The root cause of ordinary people losing money in stock trading and cryptocurrency trading can be clearly understood through an example—
Suppose you have an asset of 1 million, and you invest 700,000 to buy a cryptocurrency. The next day, the price of the coin drops by 1%, and you lose 7,000 yuan, but you don't care at all, firmly believing that it will rebound in the future.
On the third day, it drops again by 3%, and your loss approaches 20,000 yuan, yet you remain undaunted, thinking that a rebound is just a matter of time.
On the fourth day, the price rises by 2%, and you recover more than 10,000 yuan of your principal. You smile slightly, feeling that everything is under control.
On the fifth day, it suddenly plummets by 20%, and you lose 140,000 yuan. You start to feel anxious, fantasizing about a rebound the next day.
On the sixth day, it rebounds by 5%, and you breathe a sigh of relief, believing that trading cryptocurrencies has its patterns.
On the seventh day, it rises by 1%, and you are filled with anticipation.
On the eighth day, it rises again by 1%. Although the increase is slow, you feel hopeful about recovering your losses and feel content.
On the ninth day, it suddenly drops by 30%, and you panic, doubting whether you chose the wrong coin.
On the tenth day, it drops another 10%, and you become angry.
On the eleventh day, the coin price enters a sideways phase. You see someone online claiming this is a bottoming signal, indicating that the market is building momentum, and you firmly believe a rebound is imminent.
However…
In the following week, the coin price continues to move sideways. You go online to learn about cryptocurrency, and based on your understanding, you conclude that this is the "institutional accumulation phase"!
You continue to hold…
A month later, the coin price not only hasn’t risen but has dropped by 20%. You start to feel numb, thinking that if you can just break even, you will exit the crypto world and never look back.
But contrary to your wishes, the coin price continues to decline. At this point, you learn a new concept—stop-loss!
You struggle internally, hesitating whether to liquidate your position or hold on…
Just then, a friend tells you that a new coin has surged by 200% and shares the "leading strategy"!
You believe it! You actually believe it!
So you sell your holdings, telling yourself,
that after making a profit on the new coin, you will come back to buy more and hold for the long term until you break even!
To sum it up: The cryptocurrency market is like a battlefield; intuition is crucial.
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