#Gate广场新手村第八期

In the cryptocurrency world, the longest path we have walked is the tricks of the market makers. In the trading market, the major players use various means to intimidate or lure retail investors, achieving goals such as shaken out positions and raising prices to sell off. Faced with the complex and ever-changing market conditions, having a calm mindset like "the mountain may crumble in front of me, but my expression remains unchanged," staying composed, holding onto your chips, and firmly believing in your original judgment is sometimes the best response.

Taking the recent market situation as an example, I bought Bitcoin around $80,000, confidently believing it would rebound to $90,000 and set a take-profit order. However, the past two days showed that despite the Federal Reserve's interest rate cut expectations rising and the glimmer of peace in the Ukraine-Russia conflict providing two favorable factors, Bitcoin failed to break through $89,000. The market looked very weak for upward movement and there was no trading volume to support it, leading me to believe that the rebound had ended and a new round of decline was about to begin. So, I canceled the take-profit order and shorted Bitcoin instead. The result is well known; I woke up this morning to see Bitcoin at $91,000 and felt like hitting my thigh in frustration. Reflecting on my actions, I realized that although I was calm when formulating my trading plan, once I focused on the market and saw some changes, I wavered from my original intentions and made wrong decisions. Do you feel the same way? If so, keep reading👇:

💡Why are market fluctuations influenced: The dual role of psychology and market mechanisms

1. The Dominant Force of Market Sentiment

The virtual currency market is highly dependent on emotion-driven factors, rather than the value assessment logic of traditional financial markets. When significant news or technological breakthroughs occur, participants are prone to fall into collective emotional fluctuations, such as FOMO (Fear of Missing Out) or panic selling. This emotion, amplified by social media and instant messaging tools, creates a positive feedback loop, leading prices to deviate from fundamentals. For example, a statement from a well-known figure supporting or opposing a certain cryptocurrency may trigger a chain reaction, causing traders to abandon long-term strategies due to short-term fluctuations.

2. The Amplification Effect of Leverage Trading

Leverage trading is a double-edged sword in the cryptocurrency market. It allows traders to control large positions with a small amount of capital, but it also amplifies the effects of price fluctuations. When the market experiences unfavorable changes, leveraged positions can quickly trigger forced liquidations, forcing traders to exit at less than ideal prices, thereby disrupting their original plans. This mechanism increases market instability, making traders more susceptible to short-term volatility.

3. Information Overload and Decision Fatigue

The 24-hour trading and information explosion environment leads traders to face information overload. From technical analysis to news events, from social media discussions to expert opinions, the volume of information far exceeds individual processing capacity. This state triggers decision fatigue, causing traders to rely on intuition rather than strategy under pressure, ultimately deviating from their plans. For example, frequently checking price charts and news alerts may exacerbate anxiety, leading to irrational actions.

💡How to Stick to Your Trading Plan: Dual Reinforcement of Strategy and Psychology

1. Develop a clear and executable trading plan.

Goal Setting: Clearly define trading goals, such as long-term value investing or short-term arbitrage, and set specific metrics (such as return rate, time frame). For example, if the plan is to hold a certain cryptocurrency for a year based on fundamental analysis, then short-term fluctuations should be ignored.

Risk Control: Set stop-loss and take-profit points, and use technical analysis tools (such as moving averages, support and resistance levels) to assist decision-making. For example, when the price falls below a key support level, automatically trigger the stop-loss to avoid emotional interference.

Clarification of rules: Transform the plan into written rules, including entry conditions, position management, and exit strategies. For example, stipulate to buy only when the RSI indicator is oversold and sell when it is overbought.

2. Psychological Adjustment and Emotion Management

Cognitive Restructuring: Understanding that volatility is a norm of the market, not a sign of personal failure. Enhance self-awareness through meditation, mindfulness practices, or keeping a trading journal to record emotional changes. For example, remind yourself during a price drop that this is part of the market cycle, not a mistake in strategy.

Stress testing: Simulating extreme market scenarios (such as black swan events) to assess the resilience of plans under pressure. For example, backtesting the performance of plans during the Bitcoin crash in 2017 or the impact of the pandemic in 2020 using historical data.

Avoid over-trading: Set a daily limit on the number of trades to reduce deviations from the plan caused by impulsive actions. For example, limit yourself to a maximum of three trades per day to avoid frequent operations.
What does everyone think about this? Feel free to leave a message, and I wish everyone prosperity every day!