Just like the traditional currency market, cryptocurrency market is open 24 hours, 7 days a week. People are quick to take advantage of making a profit whenever news is released due to the price movement of bitcoin. In reality, human beings are terrible when it comes to investing or trading decisions. We let fear and greed influence our decisions. Last year, we heard CNBC, Fox Business, WSJ, CNN Money, and other financial news covering Bitcoin nonstop when the price reached $15,000, $17,000, up to $19,000. People started to notice, and the human mind becomes greedy. Some were sure that price was going to go up some more. In reality, they were buying high. The exact opposite of the investing principles of buying low and selling high. With Bitcoin’s price at $6,600 now, some people’s life savings and retirements were cut by 70 to 80 percent. So how do we avoid these financial mistakes?
Look for Value:
“How is this going to make the world a better place?” Ask this question when you’re investing in a specific stock or crypto. Facebook connects people around the world, Amazon provides quality products and quick delivery, Google provides information in an instant. These are the companies that give value to everyday life whether it may be personal or business and in return, people value these companies. So ask yourself, is this altcoin going to help better society in the future? If it’s a yes, then it might have great potential.
Block out the Noise:
News, internet, and the media like to manipulate how people think. It’s crucial to do your own research. Crypto is a great example of that. If you watch finance news or read news articles, there’s a lot of fear in the headlines right now: Bitcoin is going to zero, sell now before you lose it all. These headlines are quite effective to instill fear and uncertainty to the people. What the public does not hear is the daily technological developments, investment companies accumulating, or regulatory progress with crypto. Do your research or find an unbiased news source to get the complete reports.
Work with Technology:
In the traditional market, automated traders (computer traders) are proven to be far better than humans. It makes sense, computers are programmed to make rational decisions without any emotions. Computers don’t get tired, overwhelmed, and they can calculate much greater data than humans. So why try to go against these bots? Many successful portfolio managers use bots to make decisions. When their human decision matches the bot recommendation, then there’s a great profit probability. If it doesn’t match, portfolio managers reevaluate their decision or tinker with the bot until it becomes a match. Either way, both improve their decision making. Find or program a bot, back test its performance, and evaluate the results. If it is profitable like BTFD’s Moneta bot, then you should be friends with it and make sure all decisions are in accordance. Instead of trading against these bots, use the bots in your favor instead.
Here are the 3 common investing mistakes most people make (me included) and there are plenty more out there. Human psychology is a dangerous thing and many people fall for these mistakes over and over. Be aware of the traps and always do your research. And make sure not to buy bitcoin at $25,000 at the end of the year.