Unpredictable cryptocurrency world: How commercial psychology affects market behavior
The cryptocurrency world has developed rapidly in the last decade, and prices are wildly different in response to the difficult interaction between psychological, economic and technical factors. As cryptocurrency popularity continues to grow, investors and traders have an increasingly important understanding of the role of psychology in market behavior.
What is the trade psychology?
Trade psychology refers to spiritual processes affecting individual decisions in buying or selling funds, including promotions, bonds, goods and currencies. These psychological factors may include emotions such as fear, greed, tension and anxiety, as well as cognitive abnormalities, such as amplification abnormalities, anchoring and avoiding loss.
The impact of trade psychology on the mysterious currency market behavior
Cryptocurrencies are known for its great volatility, which makes them a great example of how commercial psychology can affect market behavior. Here are some key factors to consider:
1
Fear and greed : At the time of financial uncertainty or market recession, fear may encourage investors to sell encryption currencies, causing a strong fall in prices. At the same time, greed can cause investor cryptocurrency at expanded prices that exacerbate the downward pace.
- Loss Aviation : Fear loses more than getting it, some merchants stay too firmly at cryptocurrency, even if they are overestimated or underestimated compared to other means.
3
Anchor Effect : Investors can associate with a certain price level, even if there are no clear reasons for catching them. This can cause them opposite sales cheaper or buy at higher prices.
- Approval Exception : Merchants who selectively search for information that supports their existing views on the market can be misleading that they have a good idea of what is happening next, instead of being open to new evidence.
- Emotional noise : The cryptocurrency market is characterized by high noise and uncertainty, which makes it difficult to distinguish traders between real trends and psychological variations alone.
Examples of reality
1st
2017 Cryptocub : In May 2017, the cryptocurrency market has had a rapid expansion, mainly due to hype and speculation as basic analysis or economic considerations.
- 2020 Rally
: During the Covid-19 pandemic, investors were increasingly drawn in safe assets to cryptocurrency. This rally is facilitated by fear of inflation, market volatility and the potential for the global economy.
How to avoid trade psychology
While commercial psychology can be a natural part of the investment process, traders can do to reduce its effect:
1
Develop a trading plan : Develop clear goals, risk management strategies and output criteria that will help you stay disciplined in your trade decisions.
- Use technical analysis : Use charts and technical indicators to identify trends and patterns, rather than trusting emotional decisions only.
3
Be disciplined
: Avoid impulsive or emotional decisions based on short -term market movements instead of focusing on long -term goals.
- Continuously train yourself : Be aware of the market development and learn from your experience to improve your trading method.
Conclusion
The cryptocurrency world is a complex and dynamic system that is increasingly influenced by psychological factors. Understanding the role of psychology trade in market behavior, investors and traders can better navigate this market and make more conscious decisions.