How to Stick to a Crypto Trading Strategy and Eliminate FOMO
Cryptocurrencies are known for their extreme price fluctuations, and, it’s natural for investors to feel heightened emotions during trading, like fear of missing out (FOMO) or panic selling. This situation is amplified in the crypto market more than in traditional markets like stocks, but trading based on emotions rather than strategy can lead to negative consequences. On the other hand, a predefined crypto trading strategy can help investors earn more profit. Let’s discuss emotional investing impacts, and how to implement a crypto trading strategy.
Impacts of emotional investing
Whether we like it or not, emotions are a natural response to the market’s ups and downs. But giving in to the emotions and acting impulsively is how many investors lose their portfolio. When the market drops more than we expect, panic sets in. As a result, investors start selling their assets to avoid a drop in their portfolios. On the other hand, when the market prices hit new all-time highs for an asset, investors feel FOMO. In this case, they start accumulating the asset more at the peak price.
Emotional investing will end up in two scenarios: either traders sell an asset too soon and lose out on profits, or they buy too late and watch prices take a downward turn. Acting on impulses is not advisable in cryptocurrency investing. Investors may damage their portfolios and lose significant profits in the long term if they act impulsively every time an asset goes through extreme price swings.
How to avoid emotions while investing
The most significant reason for emotional investing is when the monetary stake and emotional stake of an investor are closely linked. Traders look at invested assets and cannot differentiate between their monetary stake and emotional stake in the asset.
Investors can eliminate emotions from cryptocurrency investing when they look at their investments as an outsider and think strategically. It’s important to practice the mindset that looks at losses as an ordinary and expected occurrence. Developing this mindset is crucial while trading cryptocurrencies. If investors find it difficult to practice this thinking, they can start with a small portfolio and gradually build this mindset until they feel capable of investing additional funds.
Tools to avoid emotional investing
Besides developing a strong mindset, investors can avoid emotional investing by leveraging suitable tools. Trading tools that help investors pre-define their buy and sell settings, like automated trading bots, are the best choice to avoid emotional investing. With the help of these tools, investors can create a crypto trading strategy and stick to it no matter the market price swings. They can assign their thinking process to the automated tools and avoid taking actions based on impulses.
Apart from sticking to the predefined trading strategy and eliminating emotional investing, automated tools will also take care of chart analysis. Keeping track of market prices and performing chart analysis is a time-consuming task for investors. Automated tools or bots can save significant time for investors and keep them from acting on impulse. However, bots do not guarantee profits or a completely risk-free environment. Investors need to research and test different features of bots with fake funds (also known as paper trading) before involving real funds.
Use a crypto trading bot
Cryptohopper is an automated crypto trading bot that helps investors eliminate emotional investing. With the help of its “strategy designer” feature, investors can create a crypto trading strategy and stick to it. Additionally, their simulated paper trading feature allows investors to test their trading plans before implementing them in real-time.
Investors can create a well-researched trading strategy with Cryptohopper; it provides more than 30 technical indicators, including the most popular indicators like RSI, EMA, CCI, and 90 candlestick patterns. It also helps new investors by providing ready-to-use trading strategy templates, tutorials, and a learning academy.
With the help of its “ Marketplace Signalers”, Cryptohopper helps its users follow the lead of experienced traders. The marketplace takes insights from 55 professional traders and allows other users to copy them. After choosing a trading strategy, the bot executes transactions and manages the portfolio automatically. It also facilitates investors with several strategy packages and market scanning algorithms.
Investors lose profits and impact their portfolios negatively if they act based on their emotions. Developing a strong mindset and thinking strategically is crucial while trading cryptocurrencies. Creating a crypto trading strategy beforehand and sticking to it with the help of automated tools is the best solution to eliminate emotional investing.