Wanna Trade Full Time... Is it Possible? A Good Idea?I walk you through my thoughts on the dream that most traders have: doing it full-time! I give you my personal experience and how I've tried things in the past. What I'm doing now and what works for me. Key takeaways: - The trifecta: access to capital, good strategy, cost-of-living. You have to solve for 2 / 3 of these! - You can't buy peace of mind. Have other income streams to mitigate the risk from your trading not going well for periods of time.
BITFINEX:XRPUSDEducation
by ImreSG
3
ETH An example in why retail traders are wrong!Good Morning traders! Today I have a great example of order protection and liquidity building. This is something that I have been speaking about for a long time and this current PA shows it well. The blue boxes show places where large orders have been placed and and initiated moves. See how price returns to retest these areas?! this gives the Banks, Whales and big players a chance to protect orders. Retail traders place orders outside of these areas "support and resistance areas" These orders can easily be seen, and therefore hunted. The highs and lows create areas for the big players to exit the large volume positions as every buy order needs a seller and vice versa. I hope this information has been helpful. As always trade safe. EnvisionEJ
BITSTAMP:ETHUSDEducation
by EnvisionEJ
3
The importance of sticking to the plan 👊👌As traders we are our own worst enemies! A common theory with trading is as follows. 10% is having a good strategy, 30% is having good risk management and the final 60% is psychology. If we as traders fail to address the final psychology part of the sentence above then we as traders will fail in the markets. The chart shown in this idea is EURGBP working the 30 minute time frame. The strategy is a rules based mechanical approach working a 1:1 RR to fixed stop loss and take profit targets. I know I have a proven edge with this strategy as with all my ideas the built strategy tester report is at the foot of this idea shows the strategies credentials. Position sizing is correct I trade this strategy on a stand alone account for this pair and I'm happy to risk 2% per trade of my capital from said account. So where does the psychology part come in to all this? The emojis on screen show the emotions I would of been feeling with this trade once upon a time! An emotional roller coaster! The chart shows three trades. A short which hit TP followed by a long which hit SL. Then the trade I'm using for this idea which lasted a full 13 days! But this is where sticking to the plan and the rules I set help remove that emotional roller coaster. Not sticking to that plan could of created many outcomes. I could of closed for less profit than intended as part of the plan or worse still could of cut my losses only for the trade to go on and hit TP target. The above would of then led to more emotions thus effecting my future trading decisions and choices. With each trade I enter I am comfortable with said outcome whatever that maybe. That comes from trading a proven strategy, having correct risk management and then by sticking to the rules of the trading plan for the strategy. Sticking to a plan removes any subjectivity and helps take care of the psychological side of trading. I even automate my strategies now and not checking trades every minute of the day has helped removed all those up and down feelings the emojis on the chart represent. I'll end with one final thought patience has to be part of your plan. The markets take from the impatient and give to the patient ones among us. ------------------------------------------ I try and share as many ideas as I can as and when I have time. My trades are automated so I am not sat in front of a screen daily. Jumping on random trade ideas 'willy-nilly' on Trading View trying to find that one trade that you can retire from is not a sustainable way to trade. You might get lucky, but it will always end one way. ------------------------------------------ Please hit the 👍 LIKE button if you like my ideas🙏 Also follow my profile, then you will receive a notification whenever I post a trading idea - so you don't miss them. 🙌 No one likes missing out, do they? Also, see my 'related ideas' below to see more just like this. The stats for this pair are shown below too. Thank you. Darren
Education
by pow_removetheguesswork
38
BTC-Buy the dip, but be prepared we may not be done yet!Good Afternoon traders! BTC is continued to move mostly inline with my expectations, we are having a reasonable rejection of the area I marked out and its a good place for buys. We have got a massive discount, what more are you waiting for? While I am currently more bullish than bearish, I do still 100% believe that we can head to the 37k area as mentioned earlier today. Technically we wont be out of the woods until we break back above the neckline of the head and shoulders pattern suggesting it has failed. Either way cheaper BTC is always a decent buy. As always trade safe, EnvisionEJ
BITMEX:BTCUSD.PLong
by EnvisionEJ
BTC- Be greedy when others are fearfulGood morning traders! BTC continues to follow the forecasts that I provided the past few days. While I did say I would be looking for buying opportunities around yesterdays lows I also said I would be prepared to buy all the way down to the 37k region. As the order book get swept on the back of increasing risk from the Evergrande financial fiasco fud continues to move through the markets. The same people not buying BTC at a 25% discount will be the same people not buying it over 100k... As always trade safe, EnvisionEJ
BITMEX:BTCUSD.P
by EnvisionEJ
BTC-Predictable as alwaysGood Morning traders! Yesterdays PA was easy to understand if you new what to look for. Retail traders are PREDICTABLE and therefore the markets movements are. The market has moved exactly as anticipated, sweeping out the retail orders stacked at the bottom of the range. We are now currently sitting on the neckline of a large head and shoulders pattern. These patterns are subjective, and become "valid" once we break and close under the neckline. Again don't you think whales and funds know of these patterns.... From this point onwards I will be looking to enter longs, however I will be prepared that price can easily pull right back to the yellow circle around 37k. The current market is being influenced by the spx500 and Evergrande, how it will play out is anyone's best guess, but I would suggest the Chinese government will stop a default to stop toxic debt seeping into the greater market. As always trade safe EnvisionEJ
BITMEX:BTCUSD.PLong
by EnvisionEJ
AUTOMATED TRADING BOTS: How to profit with Tezos.Tezos is one of the best token for our robot. Our robot mainly uses the DCA (dollar cost averaging) trading method. If the price drops, instead of the Stop loss order, we have a Buy limit order. This will also cause the Take profit value to drop and approach the current price. If the price falls and falls, the robot buys and buys. This keeps the Take Profit lower and lower. After that, the price of the token rises and our trade ends with Take profit, which is not far from us thanks to constant and precisely predefined purchases. The XTZ / USDT currency pair is suitable for our demonstration. You see very high volatility. It is through volatility that our robot can be profitable. If the price still went in one direction without frequent fluctuations and without "waves", the robot would earn very little. We need great volatility for big profits. Volatility in the TradingView platform will be helped by the Historical Volatility indicator. This indicator often (on this time frame) intersects the value of 50.00, which is rarely affected for low-volatile currency pairs. For example, you would look for Bitcoin very bad around 50.00 on this time frame. The key to our profitable trading bot is volatility! At a time of market colapse, when almost everyone is going through and positions in the Futures markets are being liquidated on a large scale, we are EXTREMLY profitable thanks to our robots. Of course, it is very important that you know how big the position is and how often, or at what intervals it is necessary for the robot to buy more. In no case is every setting of the robot profitable, on the contrary, setting up a profitable robot is not easy. You will learn how to set up a robot to be constantly profitable in our Academy. PS: One of the best things about trading with robots is that you remove all emotions and decisions. We wish you a nice day. UCT team.
Education
by UltimateCryptoTrader
BTC resting on a KEY AREAGooding morning traders! Welcome to a new week! As spoken about last week the stacked retail orders were swept! These stops are EASY to see for the average investor, don't you think Whales and institutions can see this as well? After the sweep we have returned to a key area-and personally I am not willing to call which direction we will move, but have highlighted my 2 main forecasts.... Firstly we could mitigate this breakout range, if we do I can see price heading higher and targeting the region above. If this doesn't happen, I expect a deeper pullback towards the 40k price level, again taking out those retail orders, at this point order books will be cleared a a clear direction can be set again. As always trade safe! EnvisionEJ!
BITMEX:BTCUSD.P
by EnvisionEJ